5 Common Payroll Myths Busted

Working with payroll can be intimidating. This is especially true if you’re a small business owner or just getting started. You need to be aware of state and federal laws as well as rules for each type of employee.

Small to medium-sized businesses often try to pay employees in-house without using HRIS software. However, this is risky for a few different reasons. Let’s look at five common myths and debunk them.

Myth #1: As a Small Business, We Don’t Need Help With Payroll

The truth is that even if you have just one employee, you can benefit from the use of a payroll service. Software or outsourced services help you ensure correct tax withholding as well as adherence to tax deadlines.

Many providers have services that cater to microbusinesses. You can set payroll to run automatically for each pay period if the hours and rate are always the same.

Even if you have a small or medium-sized business, most of the same laws and bureaucratic procedures apply. Starting with a payroll service while your business is small can make the growth process much smoother. You can scale up with little increase in time and effort surrounding paying your staff.

Myth #2: We Can Get Payroll Right on Our Own

Payroll legislation is complex and changes all the time. This is also an area where many governments are very stringent. If you make mistakes and fail to follow federal and state regulations, penalties can be very steep.

In many countries, larger businesses are subject to higher scrutiny. An effective payroll system is crucial to make sure you are meeting all government requirements.

Payroll errors can impact employee wellbeing. Mistakes like being paid late or finding inaccuracies on a payslip can lead to distrust of the company. Employees may feel the employer doesn’t care or feel less motivated.

Payment mistakes can leave employees feeling financially unstable. Surveys suggest that approximately 21% of workers have quit a job because of payroll mistakes.

Myth #3: It’s Faster and Cheaper to Handle Payroll In-house

If you stop to do the math, you’ll find you’re spending a lot of time and money on in-house payroll. There are considerations like who took time off that pay period, reviewing timesheets, and calculating any overtime.

Onboarding and paying an in-house payroll team actually costs you more than outsourcing. You have expenses with advertising, interviewing, and payment of the group. This adds up to more than you would pay to outsource your payroll.

A third option is using existing employees to handle the payment process. The risks with this proposition are high, as these workers are not explicitly trained to handle this workload. The chances of errors and fraud go way up with an in-house team.

Myth #4: We Can Do Year-end Tax Calculations In-house to Save Money

Often companies who outsource their payroll keep taxation in-house to try to lower costs. There are a few problems with this approach.

Taxation is typically done annually, and it’s easy to forget about it. If you end up late, you can pay stiff penalties for non-compliance. By using software or a third-party service, you can integrate taxation with payroll.

Combining your payroll and taxation leads to a streamlined approach that benefits your business. Using a human capital management (HCM) platform like this one from HR Payroll Systems will keep you up to date on all the legislation changes that you need to know about.

These services are automatically updated to include changes in federal, state, and local law. They also include regulations from such agencies. So, you will be protected from errors or oversights that could occur if you try to calculate everything yourself.

Myth #5: If We Outsource Payroll, We’ll Lose Control

The reality is that a credible provider will do their best to understand and meet your organization’s needs. They should offer you secure access to your company’s data at all times. In this way, you can be aware of everything that is going on.

Payroll needs to evolve and innovate with your company’s growth. Look for a provider that has solutions that are scalable for future changes in your workforce. Using HRIS software or outsourcing can bring your business the accuracy, agility, and control you need.


Several myths can keep businesses from automating payroll and taxation. However, even small businesses can benefit from using software. Without automation, you risk making errors that can hurt your relationship with employees.

Using automated solutions for payroll and taxation can save you time and money. A reliable provider will allow your business to have adequate control while minimizing errors. Your company has a lot to gain by automating payment processes.