Every company has slightly different methods for managing payroll. Many companies are now utilizing online payroll services to assist with their payroll, but some drawbacks arise when using these services. If you’re considering a switch from a manual payroll system to an online one, or have recently started your business and are weighing your options, make sure to factor in the following potential disadvantages.
Since online payroll services rely on a third party to process and store payroll information, sensitive information about employees and the hours that they work doesn’t remain solely within the walls of one’s workplace. In an ideal world, all online payroll services would remain very secure and be guaranteed against leaks, but this may not always be the case. Before working with a vendor, be sure to ask about security measures.
Errors Can Be Tough to Fix
Most online payroll services perform many functions automatically, with just a few areas that rely on authorization. While this mitigates the potential for human errors, there may still be imperfections caused by things like an employee forgetting to clock in for several hours. When these errors occur, it’s generally necessary to call customer service – which may be inconsistent and inefficient depending on the vendor.
Accountability for Compliance Issues
Compliance with laws is ultimately the responsibility of a company. For example, if an online payroll service is used and compliance errors are found when reports are reviewed or taxes are filed, the company and not the vendor is responsible for those errors and any penalties incurred because of them. If the errors are due to a glitch in the system or a failure to communicate, it can be frustrating and potentially costly.
Potential for Extra Charges
If you’re not converting all your HR processes to an online platform, you may find yourself paying for some unnecessary services. Some payroll vendors package their offerings, potentially giving you access to services currently handled by other third parties or that you manage in house using other systems. There may also be extra charges for things like report generation or support services.
If you are considering online payroll services, be sure to read the fine print and get answers to all your questions, especially regarding fees. The best vendors will walk you through every aspect of their pricing scheme and make sure that you understand and agree with everything. If you find that there are more features than needed, you may be better suited to partner with a vendor that allows you to customize your services.
Online payroll services can be helpful, but there are disadvantages that you should be aware of before committing to a specific vendor or system. If you decide to incorporate online payroll services into your company, working with experts to select the right system for your company may help you avoid some of the potential disadvantages.
Authored by: Dave Rietsema