Trying to do payroll in-house is one of the most frustrating, time-consuming, and – if you get it wrong – risky things a business can do. Off-the-shelf software packages are rarely able to deal with the complexity of real-world employees and their mixes of benefits and allowances. In addition, every March the Chancellor moves the goal posts. Whether you agree with his latest changes or not, they almost certainly impact the way you run your payroll, so it’s out with the software manuals while you try to figure out how to align your system with the latest requirements.
These problems are particularly difficult for businesses that employ large numbers of casual staff or have high turnover – for instance, in the horticultural and agricultural sectors, or where staff have to be taken on and processed at the busiest times of the year. HMRC didn’t help when it thoughtfully introduced real-time information reporting for these workers so that every employee has to be entered onto the payroll, even if they are working for a few days. You now have to report to HMRC every time you pay an employee. It’s a huge burden for all businesses.
And that’s before we even start looking at pension payments and contributions – another layer of complexity to add to the mix. In fact, compliance with government regulations on everything from maternity pay to statutory sick pay, privacy legislation and data protection is another reason for the increasing number of firms taking the view that payroll is no longer a business function that can be managed in-house.
There are a number of sound reasons behind the move to outsource payroll:
– It can be cheaper. The fact that a payroll provider is processing many thousands of employees each month means that they can offer economies of scale. Your in-house team may need to spend a great deal of time on individuals with complex payment arrangements.
– A little distance can be no bad thing. It’s all too easy, if there’s an office down the corridor, for employees to get into the habit of popping along to the office to chat about their payslip or other minor queries, so in-house staff may be constantly interrupted to deal with enquiries. More seriously, an off-site payroll processing service reduces the risk of breaches of privacy and enhances the confidentiality of your salary and bonus payments.
– Outsourced payroll provides more certainty that you are paying correctly. Although you as business owner are ultimately responsible, a professional payroll company can ensure that calculations are correct.
– It relieves you of the burden of keeping up to date with constant changes in the tax and national insurance systems. Your payroll provider will be watching the Budget keenly, will take note of the deadlines for changes and will ensure that your payroll is compliant with the very latest government and HMRC requirements.
– A sudden flood, a collapsed ceiling, bad weather, maternity leave or sickness in your office can all make it difficult to meet your payroll date. With an outsourced service, you don’t have to worry about all this. They have far more specialist staff to call on.
– Key documents such as P60s are taken care of.
– If your business is growing, it’s easy to scale up the payroll provision. This can also work well for seasonal businesses which employ a lot of people at certain times of the year.
Once it’s outsourced, few companies ever return to in-house payroll – the business advantages of outsourcing are just too compelling.