Should I Outsource Payroll Services?
If you're a business or employer looking to reduce costs and time spent on payroll, you may be wondering if you should outsource payroll services. Just like with the majority of jobs that you might not want to do or are unable to do, there are specialists who can take over the role for you. Outsourcing your payroll is a way of delegating this task to an external third-party payroll provider. Outsourced payroll companies can take care of everything from transferring wages into employees' bank accounts to simply calculating the pay. There are both advantages and disadvantages to outsourcing, and it is essential to weigh up the pros and cons before deciding if this could work for your company.
The process of running payroll can take a huge amount of time, as well as being highly complicated, depending on the size of the business. There are legal requirements which need to be considered too, with significant consequences if mishandled. This is why many business owners prefer to hand the payroll work off to the experts. It gives them more time to focus on aspects of the business which they are more knowledgeable about, as well as the peace of mind of knowing that they are not breaking any rules when it comes to taxes and paying employees.
What are the Disadvantages of Outsourcing Payroll?
Outsourcing payroll comes with risks that must be taken into consideration by any business. Firstly, employers may feel they have less control over their payroll data when running payroll through an external provider. The risks associated with data protection and storage are important factors to take into account, as clients must ensure a secure system is in place to process their information.
Another disadvantage of outsourcing payroll is that you can unwillingly introduce a lack of consistency to the day-to-day operations of the business. In other terms, once the outsourced company has started working on payroll, you may find that they have different methods for working on wages or that they visualise the information in a different format which isn't consistent with the methods or branding used within the business. In order to resolve this situation, you may need to have management discussions with the outsourced company, which can lead to delays and the outsourced work not being completed on time.
Outsourcing also reduces the flexibility of a business. If an employee internally is working on payroll, then any issues or alterations can be discussed with them directly. With outsourced workers, you will need to find a way, or sometimes schedule a specific time, to contact them. For example, if an employee has told you that they have not received their pay for the month, with an internal employee, you can speak to them face-to-face in order to update them and solve the issue. With an outsourced payroll company, you will have to schedule a call which can massively delay the proceedings.
Finally, one more negative of using an outsourced payroll company is that if you choose a company who are not dependable or creditable, then you can potentially risk your business' finances and reputation. As you do not have full control over the decisions and work done by the outsourced company, then it is possible that they could provide you with work that is either negligent or incorrect.
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Get a QuoteWhat are the Benefits of Using an Outsourced Payroll Company?
Outsourcing payroll to an external provider can offer many advantages to employers.
One of the main advantages of outsourcing payroll is the savings in both time and money. Using a third-party provider enables employers to free up resources and focus on what matters most; their core business. From a cost perspective, the amount paid per transaction when working with an outsourced company is usually much lower than it would be if you were to simply hire an equivalent amount of employees to complete the required amount of work. It also takes some of the pressure off the existing teams within the business. This means that they are freed up to focus on other elements which can add value to the company.
Also, outsourcing payroll can help to reduce potential payroll errors and mistakes, which can be costly in the long run. It can also provide employers with peace of mind by ensuring compliance with all legal procedures and requirements, which can be a major concern for small and mid-sized businesses. By outsourcing payroll to a trusted outside party, any tasks related to local or national legal regulations can be delegated to those who are knowledgeable about the subject.
Finally, outsourcing payroll can provide employers with enhanced security by utilising specialist software and technology to keep sensitive data secure and safe.
Why Do Large Organisations Outsource their Payroll?
For many organisations, payroll is not seen as being just one of many other simple tasks that need to be carried out. Payroll is absolutely crucial, as if not handled correctly, then the business's reputation can be affected, and employees will be unhappy, therefore being less productive and creating lower-quality work. On average, the cost of payroll for organisations is somewhere between 30% to 35%. This is a huge figure, and often it is just a small team of finance or HR workers managing the whole process.
Large organisations often outsource their payroll function in order to maximise efficiency, save time, and reduce costs. Large companies often have hundreds or even thousands of employees, meaning the payroll process can be time-consuming and laborious. Outsourcing this process allows large organisations to focus on other areas of their business, as they'll no longer need to dedicate resources to manage and maintain payroll data. Furthermore, large organisations can benefit from economies of scale and discounts offered by payroll providers, which can ultimately lead to cost savings.
How Much do Accountants Charge for Payroll Services UK?
There are various elements to the cost of outsourcing payroll services in the UK. They have been split up into individual sections below.
The Set Up Cost
The cost that is associated with setting up payroll with an outside supplier will change depending on the size of the business in question, as well as the requirements of the work. To set up payroll with a new outsourced business, the charge usually starts at £10 as a one-off cost. But as previously mentioned, this can grow depending on the business size.
Per Payroll Costs
Another factor that impacts the final price of hiring outsourcing services is the per-payslip cost. Depending on how many payslips the outsourced firm will need to process for your business, this cost will change. On average, the cost per payslip is somewhere between £4 to £6. It is common for outsourced firms to offer discounts each month when the number of payslips reaches a specific amount.
Auto-Enrolment Services
Firms that offer outsourced payroll services to businesses will also offer auto-enrolment services. Auto-enrolment is made up of three main stages, which each have their own separate costs.
The Initial Review Stage - this costs between £15 to £25 per client The Registration Stage - this costs between £25 to £35 per client Compliance - this costs between £0.75 per pay run per employee
End-of-Year Filing
This is a very important part of all UK payroll outsourcing. As it is so important, HMRC has ensured that year-end filings are as simple as possible. The main concern here is that the final FPS (full payment submission) or EPS (employer payment summary) is submitted on or before the deadline. On average, it costs £20 per EYU (earlier year update). In conclusion, outsourcing payroll can have numerous advantages and disadvantages that employers must carefully consider. Businesses should always research the provider they are considering and ensure they have a solid understanding of the services they offer and
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