Getting paid is one of life’s most important requirements, so it’s crucial that companies get this right for their employees. Today we’ll look at payroll outsourcing, what it means and the benefits of the service.
Payroll outsourcing is where a company engages an external service provider to manage all their payroll services. The payroll company will be staffed by professional payroll experts who are up to date with the legislation needed for managing your employees and your business. Outsourced payroll companies make sure your employees are paid correctly, on time and that the correct deductions are made from your employees’ gross pay. They can also make payments to HMRC and to any service providers for employee benefits, such as private healthcare, pensions or gym memberships.
Running payroll can be a time-consuming and complex job. If you don’t have expertise within your business, it can lead to problems with non-compliance with legislation, which puts your business at risk of financial penalties. Payroll outsourcing companies mitigate this risk and carry out the payroll function on your company’s behalf.
You may have heard terminology such as ‘managed payroll’ or ‘payroll bureau.’ These are simply other descriptions for the outsourced payroll service. Managed payroll services and payroll bureaus provide the same outsourced service for your business.
What are the benefits of outsourcing payroll?
Outsourcing payroll can be cheaper than running payroll in-house. Outsourcing payroll reduces staff overhead by removing the need for full-time payroll personnel. Companies can also control budgets better with transparent fixed costs per employee. In companies with no dedicated payroll expertise, outsourcing payroll also significantly reduces the risk of errors in payroll processing.
By putting payroll in the hands of experts, companies remove the risk of non-compliance with legislation. There are well over 150 pieces of legislation relating to payroll in the UK. For an SME, it’s almost impossible to keep up with legislative changes and if you fail to keep up with them, you will fall foul of the law. By outsourcing payroll, you hand this off to the experts. It becomes the payroll service provider’s responsibility to keep their systems up to date and automate complex payroll calculations. Not only is there the financial implication of failing to keep up with legislation, but there’s the potential damage to a company’s reputation to take into consideration too.
Payroll outsourcing also removes the potential problem of a single point of failure in your business. Particularly when you have a larger workforce, your payroll may be pretty complex. If your payroll manager is unable to run the payroll – if they are absent from work through illness for example – you could well be stuck. By using an outsourced provider, you’ll never come across this problem. Advanced systems are fully automated with little human input required. You’re also supported by a team of experts who can fix any problems, answer any queries and process your payroll effectively. You’re no longer relying on one person to make sure you staff get paid.
Outsourcing payroll gives an employer peace of mind that the payroll function is being handled correctly and frees up time, so they can focus on running their business. Payroll is an incredibly important function and it’s critical to get it right, but is it the best use of a business-owner’s time? As a business owner, if you spend time inputting data, running and checking payroll, you’re working in your business rather than working on your business. If you outsource the payroll, you can concentrate on developing your business and making more money!
By getting the payroll function right, employees feel more valued and motivated. Humans are fallible and mistakes get made, but this has a huge impact on employees - particularly in times of financial stress. With outsourced payroll, the system is automated. This leads to a huge reduction in payroll errors and ensures your staff get paid correctly and on-time which has a big impact on staff morale and productivity.
Types of outsourced payroll providers.
A full-service payroll provider will look after your payroll from start to finish. This includes making payments to employees and making payments for benefits (disbursements). When working with a full-service payroll provider, you initially provide employee data, bank details and business information and they take over from there.
If you have no or slow staff turnover, further involvement is limited, other than approving the payroll and making sure there is money to cover the pay run. As new employees come on board, or there are changes to employee terms, you need to inform the outsourced payroll provider so they can update their systems for those employees.
Basic payroll providers leave the administration to you, but they calculate pay and deductions for your employees. They generally complete the basic function, produce payslips and calculate payments to HMRC on your behalf, but leave payments to you.
What information do I need to provide?
You don’t need to have a payroll expert in-house if you work with a full-service payroll provider. The following types of payroll data needs to be provided and the service provider does the rest:
Ø Name, address and personal information
Ø Employment start date
Ø Timesheet information and rates of pay (if applicable) or annual salary
Ø Frequency of payments
Ø Tax code
Ø Changes to pay, tax codes, terms of employment
Ø Holidays and leave (parental leave, holidays or illness)
Ø Employment end date
Payroll providers provide you with software to enter, and amend, employee data. It is the responsibility of the company to keep the payroll provider up to date with changes in the business, but if all data is correct, the automated software does the rest. You’ll be able to see reports and access payroll data in real-time.
PayCaptain’s intuitive cloud-based portal leads users through a step-by-step process to set up new employees and make changes where needed. Watch a demo here.
What happens next?
Once everything is set up, your outsourced payroll provider will do the rest. You can sit back and relax in the knowledge that you have an expert in your corner and your staff will be paid correctly, as well as on-time. They’ll process your payroll, request approval from the business owner to make payments and produce your employee’s payslips. Holiday payment, sickness pay and parental leave will be calculated and they’ll submit the required information to HMRC. Disbursements for pensions and benefits will be made, using a fully automated process. When the company has leavers, the payroll service provider will produce P45s. They’ll also produce P11Ds and P60s at year end.
How do I choose an outsourced payroll provider?
There are many outsourced payroll providers. You have to find one who works for you, offering the types of service you need, to both you and your employees. Ask yourself the following questions and shortlist service providers to see if they meet your needs.
Ø Do I need a cloud-based solution?
Ø How secure is the solution?
Ø Is the provider regulated by the Financial Conduct Authority?
Ø What’s the track record of the leadership team?
Ø Does the software manage all changes to payroll legislation?
Ø How much admin time will be needed each month?
Ø What accreditations does the company have?
Ø What benefits are there for my employees?
Ø How clear are the payslips and reports?
Ø Is the solution easy to use and intuitive?
Ø Is there a demo available?
Why is PayCaptain different?
PayCaptain is a full-service outsourced payroll company that works closely with clients. Whilst the system is fully automated, PayCaptain has a hotline to their payroll experts that means queries and problems are resolved in real-time.
Sadly, many payroll service providers think of employee’s as ‘payslips.’ They don’t look at the human element of processing payroll. They think of a company’s employees as a number, rather than a person. PayCaptain is different. They recognise the mission-critical role of getting a company’s employees paid correctly and on time. They also understand the impact on financial wellness and mental health if errors are made in the payroll function.
PayCaptain founder, Simon Bocca, says, “Our mission is to support SMEs deliver excellent payroll services. We’re not just an external provider, we become an integral member of the team. We don’t see employees as faceless payslips, but as people. We’re on hand for both employees and employers to answer questions and to make payroll a solution for financial wellness.
Financial wellness has a huge impact on mental health, which in turn impacts productivity and morale. Financial stress is the number one driver for absenteeism. We make the running of payroll seamless, reducing errors and improving the delivery of this critical function. Our app makes accessing and understanding payslips easy, so that employees know exactly how much money they’ve got to spend. We also help employees make provision to invest and save.”
With PayCaptain, employees are provided with interactive payslips on the payroll app. If they have any questions regarding their payslips, they can have a conversation and ask questions with a chat bot which gives quick answers to most frequently asked questions. If the employee doesn’t get the information they need to understand their payslip, they get transferred to a PayCaptain expert who will answer their queries. Read more about the benefits of interactive payslips here.
PayCaptain has an intuitive cloud-based portal for employers to add and amend employee data. They can also check and approve payroll as well as run detailed reports, making critical payroll information clear and easy to access. Updates to payroll legislation is automatic, so employers and business owners never have to worry about falling foul of the law. Employers can be assured that their payroll will be run on time, correctly and comply with all payroll legislation.
So, why is outsourcing good for my business?
Outsourcing payroll has many benefits for businesses and employees alike. Payroll is a business-critical function that, done right, improves productivity and morale by demonstrating to employees their worth to the business. Outsourcing can save both time and money. It can give business owners the opportunity to concentrate on running their business and plan for strategic growth. It also provides peace of mind that payroll is in the hands of experts and ensures compliance with legislation, protecting the business in the long run.
To learn more about PayCaptain, arrange a demo.
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