The Five Top Reasons for Outsourcing Payroll
Payroll is one of those essential business processes that add zero additional value to your business.
In fact, the only outcome you can have from running your own payroll is neutral (when people get paid what they expect) and bad – when they don’t.
With all the paperwork, pressure, and risks involved if things go wrong with in-house payroll it can be a real pain for your HR department.
Here’s five reasons why you should outsource your payroll.
1. Complying with HMRC is a must-do – or you will face fines in the £000s and other associated costs
Complying with ever-changing regulation isn’t easy – for a start, there’s a great deal of it, generally written in the taxman’s jargon.
In the last (March 2018) update of our popular Moorepayhr payroll software, we included six changes just to adapt the software to accommodate the requirements of new legislation.
And that’s the underlying, basic advantage of using outsourced payroll software – the legislative compliance is taken care of for you.
But then there’s also complying with how HMRC expects you to submit information to them, and report on key figures in your business (for example your gender pay gap if you have 250+ employees).
Under legislation called Real Time Information (RTI), businesses are fined when they fail to submit certain information to HMRC each time an employee is paid. This can be an exhaustive undertaking, particularly for employers running a weekly payroll.
Again, using a reputable outsourced payroll provider ensures your RTI requirements are met with every payroll run, with no additional input or oversight required.
When it comes to compliance with HMRC, when you’re outsourcing payroll you’re really outsourcing the stress and burden of ensuring you stay in HMRC’s good books.
2. Everybody does it (or nearly everybody anyway)
That’s right – 95% of businesses outsource at least one business process, and nearly two-thirds (61%) specifically outsource their payroll.
Partly this is to do with the quality of payroll providers out there, and partly this is because payroll is a fiendishly difficult area of business, served by few specialists, that can actively distract time and resource from your core business, whatever market you’re in.
Most businesses come to the conclusion in the end that it just makes sense to outsource payroll.
3. It’s cost effective and more efficient
While it’s not right for everyone there’s a reason why outsourcing payroll is so popular: the cost per employee per transaction when outsourcing is typically much better value than employing the equivalent requirement in head count.
And taking the strain off your existing team frees them to focus on areas of HR that really can add value to your business, like reducing absence (and boosting productivity), talent development, employee engagement and retention, and making for a safer and happier place of work.
4. Your vital data will be kept secure
With the impending GDPR due to have a huge impact on business, keeping data secure has never been under greater spotlight.
Outsourcing your payroll to a dedicated provider should mean your employees’ personal information is held in a secure, encrypted environment.
For example, Moorepayhr uses the same encryption methods as high street banks (a 256Bit SSL Certificate using the HTTPS protocol for the curious) and is stored in a purpose-built UK-based data centre, owned and operated by IBM.
5. Outsourced payroll providers are transparent and accountable
With payroll, accuracy is the key requirement, and it will have a huge impact on your business if it goes wrong.
Outsourced providers in the UK live-and-die on their accuracy (Moorepay have an accuracy rate of 99.8%), but more than that they are accountable: if your provider makes a mistake you can take up the problem immediately with your account manager (if your provider has one), through legal action, and you can always switch provider if you’re unhappy.
By contrast, if an employee made the same error you’d find it difficult to fire them, replace them and train the new recruit in a shorter time (and with less disruption) than it would take to switch payroll provider.