Therefore, you must evaluate the usefulness of the payroll data in the context of your total information needs and decide which choice helps you meet the efficiency goal. For example, if your company needs to be able to break down wages by job or project for job costing purposes, you need to carefully ascertain how a payroll service company can facilitate this need. The payroll service may be able to produce a report giving you the job costing breakdown you need, but if you then need to keypunch that information into your own accounting or costing system, the efficiency is lost. Another example would be a need to track and record human resource information in addition to a standard payroll. Propriety of people handling the payroll information.
Confidentiality has two levels.
The first addresses employee salaries. The person must be professional enough to respect the payroll information and not use the knowledge to feed the office gossip mill. The second addresses management compensation. Some business owners are not comfortable enough with their accounting people to share individual salary data. Instead, they outsource only executive pay and care for the entire executive payroll preparation process themselves.