Payroll Services Explained: Here’s Your A-Z Guide

If you run a business that has employees, then you need a payroll to pay them. Today, several companies go the route of working with payroll because it makes the process more convenient and simpler compared to processing the payments on their own.

If you don’t know how a payroll service works, you need not worry. In this article, we tell you everything you need to know, as well as recommend a few companies to get started with, like Read on to learn more. 

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What Is a Payroll Service?

A payroll company refers to a service provider tasked with automatically processing payroll calculations, year-end taxes, payroll tax statements, and more on behalf of your company. But that’s not all. When you choose to work with a full-service payroll provider like, you also benefit from services like withdrawals and benefits for your employees, new-hire reporting, pay garnishments, and withholding. 

Thanks to a payroll system, you can pay any type of employee easily. These include part-time, freelancers, or full-time employees. Hiring a payroll company frees you to focus on the core services of your company, leaving the matter of paying your staff to experts.

What are Other Payroll Options at Your Disposal?

Hiring a payroll service provider has many advantages but it’s not the only option. Below are some other payment methods:


This option works for an established company that has many employees. Under this method, you hire an internal accounting department to handle your payroll function. One advantage of this approach is that your accounting team is familiar with your company and knows its culture and values. It also means that the department is equipped to change as your company grows. Another thing is that an in-house department is available should you need to make a last-minute change.


The work of a bookkeeper is preparing your accounts and tracking your finances. The method is ideal for small and medium-sized businesses that have fewer employees. You can choose an internal employee as your bookkeeper, or even be a client of theirs.

Online payroll

Do you want to handle your payroll by yourself? If so, there is no shortage of online services that you can use. However, the option is time-consuming since you will be required to feed all the data and even process the payroll. The advantage is that it saves you money.


Payroll software is similar to an online payroll service in the regard that you have to key in all the data by yourself. The software has automated options to save you time instead of having to process everything by yourself. The downside of this approach is that, in addition to buying the software, you also have to maintain it. The results have also to be checked doubly to be certain there are no errors. 

What are the Typical Services Offered by Online Payroll Services?

The main distinction of online payroll services is that they are cloud-based. This means that business owners need not maintain any software or install a program. Additionally, online payroll services enable you to manage them from anywhere. An online payroll service can be used to pay part-time and full-time employees. They also work well in paying freelance and contract workers. Below are some of the services of online payroll:

Payroll processing

The main work of an online payroll service is to calculate the amount that each employee is owed in each pay period. They account for shift differential, wage rates, holiday pay, overtime, social security, benefit deductions, and taxes. After that, they pay employees via prepaid cards, direct deposits, or paper checks. 

Filing and paying payroll taxes

Online payroll services can also withhold staff taxes, file payroll tax reports, and even pay tax withholdings of your employees to the right state, federal, or local agencies. The services also generate year-end 1099 and W-2 forms. Some services go a notch higher to provide an error-free guarantee. This means that, in case of an error, the payroll company will not only fix it but also cater for any interests you incur or fines. 

New-hire reporting

A common service of most online payroll services is to report any new employees you have hired to the government.


Cloud-based payroll services sync with various payroll-related programs that businesses are already using. These include HR systems, time and attendance software, and accounting programs.

PTO Management

The majority of online payroll services managed PTO (paid-time-off). They do this by tracking the number of vacation and sick off-hours your staff earned and used. 

Employee Self-service

This is where the service allows employees to log in to the system and access their pay stubs. They can also be able to view in real-time their year-end tax forms and PTO. 

Mobile Access

Many online payroll providers have mobile-friendly websites or apps that allow you to run and manage your payroll using your Smartphone or any other digital device.

Payroll reports

Comprehensive labor and wage reports are vital for the smooth operation of your business. They can allow you to gain an insight into the way your business is run. 

Online payroll systems are advantageous in the sense that they can often complete all payroll-related work for you. These include payroll tax payments, payroll calculations, and year-end tax forms with considerable ease. The systems enable you to run your payroll in just a few minutes. 

But online payroll services have a serious downside in the sense that they are costlier than running your payroll by yourself. You also leave it to your payroll service provider to get everything correctly. A mistake by your provider may leave you with fines to pay from the government. 


Outsourcing your payroll function frees time for you, allowing you to focus on the core functions of your business. Additionally, getting a good company like enables you to leverage expertise and technologies that you would not otherwise enjoy were you to handle your payroll internally. It is also cheaper since you don’t have to pay for costly software and upgrades. 

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