Benefits of Outsourcing Payroll

Benefits of Outsourcing Payroll

utsourcing your company payroll function gives you peace of mind that this area is being handled by a third party that specialises in this task day in, day out, and which should be able to provide a fast, efficient and reliable service.

Payroll is a complex area. It’s not just about ensuring all employees receive the correct basic pay, and other payroll issues you might be faced with include:

  • Overtime
  • Bonuses
  • Commission
  • Redundancy payoffs
  • Maternity/paternity pay
  • Child support payments
  • Pension contributions
  • Payments to other employee benefit schemes, such as group health plans
  • Business expenses
  • Whether to classify individuals who provide services as employees or self-employed
  • Ensuring the system uses the right start and end dates for employees joining or leaving the company

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Mistakes in payroll really are best avoided, and making use of an expert third party should avoid such problems.

If an employee is underpaid or overpaid, the mistake may not even get noticed. It may mean however that an individual ends up paying too little or too much in tax and/or National Insurance.

If a mistake is noticed, and efforts are made to rectify the error, then it can lead to a great deal of unpleasantness. An employee who receives less pay than they should is unlikely to feel charitable towards you as their employer, and you will be left with the task of working out exactly what ‘back pay’ should be paid to make up the deficit. Should an employee get paid too much, it can be awkward trying to recoup this.

Legislation relating to payroll can change at any time, and as a small business you need to ask whether you can keep up to date with any such changes, and make the necessary amendments to your procedures. The recent introduction of auto-enrolment pensions has been one example of a recent payroll headache for smaller companies.

2016 research by the accountancy firm UHY Hacker Young showed that payroll errors cost UK companies more than £700 million over the course of just one financial year.

A payroll company will of course charge a fee for its services, but if you decide to outsource this function, then you will not have to pay someone in-house to administer payroll, will not have to spend money training them, and will not have to purchase a payroll computer system.

Studies have shown that many small businesses spend six or more hours each week on payroll-related tasks, time that could perhaps be better spent attending to customers’ needs, or focussing on how to grow the company.

Even if you think you have someone amongst your staff who is competent to carry out all payroll tasks, what would happen if that person left the company, or was off sick for an extended period?

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Author: Gary Parsons
Gary is CEO at Talk Staff, passionate about the role that people play in helping build long-term and sustainable businesses. He sits on local business advisory boards and has been key in leading the growth of Talk Staff from inception in 2009.