Is your payroll a saviour or another challenge? Many organisations are unable to answer it because they are stuck on the choice of cloud or on-premises payroll. Which one is better for your business? How does one solution fix more operational obstacles than another? And what is the best payroll deployment option for businesses?
You don’t have to answer it all; let us help you by comparing both Cloud vs. On-Premise Payroll for better clarity.
What is Cloud-based Payroll Software?
Cloud-based payroll software is a concept in which the payroll processing system and data are housed on external servers and accessed remotely via the internet.
This enables customers to handle payroll from any location with an internet connection, providing real-time access and control, whether employees are in the office, at home, or travelling for business.
Cloud-based payroll software has several significant features, including accessibility, automatic upgrades, and flexibility. As your firm grows, you can easily hire additional employees or change their permissions. The provider also handles implementation, which eliminates the need for expensive installations.
Benefits of cloud-based:
- Access from anywhere. You can work from anywhere; all you need is a web browser and an internet connection.
- Disaster recovery. Cloud hosting is often backed up more regularly than your own servers, allowing for faster recovery. You are no longer responsible for backups or security.
- Greener. Cloud solutions utilise resources only when needed, which is more environmentally friendly and reduces energy expenditures.
What is On-premises Payroll Software?
On-premises payroll software is a payroll administration system that is installed and run on a company’s own servers and hardware. It enables enterprises to manage payroll procedures, including wage computations, tax deductions, and compliance, within their existing IT infrastructure.
Benefits of on-premises:
- Total Cost of Ownership. On-premise means you buy hardware once and then have fixed running costs.
- Total control. Your data is with you, and you have complete control over it.
- Uptime. You do not require an internet connection to use the software.
Aspects to Consider when Selecting Payroll Software
Several key considerations should be taken into account when deciding between on-premises and cloud-based payroll software for small businesses in Australia.
- Budget
Consider the limitations of your financial plan. Does implementing an on-premises system require all of the costs to be paid at once, or can you continue to pay a subscription fee for cloud-based solutions?
- Company Size and Structure
Assess the present and future expansion of your company as well as the manageability and scalability of each system. Businesses that anticipate rapid growth are probably better suited for a cloud solution.
- Data Control Needs
Choose the level of control and privacy that your company needs for its data. On-premises software, however, might be appealing if these are the main concerns.
- IT Infrastructure
Check the ability of your internal IT teams to manage an on-premise system. If not, it may be good to use a cloud solution, as these systems require little upkeep.
- Compliance Requirements
You must be able to pay employees and comply with local payroll regulations using the payroll system you choose. This is particularly crucial in regions with stringent tax regulations.
Cloud vs On-premise Payroll Software Australia: Key Feature Comparison
When consulting a payroll implementation specialist, ensure you understand the key differences between cloud-based and on-premises payroll solutions.
Feature / Factor | Cloud-Based Payroll | On-Premise Payroll |
Deployment & Access | Hosted online via a secure server; accessible anytime, anywhere with internet. | Installed locally on company servers; accessible only within the office network. |
Upfront Costs | Low upfront investment—typically subscription-based (SaaS). | High initial cost for hardware, licenses, and setup. |
Maintenance & IT Support | Managed by vendor; no internal IT support needed. | Requires dedicated IT staff and internal resources for maintenance. |
Scalability | Easily scalable for growing teams and remote workforces. | Difficult and expensive to scale; hardware and licenses must be upgraded manually. |
Data Security & Compliance | Advanced encryption, regular updates, and automatic compliance with Australian tax laws. | Security is the business’s responsibility; compliance updates must be managed manually. |
Updates & New Features | Automatic and regular updates are included with the service. | Manual updates require downtime and IT involvement. |
Integration with Other Systems | Seamlessly integrates with Dynamics 365 HR & Payroll and other cloud apps. | Limited integration options; often requires custom development. |
Cost Over Time | Predictable monthly or annual subscription costs. | May cost more over time due to maintenance, upgrades, and support staff. |
Disaster Recovery & Backup | Automated backups and disaster recovery are included by the provider. | Must be manually handled by the internal team; prone to risk without proper systems. |
Mobility & Remote Access | Ideal for remote teams and hybrid work models; accessible via mobile and desktop. | Restricted to office locations unless costly VPNs or remote tools are implemented. |
User Experience | Intuitive UI, modern dashboard, user-focused design. | Legacy UI: steeper learning curve for new users. |
Best For | Businesses, looking for the best payroll systems for Australian businesses with flexibility and minimal IT burden. | Companies with strict data control policies or those in regulated industries. |
Conclusion
Choosing between cloud vs. on-premise payroll depends on your business’s size, budget, and data control needs. For many companies, cloud-based systems offer flexibility, accessibility, and automated compliance.
However, some still prefer the control of on-premise setups. With evolving business demands, investing in scalable, secure, and integrated HR and Payroll Solutions in Australia is key to smoother operations.
DHRP offers both cloud-based and on-premise payroll implementation tailored to your operational needs. Whether you prioritise data control or need remote access and automated updates, DHRP’s expert team ensures smooth setup, compliance, and ongoing support.
With DHRP, payroll is no longer a burden—it becomes a strategic advantage that drives smarter decisions and a more agile workforce. Plus, with DHRP’s HR and Payroll mobile app, your team can manage essential tasks anytime, anywhere—enhancing flexibility and real-time visibility.
FAQs
Cloud payroll is hosted online and accessible remotely, while on-premise payroll runs on local servers within your business premises and requires internal IT maintenance.
In 2025, cloud payroll is considered better for most businesses due to its flexibility, lower upfront cost, automatic updates, and strong support for remote teams and compliance.
Cloud payroll uses advanced encryption, regular security updates, and vendor-managed compliance, whereas on-premise security depends entirely on your in-house systems and IT team’s expertise.
