Payroll is a complex process that involves calculating wages, withholding taxes and deductions, and more. Because of its complexities, you may not know how to process payroll—in-house or using a third party. What’s the difference between in-house payroll vs. outsourcing?
In the past, you could have more time (outsourcing) or more money (doing payroll in-house). But thanks to today’s payroll software, you can have both.
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In-house payroll vs. outsourcing
Should you handle payroll in-house or outsource it to someone else? That’s the core difference between in-house payroll and outsourcing.
The payroll process includes the following responsibilities:
- Calculating employee wages
- Withholding taxes and deductions
- Paying employees (e.g., via direct deposit services)
- Filing and depositing payroll taxes
In-house payroll is where you process payroll internally. Many businesses that do in-house payroll use payroll software to streamline the process.
Outsourcing payroll is when you rely on a third-party provider to process payroll. Typically, the third-party provider is an accountant or a professional employer organization (PEO).
In-house payroll is generally less expensive than outsourcing payroll. However, in-house payroll is more time-consuming, particularly if you don’t use software. In-house payroll gives you more control than outsourcing. Outsourcing payroll also gives you access to a team of payroll experts who are responsible for paying employees.
| In-house Payroll | Outsourcing Payroll | |
|---|---|---|
| Cost | Less expensive | More expensive |
| Time | More time-consuming | Less time-consuming |
| Control | More control | Less control |
| Support | Available only if you use software | Access to payroll experts |
Do you need an accountant to run payroll?
No, you don’t need an accountant to run payroll. You can run payroll in-house without outsourcing to an accountant or PEO.
According to recent payroll trends, only 34% of small businesses use an external firm to run payroll. The remainder handle payroll internally (or don’t have employees).
If you want to manage payroll in-house, consider using software. Payroll software can help you bridge the gap between doing everything solo and outsourcing.
How to simplify in-house payroll with payroll software
Cloud-based software automatically updates with current federal income tax withholding tables and more.
It can help you stay compliant and streamline the process compared to manual payroll. At the same time, you can save money compared to outsourcing.
Payroll software features include:
- Automatic calculations: Never worry about calculating your employees’ wages, taxes, and deductions again. Enter employee hours and pay rates and let the software do the rest!
- Direct deposit: Send employees’ net pay directly to their bank accounts with direct deposit. It’s easy, convenient, and often available for free.
- Tax filings and deposits: Full-service payroll handles federal, state, and local payroll tax filings and deposits, giving you all the control of in-house payroll with none of the stress.
- Pay contractors in payroll: You may be able to pay 1099 contractors alongside your employees when you run payroll.
- Employee and contractor portals: Your team gets more control, too. They can log into a self-service portal to print pay stubs, view paychecks, update direct deposit info, and more.
- Integrations: Some payroll providers offer free integrations with platforms like accounting software, time and attendance software, and workers’ compensation.
If you already have an accountant for your business, you can ask them which payroll software they recommend. Check out reviews, sign up for self-guided demos, and contact customer support to find the right software for your business.
Case study: 87% savings by taking payroll in-house
Jim Sherman, a Firehouse Subs franchise owner in Mobile, Alabama, previously outsourced payroll for his 20 employees to a PEO.
Although the PEO handled everything for him, outsourcing payroll drove up costs, cut into his profits, and raised his SUTA rate due to the PEO’s SUTA pool.
Jim paid the PEO $4,794.37 during his last year outsourcing payroll. He switched to Patriot Software’s payroll services and spent $610.18 in his first year, saving him over $4,000 annually.
By bringing his payroll in-house, Jim paid 87% less than what he paid outsourcing payroll to a PEO. At the same time, Patriot continued handling the things he was most worried about—tax deductions, SUTA and FUTA, and workers’ compensation insurance.
Want to learn more? Check out the full case study here.
Can you handle payroll in-house? Yes—with the right tools
Many business owners choose to manage payroll in-house to save on outsourcing fees and have greater control over the process.
Managing payroll on your own may seem daunting, but it doesn’t have to be. Payroll software handles calculations for you, reducing errors and time. Full-service payroll handles tax filings and deposits for you, saving you even more time.
Handling payroll in-house might never be your favorite responsibility. But with software, it can become one of the easiest things to tick off your to-do list.
Patriot’s payroll software is affordable and easy-to-use
You don’t have to sacrifice price for convenience when bringing payroll in-house. Take payroll into your own hands with Patriot’s payroll software.
Enjoy features that make handling payroll in-house without an accountant a snap, such as:
- Unlimited payrolls
- Tax filings and deposits (with Full Service Payroll)
- Free direct deposit
- Free USA-based support
- Online payroll reports
- …And so much more!
Check out a free, no-obligation demo to see how easy running payroll in-house can be.
This is not intended as legal advice; for more information, please click here.
