We understand that when looking at a new payroll solution, the market can seem daunting. With a variety of options available from in house systems to comprehensive outsourced solutions, finding the right fit for your organisation may seem overwhelming.
It’s no exaggeration to say that payroll is one of the most vital functions of any business. The implications of paying staff late or incorrectly can be far reaching and for many organisations, could represent a make or break point. Errors in pay can greatly impact the wellbeing of your employees as well as present an organisation with significant legal hurdles. Furthermore, a company which cannot guarantee an accurate, regular payroll will find themselves saddled with an unsavoury reputation, potentially leading to a mass exodus of talent.
An effective, compliant payroll system can go a long way towards alleviating these concerns and ensuring an efficient and accurate payroll process for your organisation, month after month. We also appreciate that the search for a payroll system can be a little overwhelming at first- with solutions varying in complexity and offering in house or outsourced service, finding the right system to meet your business needs may seem daunting.
In this article, we will explore the options available to businesses when searching for a payroll system. We will explore the pros and cons of outsourced or in-house solutions in order to arm you with the information you need to find a system to best suit the needs of your business.
What is Payroll Outsourcing?
Simply put, Payroll Outsourcing is the use of an external provider in order to handle the administrative and compliance elements of payroll. The level of complexity offered by outsourced solutions can vary from handling only certain elements of an organisation’s payroll such as calculating deductions or transferring pay to employee’s accounts, to taking charge of the entire process.
How does Payroll Outsourcing work?
The exact method of payroll outsourcing which will work best for your organisation will depend on a variety of factors. Outsourcing comes in a variety of forms to suit businesses of all shapes and sizes and can help organisations tackle specific challenges they are facing when running their payroll.
When looking into potential service providers, it is important to be mindful of their particular specialisation - some providers may be more suited to running smaller payrolls, whereas others may target specifically larger organisations.
Generally speaking, the type of payroll outsourcing provided will fall into two categories:
- Full service payroll provider - This is the most comprehensive form of outsourcing and entails a provider handling all aspects of your payroll process. All that would be required of an organisation would be to provide the outsourcing team with the relevant data for the payroll. Given that this method is akin to a full payroll solution, the costs for a full service provider are understandably far higher. This type of outsourcing is beneficial for organisations lacking in experience and knowledge around the payroll process as it can help them avoid any legal pitfalls from various legislative changes.
- DIY Payroll providers - This is a more collaborative form of payroll outsourcing, with a provider handling the more laborious, time consuming aspects of pay whilst leaving basic admin functions such as tracking time and attendance to the parent company. This method is more cost effective than a full service system, particularly for organisations who have identified specific gaps in their pay process. This method will also be most beneficial for businesses who have effective systems in place for monitoring employee attendance, as this will ensure effective and clear communication with their service provider.
What are the benefits of Outsourcing Payroll?
At the best of times, payroll can be a time consuming and complicated process. To top it off, there is a minefield of legislation and legal requirements which organisations need to navigate in order to ensure that they remain compliant when it comes to paying their people. For these reasons, many organisations prefer to pass the responsibility of running payroll to an external provider. Some of the benefits offered from outsourcing can include:
- Legal Compliance-Payroll outsourcing providers are experts in the field and their knowledge of the industry and the legal requirements of a compliant payroll can be an asset to new startups or organisations lacking veteran payroll experience. Avoid costly penalties and fines from compliance pitfalls by letting an expert in the field take the strain.
- Benefit from the latest technology- Most service providers will make a point of keeping up to date with the latest technological developments in the industry, meaning that you can take advantage of the efficiency and speed of new systems and processes without the need to source new systems in house.
- Improved security- Payroll is understandably an area where data security will be at the forefront of everybody’s mind. Many organisations who are lacking confidence in their own security will find outsourcing a welcome boon. Many outsourced providers secure data safely on cloud based servers, often backed up by market leading security encryption, given you the peace of mind to know that your people’s data is being stored safely and securely.
- Save on time and money- It’s no secret that payroll is an expensive process both in terms of financial cost and man hours lost. Inefficient processes can run up massive costs and understandably organisations are keen to avoid this. Outsourcing can give you the peace of mind to know that your payroll Is being run efficiently and effectively month after month.
What are the benefits of In-house payroll?
Whilst outsourcing payroll can be a boon to many organisations looking to ensure an efficient and accurate pay process, many businesses still prefer to handle their payroll in-house. There is no wrong answer when It comes down to in-house or outsourced, only what is right for your business. With that in mind, what are some reasons that people choose to keep payroll in house?
- Greater control - Outsourcing payroll does mean relinquishing a certain element of control to an external organisation. As effective and efficient as outsourced providers are, many businesses may be uncomfortable with not having complete control over the process. This largely comes down to a security and data sensitivity standpoint, with many organisations wanting to control who has visibility of sensitive information on matters such as employee salaries etc.
- Lower cost - Even the most comprehensive payroll systems offer a more attractive price point when compared to outsourcing. Businesses who feel like they have a suitable level of knowledge/experience in their payroll teams will find that supporting their people with effective and efficient payroll systems may be a more effective long term investment.
- More accurate - Outsourced payroll relies heavily on accurate data being supplied by the client organisation in order to ensure a smooth and accurate payroll process. Intuitive knowledge of a company’s internal structure and working process can often ensure a greater degree of accuracy when collating data. Any errors in reporting can lead to knock on effects and for that reason, many organisations prefer to keep payroll in house in order to ensure a level of accuracy.
- Flexibility - Outsourced providers can very often have a huge client portfolio which means naturally, that their time is divided between each one every month, allotting maybe enough time to run the admin tasks for each. This can leave little room for error and if errors occur-as they sometimes do- organisations who rely on outsourced providers may find a lack of agility and flexibility in being able to meet and fix problems before payroll is ran.
What to look for in an outsourced supplier?
The requirements for an outsourced solution will differ for each organisation, varying in the complexity required based on a number of factors such as employee numbers, locations and pay rates. When sourcing a provider it is important to be conscious of the issues hindering your payroll process and which providers will be most suited to help you meet these challenges.
Some of the most crucial elements to look for in an external provider include:
- Record keeping and payments- Keeping on top of the admin burden of recording commission, sick pay, travel subsidiaries and any other financial inducements.
- Compliance - Make sure any provider is fully compliant with HMRC and the Pensions Regulator in order to avoid any legal headaches for your business.
- Are they payroll specialists - This may seem strange but some organisations are more specialised in the account management aspect of finance as opposed to being specifically specialised at running payroll. Consider what you are looking for in a provider, if it’s more than a simple admin issue, look for a provider with specialisation in the field of payroll.
- How much input will be required from your admin team - the success of any outsourcing will largely depend on your ability to correctly identify which aspects of your payroll you are looking to improve. Furthermore, one of the main reasons organisations look to outsource is in order to unburden their payroll teams, therefore any outsourced solution which still requires a huge amount of admin from your pay people, may not be worth your time.
- What are you getting for your money - As with any competitive market, it’s always vitally important to assess any potential external providers and properly assess what level of service you are receiving in exchange for your money. You can assume that every provider can offer a base level of payroll service but when looking at outsourcing, ask questions of their service: do they provide any other services to your employees, are they GDPR compliant? How well equipped are they from a customer support standpoint?
- Will it give you peace of mind - Ultimately, the reason anyone outsources a service is to take a burden off their hands. When looking at a potential provider, you have to ultimately weigh everything against whether outsourcing is going to make the lives of you and your finance teams easier. The right provider will look different for each organisation and fundamentally, what will work best for you is choosing a provider to specifically tackle head on, the challenges facing your business paying people, whether that be admin burdens or issues of compliance.
At Advanced, we understand how important it is not only for your payroll process to be as smooth and accurate as possible but also to make sure that your finance teams are freed from the burden of time consuming routine admin tasks and allowed to get on with business critical work.
Our Outsourced Payroll service has been designed specifically to help organisations across the country meet the challenges facing them from a payroll perspective and to provide them with the peace of mind they need to know that their pay process is compliant, accurate and efficient, month after month.
To find out more about how Advanced can help free your finance people and take the strain of your pay process, Get in touch with one of our friendly team members today.