Digital technologies have allowed companies to outsource HR, IT, and payroll processes. Outsourcing your payroll is particularly helpful in case your business needs an in-house finance or administration team or your finance team is busy handling more strategic tasks like client finances.
Outsourcing payroll is more helpful for small businesses in the UK that want to save money and time spent on payroll processing. But before we tell you if it’s a good idea to outsource your payroll, let’s understand what payroll outsourcing entails.
What is Payroll Outsourcing?
Payroll outsourcing means that you let a third-party vendor (an external entity) manage the payroll for your business. This means that a third-party service provider would handle your payslips, process your payroll, and handle all the compliance and tax functions related to paying your employees.
Outsourcing your payroll to a reliable service provider would take all the extra responsibilities off your shoulder while giving you access to the best payroll services. You will be able to work on your strategic business goals with more focus while ensuring that your employees receive their compensation on time, accurately, and without any risks involved.
Advantages of Payroll Outsourcing
Outsourcing your payroll to a trusted third-party vendor has several advantages. Let’s take a look at some of those significant benefits.
Payroll requirements could get complex. Sometimes businesses prefer to refrain from using their resources on such difficult tasks. Even though some businesses have an efficient in-house team to handle payroll, they prefer outsourcing it to an external agency that can do the same work at lesser costs.
Hiring full-time employees to handle your payroll processing, and buying the required software, etc., is costly. Meanwhile, hiring a third-party vendor in a developing country helps you save on all these fronts.
Payroll processing is a task that requires a lot of time and attention. Such time-consuming tasks can distract your finance and administrative department from their primary job, which is, handling your client’s finances. Outsourcing payroll can save a lot of time for your finance department, which can be invested in more crucial business-building work.
Payroll filings, omissions, or missed deadlines could result in you paying hefty compensation to the government. If an outsourced agency has the task of taking care of your payroll, they can focus better on their task while you focus on your sole job of making a profit. These outsourced companies also have payroll experts who have experience in managing payroll processing. This minimises the chances of errors.
The third-party vendors providing payroll processing services are specialists in their field. It is no doubt that they are on top of labour codes and employee legislation. This will help you keep your employees compliant with the law. In addition, these service providers can also help your employees with their payroll queries. This will speed up your payroll processing response.
What Payroll Services Can a Business Outsource?
Now that you know outsourcing your payroll services can be advantageous, we want to help you understand what services you can outsource. Mentioned below is our list.
- Doing employee pay and withholding calculations and running payroll
- Issuing checks to employees or depositing funds in their account
- Making tax payments to HMRC
- Calculating payroll taxes
- Filing the required payroll-related government reports
- Keeping an eye on employee benefits
- Administering national insurance and pension contributions
How to Choose a Payroll Service Provider?
- The Cost – When you hire a payroll service provider, confirm if they are offering you a fixed price for their services. It would help if you also found out whether they have hidden costs. Keep in mind that you need to understand their charges per payslip. All of this can help you hire an affordable payroll service provider.
- Compliance – The next thing to consider while hiring a payroll service provider is whether they work within the law. Ask if they are compliant with GDPR. Another concern before hiring a payroll service provider is whether an accounting body regulates its firm/business.
- Experience – Auto-enrolment and real-time information (RTI) are some functions that prove how suddenly HMRC requirements can change. Small businesses need more time and resources to keep up with all this. However, external payroll service providers are adept at handling these details.
Make sure that you hire payroll processing specialists with many years of experience. These experts are always up to date with the changes and give proper guidance to businesses on how to effectively manage their payroll. They also help minimise payroll processing mistakes while speeding up the entire process.
To Sum It Up
You can outsource your payroll processes. It is quite advantageous. Make sure you hire the right payroll service providers with the experience and expertise to handle complex tasks like payroll.