Payroll outsourcing: is it worth it?

As businesses grow and employ more people, managing the payroll becomes more complex. As well as having to calculate wages and deductions, you need to remain up-to-date and compliant with regulations. For example, you need to be able to accurately determine whether individuals are employees or contractors (inside or outside IR35). If you don’t, you can get hit by major penalties. Similarly you also need to abide by rules relating to workplace pensions and auto enrolment. Given that managing a payroll correctly is a technical and time-consuming task, many businesses opt for payroll outsourcing services. In this article we look at whether payroll outsourcing is worth it for your business.

What is payroll outsourcing?

At its simplest, payroll outsourcing is when you hire someone else to take care of your payroll. This will normally be an accountant, bookkeeper or a specialist payroll company. For example, at THP we not only offer accountancy services but we have a dedicated payroll team for our clients.

What are the advantages of outsourcing your payroll?

There can be significant advantages to outsourcing your payroll. Depending on your business, some will be more attractive than others. They include:

• Freeing up time and resources. As your payroll grows, so does the administrative burden of managing it. By outsourcing, you can free up valuable time to focus on growing your business.
• Expertise and compliance. It’s easy to get payrolls wrong and to inadvertently fail to comply with legislation. By outsourcing your payroll to specialist experts, you’ll have peace of mind that they’re aware of the latest rules relating to payroll and will comply with HMRC regulations.
• Access to advanced technology. Outsourced payroll specialists usually have access to specialist software that makes managing your payroll simpler and more accurate. For example, at THP, we use Able Internet Pay Bureau. This was the first ever payroll package with inbuilt auto enrolment functions. The software also allows you to collaborate with us via your own online account, which you can use to enter timesheets, print off payslips and other documents, and even give employees self-service to their payslips, P60s and other items.
• Flexibility. If your payroll changes frequently – such as via business growth or hiring seasonal workers – an outsourced payroll provider can easily adapt to provide the efficient, accurate service you need.
• Security and confidentiality. Professional outsourced payroll providers will have strict security measures to protect employee data and prevent unauthorised access. This will help you comply with your GDPR.

The cost of outsourcing your payroll

The cost of payroll outsourcing depends on a range of factors. These include:

• The size and complexity of your payroll
• The level of service you receive (i.e. does the provider simply prepare your payroll, or does it also deal with HMRC on your behalf and ensure compliance?)
• The payroll service provider you choose

If you have only a very small number of employees, you may believe that outsourcing your payroll is too expensive. However, whatever the size of your business, payroll outsourcing usually delivers significant savings. For instance, you don’t need to:

• Hire or train in-house payroll staff
• Invest in payroll software
• Be expert in payroll legislation (assuming your provider takes care of compliance). This can also help you avoid penalties and fines

In addition, a professional payroll service provider is much more likely to be accurate and efficient, reducing the likelihood of mistakes and the expense of putting them right.

Should I outsource my payroll?

The decision to outsource your payroll is always yours. However, if you think it may be time to look into payroll outsourcing, do get in touch. Our specialist team will talk you through the payroll service we offer, how much it costs, plus the benefits it can bring to your business. There’s a strong chance that outsourcing could cut your costs and give your business a helping hand as it grows.