When you first begin to think about starting up a business, and when you eventually actualise the prospect, it’s natural for your mind to gravitate towards those core functions which the business is designed around. Namely, its purpose; whether that be to provide a unique service or manufacture and sell a certain product. However, for any business to operate properly there are a further set of internal tasks that must be addressed.

One such universal duty shared by business owners is paying their employees a wage. Payroll is how this is done, and it’s vital that it is carried out properly. But it’s not just a matter of making sure that staff are paid on time and in full. In the UK, payroll is a legal requirement, meaning, failure to meet set standards implies serious consequences. On top of this, if you have no experience with payroll procedures then it can be singularly confusing and frustrating.

Understandably, this may come across as quite worrying if you’ve recently decided to establish a business, regardless of its size, and haven’t yet considered the finer details. Having said this, there is a way to negate these difficulties, and that is by outsourcing payroll. We’re here to outline all the benefits that come with outsourcing your payroll, and how to easily switch providers if you feel like it’s necessary.

What is Payroll Outsourcing?

Payroll outsourcing is when a business hires an external third party to handle all of the responsibilities associated with payroll. Fore mostly, this involves making sure that an organisation’s workforce receives their accurate paychecks in a timely manner. Moreover, it also includes the provision of data security alongside support with tax reporting, accounting, legal matters, and unemployment claims.

The obvious consequence of outsourcing payroll is that it entails a substantial reduction in the administrative tasks which would otherwise be carried out internally. When considered in this latter context, it essentially allows a business to automate this section of its operations. The simplification of regulatory compliance, data protection, employee benefits, monetary calculation & distribution, HMRC liaison, and incident control is inherent within outsourcing payroll.

Advantages of Outsourcing Payroll

It is generally the case with any business decision that there are a set of advantages and disadvantages to be weighed up during considerations before a definite choice is made. Contrarily, with payroll outsourcing, so long as you locate a service provider which matches your ideals, the benefits are comprehensive. They are as follows:

1. Saves time

Running a business is one of the most time-consuming occupations because you are expected to oversee every facet of its operations, ensuring that everything is functioning accordingly. It’s very likely that at some point the amount of responsibility causes you to feel overwhelmed and burnt out. Naturally, this is not permissible if a business is to survive, and so any area where time can be saved, it should.

Payroll is a very meticulous process, it demands a lot of attention and focus since it is a fundamental procedure within virtually every business. Calculating and distributing your employees’ pay, the amount of tax they are due, and other factors like student loan repayments & pension contributions is of utmost importance. Likewise, it’s essential that these calculations are accurate. Bear in mind also that the volume of these duties will only increase as your business grows and takes on more staff.

Rather than fulfilling these obligations in-house, outsourcing your payroll effectively removes the various obligations from you and your workforce’s schedules. Meaning, more time can be used on those core tasks which your business primarily revolves around, so that it can thrive in the places that really matter for the promotion of its success.

2. Saves money

The fact of saving time by outsourcing payroll is inextricable from how it similarly works to save money. This is because, in business, time is equal to money. If you are prevented from putting time into enhancing the internal processes which go towards increasing your revenue, then you are intrinsically holding the quality and subsequent financial gains of your business back.

Especially pertinent, payroll is a function that is considered to fall into the field of human resources (HR). That is, it is an element of business which does not, in any way, work to increase profitability. Rather, it is a job that is external to the unique practices of any given business, hence why it is regarded as an obligation, as opposed to a recommendation.

Further, if you were to meet these responsibilities in-house, then you would be subject to the costly expenses that are required to buy and maintain your own payroll system. Outsourcing a managed payroll service means that such upfront costs are subsumed by the external party. In essence, any costs that come along with outsourcing payroll are fully accounted for in both the time that it frees up and the prospective spending that it eliminates.

3. Rules out training & prevents errors

In order to be able to carry out payroll in-house, individuals need to be trained. Choosing this route would mean investing company budget and time into preparing staff to be adequately trained for the job. Or, you could hire already fully-qualified staff to take care of payroll, but again, this would necessitate a substantial increase in the level of outgoings. Notwithstanding, if a hiree were to leave, then the arduous and costly recruiting & training procedures would have to begin again from scratch. By the same token, payroll operations may become delayed if there were to be an absence of staff for whatever reason.

Instead, since outsourcing your payroll is where you employ a team of professionals who are solely specialised in this subject, there would be no need to involve such measures. What’s more, it reduces the chance of errors occurring like miscalculated wages and outstanding omissions. This is due to the fact that payroll providers are wholly committed to ensuring that no oversights occur here, whereas it’s quite possible for a newly-trained employee to make erroneous judgements, given their relative inexperience and the amount of data being handled. Likewise, it allows you to rest assured that all payroll duties will be addressed in a timely manner, and that the detrimental role of absences will play no part. Mistakes in payroll aren’t easily forgiven because it concerns your employees’ financial wellbeing, not choosing a reputable payroll service provider can considerably harm your business’s overall structural authenticity.

4. Improves data security

As an employer, it’s also your responsibility to maintain a suitable degree of security over sensitive data. One of the main benefits of outsourcing payroll from a respected service provider is that it enables access to the latest industry technology. Today, companies that outsource payroll use cloud-based systems capable of easily managing important data while upholding an amplified level of integrity. Having all your business’s payroll information on a centralised platform additionally implies an increased range in visibility. Namely, if you or your employees want to access certain files then this can be achieved anywhere, provided an internet connection is present.

Integrated cloud-based HR software is also leading the way in heightened efficiency for businesses. One of the novel facets besides better data storage and visibility is that it makes it possible for internal processes to be automated. Thereby, eliminating the chance of human error occurring and streamlining the processing of payroll & audit-tracking. In light of this technology, doing such duties manually is now regarded as unnecessarily onerous because administrative time and costs can, accordingly, be seamlessly curtailed.

Perhaps surprisingly, digital solutions like this can be leveraged to gain a competitive advantage by how the software can produce insights through in-built performance analytics which reveal opportunities for organisational improvement. Needless to say, as the prevalence of remote working continues to grow, alongside employers taking on new hires from outside the UK at an increasing rate, such online software is showing its value more and more each day.

5. Ensures regulatory compliance

When conducting payroll, regulatory compliance is something that has to be done right. If your business is not compliant with the regulations that are in place then it is likely that you’ll incur penalties and fines. It’s for this reason why business owners in the UK tend to worry over correctly responding to PAYE and tax requirements. This means submitting employee wages with accurate tax, national insurance, pension contributions, as well as adhering to proper deductions in-line with the numerous student loan types.

Such compliance is imperative for not only the business, but their respective employees too. Failure to follow regulations, as said, can have rather serious consequences if not addressed. The inherent complexity of this aspect of payroll is further compounded by the fact that employment, data, and compliance regulations with the addition of tax legislations are changeable & vary depending on what country each of your employees operate in. The latter is quite relevant, considering the aforementioned emergence of international remote workers.

Naturally, this is a lot for in-house payroll operators to keep on top of and efficiently manage. Mistakes can happen in such circumstances, especially if they are only recently trained. Outsourced payroll providers, on the other hand, are adept at guaranteeing the evasion of mistakes here while maintaining accurate records for future use.

As these points illustrate, by outsourcing your payroll and so shifting the associated concerns to a third party entity, your business not only becomes more efficient and secure, but able to carry on with its usual, lucrative workflow. To reiterate, the benefits are comprehensive and work to establish your business’s integrity; in the long term, any cost proves itself to be directly offset.

Switching Payroll Providers

Initially, it might seem like switching payroll providers is a transition that requires a big upheaval. However, as the title of this article suggests, it can be done quickly and painlessly. All you need to do is follow our concise checklist:

• Consult your current contract

This will depend upon whether your contract is binding for a specific period of time or flexible. For instance, if you are tied to a payroll service deal for one year and you’ve only been on it for half of that time, then it may be a little more difficult to depart. If, however, you are currently on a flexible contract that is paid for via monthly subscription fees then you’ll be able to leave at any point. If your case is the former, then it’s worth contacting your provider to discuss your options.

• Let your current service provider know

If you want your switch to be as smooth as possible, it is essential that you contact your current provider to let them know that you’re checking out. This is so that they have ample time to get their tax documentation in order for your new provider.

• Gather the necessary data

Whereas some HR systems have purpose-built integration capabilities, others don’t. For such a situation, it is necessary that you collect data relating to your business and its workforce such as employee personal details, their bank account information, tax documentation, salary breakdowns, and relevant business particulars.

• Choose the right time

The best time to switch is just after the end of the tax year (early April). The reason for this is because year-to-date reporting is, as a consequence, a lot clearer. If you were to switch mid-year then you’d have to share a considerable amount of year-to-date figures with your new provider, i.e., more paperwork and complications. Albeit, it is still possible to switch at this latter time.

• Make collaboration between providers a certainty

You want your providers to be cooperative. For example, you want tax filings to be coordinated so that each provider knows who will be submitting real-time information to HMRC, and when the crossover will be finalised. An extra measure to ensure cooperation is to carry out a parallel run. This is where your old provider continues to distribute pay while your new provider sets up their system properly so that the switch is seamless.

There you have it! And if any of the items in the list above appear to be out of your depth, then it should be reassuring to know that it pays extensively to go with a provider that understands you and your business needs. That is, a provider that can give you all of the benefits we’ve outlined here which can be garnered by outsourcing your payroll.

Thank you for taking the time to read this article, we hope that it has helped by showing you, in full, the benefits of outsourcing payroll and how you can switch providers with ease. We at advo comprise a team of HR professionals who pride ourselves on the excellent, HMRC approved, payroll service that we provide for our clients. Our advo-one platform integrates all you need as a business owner, whether small or large. If you have a firm or growing interest in our services then be sure to contact us at any time. We look forward to making payroll easy for you!