Outsourcing Your Payroll: What You Need To Know

September 6, 2016 11:16 am Published by

Outsourcing your payroll Running payroll in-house for your business can be a complicated and potentially overwhelming task, requiring qualified staff to ensure compliance with legislation that often changes in order to avoid fines, as well as ensuring your employees are paid correctly and on time.

For many companies, the time and expense taken to keep payroll management in-house is considerably greater than the cost of outsourcing to a payroll provider. In our latest post, we take a look at the main benefits and drawbacks of outsourcing your payroll.

In our latest post, we take a look at the main benefits and drawbacks of outsourcing your payroll.

The Benefits of Outsourcing Payroll

There is no doubt that elements of the payroll process can be extremely time-consuming, transferring them to a third-party can offer many advantages for your business, including:

Eliminating the need for in-house person – Outsourcing enables the current members of staff responsible for payroll to free up time to focus on other areas of your business, additionally, the need for training and software to operate your in-house payroll system is eliminated.

Ensuring Compliance – Outsourcing your payroll to a specialist company ensures you are fully versed with British tax legislation, National Insurance and general employment laws. Complying with legal obligations eliminates the risk of receiving unexpected fines for non-compliance.

Improving Accuracy & Reliability – Payroll mistakes are much less likely to occur when outsourcing, as you are paying for their expertise and knowledge. Additionally, with a payroll service provider, speed and quality of your reports won’t vary in accordance with staff holidays or sickness.

Drawbacks of Outsourcing Payroll

Whilst the benefits of outsourcing your payroll are numerous, there are some potential drawbacks to moving the process to another company:

Privacy – Using a third party company to process your payroll means your employee’s sensitive data will be in the hands of another company, which could put it at risk of falling into the wrong hands; this is why you should always do extensive background research into the security of the company you’re considering using.

Lack of instant access – In some cases when outsourcing, you may have to contact the company responsible for running your payroll to gain access to information on employee’s payrolls, a process which is instant when using in-house software.

What Areas of Payroll Are Managed?

Outsourcing your payroll means every element of your payroll is attended to on your behalf, eliminating the need for somebody inside your organisation to bear the burden.  Areas covered include:

  • Management of payroll information for all your staff, whether full time or part time.
  • Dealing with associated paperwork when a new employee is hired or an employee leaves your business (P45/P60).
  • Correct salary being calculated for each employee.
  • Ensuring changes to tax rates, bands and codes are altered accordingly to ensure compliance.
  • Production of P60’s and P11Ds.
  • Handling of SSP, SMP, SPP, Student loans, CSA payments and other attachment orders.
  • Management of childcare vouchers and other deduction of pension contributions. Note the childcare vouchers scheme is set to be replaced by tax-free childcare, you can read more about this change
  • Handling of auto-enrolment into workplace pensions and associated contributions.
  • General advice and guidance to the business regarding payroll.
  • Creation and distribution of HMRC compliant payslips to employees in electronic or paper format.

As part of our basic payroll service, employers will be required to make all final payments to their staff and HMRC. Alternatively, we offer a fully managed payroll service which includes making all payments to staff and setting up payments to HMRC and pension companies.

Checking Your Existing Payroll Software Supports Auto-Enrolment

In 2012, auto-enrolment was introduced, this major change to workplace pensions means employers are legally obligated to register employees who meet certain criteria into a workplace pension’s scheme.  This  change adds yet another layer of administration to the payroll process.

If your in-house team or software is unable to carry out any the required responsibilities imposed by this change it is advised you update or change your current software. If you are an employer and unaware of your duties, you can use The Pensions Regulator’s duties checker.

Part of our payroll software is the inclusion of auto-enrolment for workplace pensions. It will enable you to complete the following activities that you need to undertake each pay cycle,  in order to ensure compliance and avoid fines:

  • Assess your staff to determine who to put into a pension scheme.
  • Have access to information required for automatic enrolment (names, addresses, DOB’s and earnings) to ensure your contribution into their pension is correct and paid on time.
  • Calculate how much you and your staff will need to pay – using the correct tax relief method.
  • Issuing your declaration of compliance to The Pensions Regulator.
  • Generate and send out correct staff data to your pension scheme in the format required.
  • Generate communications to your staff to inform them if they are being automatically enrolled or not. Including handling and processing requests for staff who want to opt out, and issuing refunds for those who leave the scheme.

How Easy Is It To Transfer From An Existing Payroll Provider?

If you already outsource your payroll to another provider but are unhappy with the service you are receiving, switching to us is easier than you think.  Before switching, we will liaise on your behalf with your existing payroll provider to ensure everything is in place for a smooth transition.

Need a Hand with Your Payroll

If you’re confused about your business’ payroll and are considering outsourcing it, or are unhappy with the service you are receiving from your current provider, give us a call on 0117 379 0810 to arrange a free no obligation consultation.


Latest posts by Steph Roffey (see all)

Categorised in: ,

This post was written by Steph Roffey

Comments are closed here.