Outsourcing payroll: ten benefits to your business

by Rob Stokes

Published on 16th December 2019

As an employer, payroll is among the most important tasks for your business for many reasons, so why would you then consider outsourcing payroll?

Paying your staff on time, and with the correct amount, is not only a legal requirement it is ethically and morally the right thing to do and is one of the factors that helps engender loyalty among your staff. After all, who wants to stay with an employer who is an unreliable payer or who pays the wrong amount?

However, running a payroll can be time-consuming, is highly regulated, with frequent changes and easy to get wrong if you lack up-to-date knowledge and experience. The process can seem overwhelming and so is prone to human error. Often there are many elements to calculating an individual’s pay which then need to be itemised on the payslip, adding to the administration burden already suffered by the employer.

No wonder, then, that so many employers face the weekly/monthly payroll session with something approaching dread.

There is another option, however: outsourcing payroll. At Optimum, we have an experienced team led by Tahera Begum, who run the payroll for many of our clients. They are delighted to have handed over what was, for them, a distraction from other business tasks. Although, as an employer, they still retain overall responsibility for payroll, the practical side is now being handled externally.

Benefits of outsourcing payroll

There are many headaches and responsibilities that come with running your own payroll all of which can be alleviated by outsourcing this vital business function.

Here are just ten immediate benefits

1. Saving time. Running the payroll can be time-consuming and a distraction from your primary role of running your business. By outsourcing your payroll, all you need do is provide information on standard hours worked, plus any variations such as days off for sickness or holiday, any redundancies, pay rises, taxable expenses and so on. The payroll will be seamlessly run and your staff will be paid the correct amount and on time, with all returns filed on time.
2. Keeping compliant. There is a hefty legislative side to payroll and many rules and regulations that must be adhered to. These include pensions through automatic enrolment (AE), National Minimum Wage (NMW), National Living Wage (NLW) and GDPR. By outsourcing your payroll to a professional, you can trust that you will be fully compliant. If, for example, there is an increase in the NMW, or the employers’ and employees’ contributions to AE pensions need to increase, these changes will be instigated automatically by your payroll professional, subject to your agreement.
3. Pension scheme compliance. Under AE legislation, employers have to create a pension scheme for their staff and then opt their staff into the scheme. However, not all available schemes fully comply with automatic enrolment rules. Here again, your payroll professional can review the pension scheme you use and advise on a move if necessary.
4. Accuracy. Using a payroll professional removes the risks of errors, as they are experienced in reviewing the output of payroll software.
5. Fielding queries. If there is a query from an employee, for example over their pay, then you can quickly refer to them to your payroll team, again saving you time in dealing with or researching the issues. Similarly, any pay or benefits related queries from HMRC can be dealt with by the payroll team.
6. Access to information. All employees need to be provided with a payslip, either electronically or in printed format, including some predetermined information. However, these can easily be mislaid. Should an employee need a fresh copy, they have access to an online portal which they can log into and review their payment history and be able to retrieve payslips.
7. Employee retention. Paying wages accurately and on time will enhance your reputation as an employer people want to work for, so another benefit of outsourcing payroll is it can assist with employee retention and employee attraction.
8. Professional support. At Optimum, our payroll is one service of our business, so our payroll clients also have access to accountancy, bookkeeping and legal services. The accountancy and bookkeeping services, in particular, complement outsourced payroll.
9. Cost. It is a common held myth that outsourcing your payroll will be a large expense. In fact, when you factor in the time saving and licence fees you will be saving in software, which will now be provided by outsourced payroll, then it becomes a very cost-effective option.
10. Finally and most importantly: peace of mind. By outsourcing your payroll you take a weight off your shoulders. No longer will you have to make time to pay your staff and then remember to pay HMRC three weeks later. This will all be done for you.

CIS, construction and outsourced payroll

Whilst outsourcing payroll is always an option for employers, regardless of their business, there is one sector, in particular, that can benefit from outsourced payroll: construction.

Here, the Construction Industry Scheme, or CIS, operates. Contractors must register for CIS and the construction companies employing them have to deduct a proportion of their wages, at different rates subject to their registration status, to pass on to HMRC as contributions towards their tax and National Insurance.

It is a complicated scheme to be part of and, to ensure accuracy and compliance, it is advisable to outsource this as part of your payroll.

Owner managed businesses and outsourced payroll

If you have a limited company and you are your only employee, you might feel outsourcing payroll is unnecessary. However, it has been demonstrated that mistakes can be made, even where there is a single payee.

For example, at Optimum we have been assisting new clients who historically have been paying themselves and inadvertently omitting to pay their full National Insurance contributions. We are now helping them to make up for this, by topping up their NI. However, had their pay been dealt with by an outsourced payroll team the NI contributions would be up-to-date.

Outsourcing your payroll means you have compliance covered, frees your time for you to work on your business and allows you to access advice on tax efficient salary setting.

If you are struggling to make time for your payroll, or have any concerns about being compliant, or simply want some help and advice, please get in touch with Tahera and the team here at Optimum. We would be happy to assist.