Payroll is a key business function that can jeopardise a company’s relationship with its employees if mistakes are made. But with the financial expenditure involved and worry of legal employment obligations, payroll can be both confusing and time-consuming.
With multiple processes that are required to comply with legislation and ensure workers are paid on time, internal payroll teams are stretched to the limit. It can take only one mistake to have a detrimental effect on employees lives and office morale. All of this can be avoided with efficient payroll outsourcing. Experts who know the requirements, processes and legalities inside out can act as an extension of your team and ensure costly errors are avoided.
Whilst many would assume that outsourcing payroll would cost more, James Alesbury, Director and Payroll Specialist at HWB Chartered Accountants highlights that research has actually shown that those outsourcing their payroll function tend to spend 20 percent less. By utilising an outsourcing solution, you can save both money and valuable resource.
But when is the right time to pursue outsourcing? What are the signs?
Business is growing
The more your organisation grows, the more complex and time-consuming payroll functions become. Your payroll function may become more sophisticated and you may have more employees in different geographical locations with constraints against what is required legally. Take time to assess your payroll needs versus capabilities, if they don’t match then there are alternative dedicated expert options available externally.
Increases in the number of mistakes made whilst payroll processing are one of the sure signs that it may be time to outsource your payroll function to experts in the field. Once timeliness and accuracy of your payroll function starts to slip, then you’ll need to act accordingly. You’re more likely to hear of such issues from your employees themselves, especially when regarding late payments or underpayments. Keep a firm eye on any issues that develop which may result from either lack of knowledge and experience or simply needing to rush the job.
Payroll compliance and the avoidance of hefty penalty fines has become a big factor in outsourcing. The introduction of Real Time Information (RTI) reporting to offer a more accurate method of sharing Income Tax and National Insurance Contribution information with HMRC was a game changer. As well as the more recent introduction of Auto Enrolment pensions and keeping information confidential with the introduction of GDPR. Each requirement adding further challenges, pressures and time constraints to an already over-stretched internal team.
Payroll is taking more time
If your payroll processes are starting to take up a large amount of time and resource then it is time to make a change. If despite the training and technology you have already invested in, you are still spending more and more time on your payroll function, then the chances are it is time to outsource.
Not having any back up
Many businesses forget to take time to train someone else in payroll processing and are left in a difficult situation if they fall ill, leave or take time out for paternity/maternity leave. Ensure you have a succession plan in place if you are planning to keep your payroll function in house. Otherwise, it’s time to outsource.
Speed and Seasonality
You may be looking to increase your staffing ready to gear up for peak season, at which point you will require payroll to get up to speed quickly and be able to manage the additional workload and pressure. By outsourcing you can ensure you are focussed on the business rather than worrying about payroll issues and the additional workload.
Poor internal controls
With limited internal controls, the chance of fraud is greater. Outsourcing can add a layer of protection with a fresh set of eyes, unbiased views and lack of relationship with staff whose personal information they are accessing. Expert payroll service providers are also more likely to identify any red flags and irregularities within your data due to both their experience and use of specialist technology.
Outsourcing any business function is often considered as losing an element of control and taking on additional risk. However, this is not the case and payroll outsourcing in particular will give you confidence that your payroll processes are handled competently, accurately and on time.
Witten by James Alesbury MCIPPdip, Director and Payroll Specialist at HWB Chartered Accountants.