risk of payroll outsourcing

The decision of outsourcing the company payroll is not simple. This has risks along with benefits which needs to be kept in mind while finalizing your payroll outsourcing organization.

You need to consider these facts before outsourcing:

Transition time & implementation plan in place

Transferring data is a vital aspect of outsourcing. Incomplete data transfers, along with poor access will get you in trouble.

Solution: You need to plan the data migration well in advance and need to get the transition plan in hand to select the best time for outsourcing. With this practice, everybody is aware of the deadlines and transition will be successful without hassles.

 Payroll Quality

Employees are key to any organization and employees’ salaries are run on short intervals i.e. Weekly / fortnightly/ monthly and while thinking of outsourcing it, this must be transferred quickly & efficiently so it does not hit the employee payments.

Solution:  The best way to avoid discrepancies is to go for trial runs. In this practice, you can make sure that data has been migrated to the new system correctly and reports can be compared with current reports to check if there are any discrepancies.

Outsource staff Expertise in all services

Payroll outsourcing team is not well versed with all aspects of the payroll may get you into the trouble and you may miss the deadlines & get penalties from HMRC.

Solution: Payroll outsourcing team should be expert in all aspects of payroll e.g. processing, filings, P11D’s, statutory payments, Auto Enrolment, NMW well versed with Industry-specific rules e.g. restaurant tronc payments & thermal industries, etc. If you belong to any industry which has specific rules, please check before proceeding for outsourcing.

Control on the payroll process

An existing employee knows the business better. They know what to do, and how to do it well. When you outsource, you do not access to the data and lose control.

Solution:  Keep your experienced staff indulges for guidance and training to payroll outsourcing organization. You will have control of the workflow, and this will lead to quality of work and few chances of compromising on service delivery.

Data Security

Outsourcing means sharing the confidential & sensitive information with a third party and mishandling can be done for the information.

Solution: you must check whether the outsourcing company is GDPR Compliant or not?  All data should be sent to employer & employees password protected. In case, Payroll organization does not follow the compliance, strict action should be taken against the payroll provider.

Services Level Agreements:

Due to the time gap in your company & payroll outsourcing organization, there may be issues in meeting the payroll strict deadlines which will lead to delay the payments to employees and incur penalties, etc.

Solution: There must be services level agreement and turn arounds for all payroll tasks and consequences if the service level is not maintained by them. If you have an agreement for this, both parties are aware of their responsibilities & deadlines.

Payroll activities not included in the contract

There are various activities which are not covered in the initial contract and charged separately which indirectly added to your annual outsourcing cost.

Solution:  You need to have a detailed contract/agreement with all services included and giving the list of services excluded in the contract. You can get a clear picture of outsourcing cost and be sure if outsourcing is beneficial for you or not. The notice period, payroll revisions & additional cost for ad-hoc work are also essential to be considered while preparing the contract.

Read Also: How Outsourcing can help scale your Accounting business

 

by:
Bitnami