What should small and large companies consider when choosing a payroll solution?


Whether your business is large or small, you’ve probably debated whether to invest in payroll software, or outsource your payroll process.

Many businesses often assume that payroll software is the cheaper alternative, or that outsourcing is reserved for big businesses. But outsourcing part or all of your payroll process has the potential to save even small businesses a significant amount of money in the long term, as well as increase efficiency.

Once you’ve made the decision to invest in your payroll process, you’ll choose between three options:

  • Run a software solution in-house
  • Run a processing solution, where you outsource your payroll but retain some components in-house
  • Run a fully outsourced model, where a third-party provider manages your end-to-end payroll infrastructure

But which solution is right for your company? Here are some key factors to consider:


Companies running payroll in-house can spend, on average, 18%more than those that outsource.[1] Small and large businesses often use payroll software to avoid outsourcing fees, but might not account for the cost of time spent on payroll tasks. Outsourcing all or part of your payroll process reduces that time and gives employers space to focus on strategic initiatives.

[1]The hidden reality of payroll & HR administration costs, PWC, January 2011.


As your business grows, in-house payroll becomes increasingly complex and time-consuming. CEOs of SMBs lose around a fifth of their working week to HR tasks – time that could be spent on their core business. If you’re unsure on whether to commit to fully outsourcing your payroll, you can still outsource time-intensive processes like data entry.


Running payroll in-house means greater exposure to regulatory authorities and potential fines, especially if you’re managing payroll across multiple legislative areas. Your payroll team must maintain the skills needed to remain compliant, even as legislation evolves. If you work in multiple countries or only have a single staff member handling payroll, outsourcing both reduces the risk of fines and removes the pressure on staff to keep up with the latest legislation.

Types of staff

In-house payroll might make things simpler for businesses with low employee turnover, whose staff receive a defined, annual wage. But in-house payroll quickly becomes complicated when dealing with contractors, or if employees are billed hourly, driving up time spent on payroll and increasing the risk of human error. In this case, outsourcing payroll, or working with a payroll processing company, may be the best alternative.


Using in-house software seems like an easy way to make sure that other financial systems and HR processes integrate with your payroll. But not all software will integrate with your existing HR and payroll software. If it doesn’t, you may end up dealing with lots of suppliers, each holding different pieces of data. Even ‘integrated’ suppliers only handle data transfer between systems, so if a connection breaks down it can be difficult to pinpoint the problem.

In-house processors who run payroll bi-weekly spend an average of nearly six weeks or 235 hours more on essential payroll-related tasks than companies that outsource. In-house Processor Study, ADP, 2012

Which solution is right for you?


It’s a common misconception that only large companies outsource payroll or work with a payroll processing provider. In reality, many companies find themselves needing to re-evaluate how they handle payroll.

Here are some common scenarios that lead companies to consider outsourcing:

  1. A hospitality business expects sales to peak during the holiday season and will need to bring in contract staff
  2. A business needs to send staff out to set up a new office in a new market and will need people on-hand who understand the local legislation
  3. A company introduces a new bonus scheme for their senior members of staff and need to understand what this means from a tax perspective

Each of these companies have the option to use payroll software, or work with a partner to outsource some or all of their payroll processes.


It all comes down to the needs of your company:

1. I have a mixed contract team/need a flexible workforce (permanent workers vs. temporary & seasonal):


Software managed in-house
Not all payroll software can handle mixed contract teams. Payroll software must integrate with your time and attendance software to be accurate for both permanent and contract workers. Even if your software can handle it, payroll staff may struggle if you need to take on lots of new contractors quickly.


Outsourcing Payroll (processing or full outsourcing available)
ADP’s Time modules integrate with your core payroll, so all of your payment contracts are stored and handled in one place.

2. We are expecting new legislation in the market(s) in which I operate:


Software managed in-house
Payroll teams must keep up with changing legislation across markets and how it affects your payroll setup. Leaving that to one or two individuals means you’re vulnerable to human error. You’ll also have a huge gap in your legislative knowledge if a payroll team member leaves or goes off sick.


Outsourcing Payroll (processing or full outsourcing available)
ADP have payroll experts in over 100 countries, so you’re always up to date with legislation. When new legislation comes in, it’s ADP who spends time getting to grips with it and making the necessary changes, so you can focus on tasks that drive your business.

Read more about becoming compliant

3. I want to integrate different information automatically into my payroll – e.g. bonuses, deductions, expenses and holiday


Software managed in-house
Not all payroll integrates automatically with finance and HR. If your software doesn’t, you may end up managing a confusing myriad of systems. That leaves your employee data spread across different platforms, which is a potential data security risk.


Outsourcing Payroll (processing or full outsourcing available)
ADP have a suite of add-ons to their payroll services that allow you to calculate performance-related pay and automatically record absence and holidays. That means you only input your data once, saving you time each month, and there’s only one supplier to call if you have a problem or question.

4. I am expanding my business into new markets


Software managed in-house
Firstly, check that your software provider operates in the new market. Check that they have the local expertise needed to support you. What if you’re paying staff in different currencies? What local legislation do you need to remember? Handling it in-house means it’s up to you to consider all this.


Outsourcing Payroll (processing or full outsourcing available)
To scale up quickly into other markets, you need strong platforms and expert people to keep payroll running smoothly. ADP manage expatriate payroll, local employees, and the nuances of market legislation and payslip requirements, so you can scale easily.

Read more about payroll across borders


ADP can help...


Making it work for you

ADP’s Payroll Software Management can be tailored to suit your business.
  • Processing Services: we host the platform, administer upgrades and provide 8/5 support. The client takes care of data entry in addition to validating the accuracy of the data output.
  • Managed Services / Outsourced: we host the platform, administer upgrades and provide 8/5 support. In this instance, ADP rather than the client validate the accuracy of the data output. The client submits the data in an agreed format to ADP for processing.
  • Comprehensive Services (COS): we host the platform, administer upgrades, provide 24/7 support and handle all your payroll obligations, including employee requests through a helpdesk (only available for ADP® GlobalView).


Integrate with all your processes

ADP integrates your payroll seamlessly with the processes that affect your payroll, like time, absence and expenses. We also give you the option to integrate onboarding talent management as your business grows.


Any device, at any time

Both employees and managers can access your data from any device, so it’s easy to add and edit details from anywhere.


Leader in Payroll BPO services

For the fifth consecutive year, ADP took the top spot in Gartner’s Payroll BPO Magic Quadrant report, beating out seven other payroll service providers – read more about that here.



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