What are the Pros and Cons of Outsourcing Payroll?
When it comes to the pros and cons of outsourcing payroll, we’ll need to come clean: we’re not entirely neutral. As you would expect.
More Pros than Cons
As an experienced bookkeeping business, in our opinion, outsourcing your payroll could be a significant plus. And, most certainly if you own a small to medium business, even with just a few employees. A managed payroll service aims to streamline your processes and save considerable amounts of your staff’s time. Equally, to enable you to remain legally compliant. In other words, it could increase efficiency and give you the peace of mind you deserve.
You can measure the benefits of outsourcing in several ways. For instance, increased turnover and productivity, lower staff “churn”, greater employee engagement and retention. Outsourcing payroll could support all of this.
Ideally, outsourcing can offer a substantial return on investment, whatever that means to you. But, it may not be for everyone.
Alternatively, there may be an outsourcing “tipping point”. This could happen when engaging the team at Angel Bookkeeping makes much more sense than struggling to do everything in-house.
To balance things up and to help you make an informed decision, we’ll highlight the pros and cons of outsourcing payroll.
Firstly, What is Payroll Outsourcing?
It’s an easy explanation.
In a nutshell, it’s delegating some or all of your payroll to a business that specialises in doing it. Outsourcing happens everywhere, in fact. Large and small organisations use what are often referred to as “managed” services. They do this for several reasons – to access expertise, reduce risk, save time, and help them focus on what they actually do.
What Are the Perceived Risks?
- Loss of Control and Privacy. Let’s address the main issue – or what may be perceived as such.
If you outsource your payroll, you’ll allow another business to access your staff’s private information. GDPR offers more robust security around data – which is positive. But, the idea that everyone’s highly personal details are in someone else’s hands may not sit easily with you and your team. This will likely include salary details, NI numbers, business banking information, etc.
To reassure you: Authentic payroll businesses offer ultra-strict guarantees and follow GDPR privacy legislation to the very letter of the law. Plus, you will have immediate access to your payroll information through cloud accounting.
- Costs. Yes, like all products and services, there will be an outlay. Over time, it could increase as you take on more staff. There will be a set-up cost, and a cost per employee. In addition, some outsourced providers could add charges for add-on expertise, such as integration with your HR software.
There is no such thing as a free outsourced payroll service, so this is a definite business expense. Especially for a young business.
To reassure you: outsourcing your payroll may sound expensive. But, there is a considerable financial risk of keeping it in-house and getting things wrong – with associated fines from HMRC. Also, there are hidden staff costs, as payroll takes up considerable time and effort, perhaps even by someone not correctly qualified.
- Missing or Delayed Information. As a business owner, you employ new staff, and other people may leave. In other words, company “comings and goings”. As soon as this happens, you will need to share this information with your payroll company: new starter salary details, wage increases and so on.
It could delay payroll processing if you forget to pass on this information or for whatever reason it doesn’t happen on time.
To reassure you: legitimate businesses like ours already know this issue and will be on your case! We’ll establish robust communication processes to ensure everything is up to speed.
Okay, so let’s turn our attention to the “pros” in what are the pros and cons of outsourcing payroll.
The Expertise You Need
Payroll can be complicated. It’s an extremely specialist function.
Legislation from HMRC changes regularly. You must remain compliant in how you pay your employees and manage your employee data. Your in-house staff may not be fully trained in payroll. Mistakes can and do happen – and could result in steep fines.
Equally, you may invest in expensive payroll training, yet with no solid guarantee that their newly acquired knowledge will stand the test of time.
Angel Bookkeeping offers experience, skills and knowledge in the multi-layered task that is payroll. We provide consistency in compliance and accuracy. Not only do we minimise the chance of errors and omissions, we can also see the bigger picture. What we mean is, with experience across a wide range of industry sectors, we can advise you on cost control and cash flow.
Save (Loads of) Time
To ensure that your people are paid accurately and on time, setting up and processing payroll can be hugely time-consuming. It’s a BIG disadvantage and a BIG headache for small to medium businesses. Likewise, so many checks and balances take your employees – and most likely you- away from focusing on your core business.
Your payroll provider will remove this burden and can return several working hours to you for you and your team to get “stuff” done.
Cost Savings
All of the above can add up to considerable cost savings: with no need to spend money on training, fewer risks of penalties from HMRC, your customer-facing staff’s attention back where it needs to be, your strategic know-how and skills put to best effect – we could go on.
In business, time is money, especially in cost centres such as HR and finance departments. If you would like your team to spend their time on more valuable work, outsourcing your payroll is a highly positive step forward.
Reliable
With an outsourced payroll function, you won’t need to worry about staff absences, resources or time management. Or, essential knowledge leaving your business if someone resigns.
Tailored
You can select which payroll processes that make the most sense for you to reflect your employee numbers and your business as a whole. Angel Bookkeeping can offer you a service that suits your company with all the support you need
The Angel Bookkeeping View
So, what do we think?
It’s worth carefully considering the risks and rewards of payroll outsourcing and how it may or may not work for your company. Feel free to contact us to discuss this, and ask us as many questions as you need.
Are there better ways of working that would add value to your business? In the final analysis, we know from client feedback that outsourcing payroll offers many more advantages than drawbacks. Ultimately, your employees are your most valuable asset. Outsourcing payroll could be your best way to thank them for their contribution.