Payroll: Is it time to outsource?
Historically, and somewhat inaccurately, payroll has been misinterpreted by many as simple data processing, often tagged onto the responsibilities of internal finance or HR teams. But with huge legislative changes in recent years; Real Time Information (RTI) reporting, Auto-Enrolment Pensions and numerous holiday pay rulings to name but a few, is now the time to outsource?
We’ve considered the advantages and disadvantages, of making the leap to an outsourced payroll function;
Advantages
Financial savings: The financial savings to be made in software alone can be enough to make outsourcing look a more attractive option! Many software providers operate on a monthly subscription basis linked to employee numbers, often based on turnover within the tax year rather than just current active employees (meaning a business can be paying to maintain the records of employees it no longer has). With additional costs for module add-ons to deal with extra requirements such as auto-enrolment pensions; this can all add up to a hefty price tag.
Time savings: Passing the payroll responsibility onto a third party can free up valuable time that can be spent on growing your business, or focussing on other important internal processes if payroll currently falls in the remit of internal finance or HR teams. It also eliminates the need for time spent keeping your own teams up to date with the frequent legislative changes; the responsibility and cost of this would all lay with the third party provider for their own staff.
Expertise: Outsourcing can give your business access to qualified and experienced payrollers. The Chartered Institute of Payroll Professionals (CIPP) estimates that there are only 15,000 qualified payroll professionals working in the UK – an asset that can be expensive and difficult to come by in-house. Payroll is of paramount importance to any business; issues with pay can quickly lead to issues in staffing and retention, so best left to the experts.
Cover, efficiencies and segregation of duties: Outsourcing your payroll function passes the burden of ensuring there is cover and continuity of service entirely to the third party provider, meaning no more holiday headaches, or worries if there are internal unexpected absences. Many payroll providers also offer BACs payment services too which can alleviate time pressures on the finance team usually required to make payments, as well as utilising autonomy to minimise the chances of input error or fraud.
Robust systems and security: A diligent payroll provider will have invested time and money in choosing a robust, reliable and secure payroll system; just be sure to enquire about your chosen provider’s GDPR policies. A strong reporting package will come hand in hand with this, often with the ability to tailor reports to individual needs.
Disadvantages
Data access: You may lose instant access to employee or financial data and statistics which may previously have been easy for you to retrieve quickly, instead having a small delay while your provider collates this and responds.
Staffing decisions: If your business currently has an in-house payroller, you may need to consider if there are enough other responsibilities for them to maintain employment. This may be the right decision for the business, but of course never an easy one to make.
Stricter timescales: Some flexibility may be lost with regard to timescales, and you may need to consider being stricter, or potentially bringing forward cut-offs for overtime claims and similar items…though some may consider that an advantage!
