Although payroll technology has evolved significantly since the days of card clocking and dot-matrix printers, we are now faced with more choice than ever before when it comes to how we process payroll. For the business trying to decide which payroll system is right for their needs, understanding what the key differences are between on-premise, hosted and cloud-based payroll solutions is the first step to making the best investment.  

Let’s start with some definitions:

On-Premise Payroll

Traditional on-premise software (or ‘on-prem’) is installed and runs on computers bought and owned by the organisation using the software. In this case, the hardware, database and network infrastructure required to run the application are physical assets that live on site and are maintained by employees, normally the IT department.

Hosted Payroll

Instead of installing payroll software on your own computers or servers, you can also choose to have it installed, hosted and accessed entirely from a remote server or location. The hosting service provider is responsible for the hardware, support and configuration and end users are able to access the application and its data through a direct network connection via the Internet.

Cloud-based Payroll

Software as a Service or cloud-based payroll is an extension of hosted payroll. Here, the company’s data is stored on remote servers in the “cloud”, meaning that there are no actual physical servers to maintain and upgrade. The application is then accessed via the Internet and generally managed directly by the payroll software developer.

How do you choose?

This tech comparison provides an in-depth look into different software deployment models to help you decide whether to go with on-premise or opt for hosted cloud.





Requires in-house skills and knowledge to maintain and upgrade system.

Vendor specialises in providing an offering and has the necessary expertise to deploy.

Support & Monitoring

Can be provided as long as your staff are available to offer assistance as there is little to no reliance on an external resource.

Cloud service providers can monitor around the clock, but may not monitor specific issues or notify you directly in a timely fashion.


Scaling up can come at a significant cost as you may require additional hardware, resources, etc.

One of the biggest benefits of hosted cloud is scalability to accommodate growth with minimal cost and effort.


As you are not relying on an external service provider, you only have your own staff to worry about.

When it comes to cloud, a lot of trust is placed on the service provider to keep the application operating smoothly.


When you run payroll software yourself, it is up to you to keep up to date and ensure compliance with all the laws and regulations that apply to your business.

As experts in payroll, cloud service providers can automatically update compliance parameters as they arise.


When there’s an outage, it is up to you to get things back up and running.

Cloud service providers may also have outages which may result in downtime, however they will be responsible for restoring services.


The security of your system and data is determined largely by your assets, resources and people.

Because the cloud is Internet-hosted, security can become complex and must be maintained. However, this is often managed by the service provider.


Once deployed, software can be used as the business needs it and can be customised with additional plug-ins, etc. as the needs of the business change.

Cloud based services offer lots of choices and configurable options which can be easily deployed.

Cost Model

On-premise solutions requires assets that may need to be purchased, financed or replaced to run the payroll software.

Cloud solutions are subscribed to and can therefore be categorised as operational expenses.

Source: GFI Software

Ultimately, the choice of which type of payroll solution you go for is largely dependent on a number of factors related to your business structure and needs. If you’re still unsure of which way to go, click here to contact one of our expert consultants, who will assess your business needs and advise the best possible solution for you.