What is Payroll?

Payroll is the total of all compensation a business must pay to its employees for a set period of time or on a given date. Usually, it is managed by the accounting or human resources department of a business. Small-business payrolls may be handled directly by the owner or an associate. Increasingly, payroll is outsourced to specialized firms that handle paycheck processing, employee benefits and insurance, and accounting tasks such as tax withholding.

Payroll can also be referred to the list of employees of a business and the amount of compensation due to each of them. It is a major expense for most businesses and is almost always deductible. This means that the expense can be deducted from gross income lowering the taxable income of the company. It can differ from one pay period to another because of overtime, sick pay, and other variables.

What are the advantages of using Payroll?

A manual payroll system requires payroll that is processed manually and therefore much slower than an automated procedure.

An automated payroll system allows the employer to process it through a computerized system. The most obvious advantage of payroll software is that payroll calculations can be completed in a fraction of the time then they do manually. This system can offer much more than the ability to calculate legal deductions. Such as national tax and insurance and maintain cumulative totals. They can also integrate Time Tracking systems that record employee attendance or time worked. In this way, the information on hours worked, either automatically collected by a user or operator, connected to a system.

1. Easy Calculations

Accuracy is required to pay employees the right money they have earned. To avoid the difficulty of manually computing the payroll, you can use software to automate the process. The withholding tax is calculated for each employee based on data entry in the conditions of detention. This reduces the likelihood of errors in the it tax, which can lead to charges from the Corporate tax and the income tax. The process is productive and efficient to save time and money. Your accounting department will be able to create reports and financial documents easily.

2. Easy Forecasting

Payroll system allows you to view and control instantly all payroll expenses. This helps you graph the financial data to help you create a forecast. If you have an idea of your business performance, it will be much easier to choose when you need to employ a new workforce for the company. You can make adjustments and calculate salary increases to help you make an assessment of how this will affect your money. It’s easier to know if your decision is good for business.

3. Save Time

It takes extra time and resources for a company to manage payroll manually. But the it software helps to accelerate all aspects of the payroll process with a number of automated functions.

4. Safe Backup

As a company, keeping large amounts of data on the payroll can be difficult. You can not store plenty of documents and data manually. However, when using it software, it is convenient to save the records to various databases available online. If your computer or system is destroyed, you should always have a backup to recover all your recordings.

5. Cost Effective

By taking control of the payroll through the software rather than hiring another person to keep records, there is great potential to save money … especially once you can use the software quickly and efficiently.

What are the disadvantages of using Payroll?

The manual payroll system requires payroll processing to be done completely by hand. Therefore, time cards, wages and payroll tax computations; wage garnishments; and voluntary deductions are done manually. Also, paychecks and pay stubs are handwritten or printed on a typewriter. The main disadvantage with this system is its high room for error. The more manual computations the payroll representative has to make, the more errors she’s prone to make. Furthermore, it’s time-consuming because to ensure that it's accurate, one has to triple-check the data before printing checks. Even then, it’s possible to miss errors.

Paper filing is required with this system, which can create clutter. Moreover, if the payroll representative does not understand how to calculate payroll taxes manually, erroneous tax withholding, reporting and payment occur. This may result in penalties from federal and state tax agencies.


The employer uses the outsourced or external payroll system when it hires a payroll service provider. The latter has a payroll staff that processes its clients’ payroll for a flat fee. Services vary by provider, but most it service providers perform paycheck and direct deposit processing. Many also offer payroll tax and benefits administration.

Since the employer is entrusting its payroll tasks to an off-site company, it can suffer from not having immediate help when needed. If the payroll service provider has many clients, the employer may have to wait in line to get any problems resolved. Depending on the urgency of the situation, this can be frustrating to the employer. Also, according to the Internal Revenue Service, if the payroll service provider makes a tax error, the employer alone incurs the penalty. With the payroll being processed off-site, if there’s a problem with it, the employer may not know about it until payday.

On-Site Computerized

The in-house computerized system enables the employer to use an on-site payroll staff and payroll software to process its payroll. The employer must invest in and maintain the software, which can be expensive. Depending on the complexity of the software, the employer may have to pay for training for the payroll staff. Additionally, depending on the size of the payroll, the employer may have to employ a full payroll staff. This system can prove expensive in that may require the employer to pay salaries and benefits to the staff, and also pay for technical support when software glitches occur. The employer has to also pay overtime (if worked) to payroll personnel who qualify for it.

HR management platform
Subscribe to our Newsletter!
Thank you! You are subscribed to our blogs!
Oops! Something went wrong. Please try again.
Contact Us!
Get a personalized demo with our experts to get you started
Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.

Schedule a Demo !

Get a personalized demo with our experts to get you started
This is some text inside of a div block.
This is some text inside of a div block.
This is some text inside of a div block.
This is some text inside of a div block.
This is some text inside of a div block.
Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.