The Payroll Blog

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The Limitations of Payroll Software

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As the saying goes: There are two sides to every coin. This statement is particularly meaningful in the discussion of payroll software. On one side of the coin, payroll software provides a number of benefits to businesses, such as greater efficiency and a reduction in the likelihood of errors – this is a good thing, since a handful of particular errors can lead to hefty fines from Uncle Sam.

On the other side of that coin are some well-documented shortcomings of payroll software, which include the expense of purchasing (and upgrading) the systems and the time and resources needed to train staff to use the programs.

Payroll software has some other interesting limitations that often are not considered when businesses map out the "ifs" and "hows" of implementing a program into operation, including:

Constant Archiving - Mountains of information are collected with each payroll cycle, and most payroll software programs are designed to keep up. But, that information needs to be archived continuously. And, this daily process needs the help of a human hand. In a busy operation, setting aside this particular slice of time in a workday can become a slight hassle.

Limited Access - In most instances, payroll software is loaded onto one computer and that data can only be accessed from that machine. This can be a hassle, especially if the payroll processing computer goes off the rails. The result could be that whole payroll process goes with it, which can cause headaches throughout the business.

Added Weight to Overhead - Implementing payroll software may also call for a full-time employee to take on the responsibilities of doing payroll in-house. With an added employee comes the cost of an additional salary and benefits. Also to be considered is the cost of technical support when the inevitable software glitches occur.

Risk of Underwithholding - The Internal Revenue Service notes that some payroll software systems are unable to distinguish additional voluntary withholding amounts from regular withholding when calculating catch-up withholding for the current tax year. This kind of glitch does not apply to all payroll software programs, but if not identified or accounted for, a business can be fined for under-withholding.

Payroll processing software programs have their limitations, but they also have their benefits. The technology pros as point out the fact that payroll processing software helps to streamline the entire payroll process for a business. What's more, using payroll processing software enables a company to not only calculate wages due to employees, but also helps a business organize and archive important records. Even such things as reimbursing employees for expenses may be easier when payroll software is used.

When considering these not-so-thought-of limitations of payroll software, it's key to keep in mind that not all payroll software programs are made the same, so they don't all have the same shortcomings. Finding the best fit for a business means identifying the payroll software that offers the most benefits with the least amount of limitations.

If you're trying to choose between payroll software and an online payroll service provider, it's important to keep these points in mind.