Advantages and Disadvantages of Outsourcing Payroll

advantages and disadvantages of outsourcing payroll

June 26, 2020

Payroll has evolved into more than merely processing payslips. This means that just having your employees paid on time is no longer enough. You need to see that you generate and submit the necessary details to HMRC and make the correct PAYE and NIC payments on time. Because of these factors, many prefer to outsource payroll services. But is that something which is going to work for you? Let’s discuss things.

Outsourced Payroll Services Advantages:

  1. Accuracy: 
    Outsourced payroll service providers have a team of experts doing things for you. This will ensure accuracy in processing large payroll. 
  2. Saves Time:
    In-house payroll processing is a time-consuming method. Payroll processing tasks such as maintaining records of benefit deduction, fresh hire, garnishments and termination and federal as well as state regulatory changes are frustrating tasks. Every year a large number of hours are wasted in preparing and sending W2s. Outsourced Payroll Companies let employers focus on their key tasks and frees up the time of the business owners as all the tasks will be taken care of by outsourcing payroll companies.
  3. Hassle-Free: 
    You do not need to bother about remembering deadlines or whether you have processed the payroll on time. Payroll outsourcing companies will do all this for you. Also, the amounts to be paid towards the liabilities too will be informed to you. It gets tough as an employer to make and keep tracks of deductions such as DEAs or AEOs. In this case, a provider can look after this for you. With the TPR unrelentingly focusing on pensions, to have someone to take care of this admin function would be good. 
  4. Human Relations: 
    Payroll is not just about PAYE and NIC payments. There are welfare benefits too which have become interlinked as the DWP does monitor things via RTI. Not having one’s NI number linked to the payroll can lead to misreporting of information and can stop or reduce an employee’s benefit payments. Considering this it is for the employee’s benefit to have things treated from their perspective. Also, for queries regarding KIT days or holidays whom better to approach than your payroll provider? 
  5. Queries:  
    Your employees might wonder why you have made a deduction or why the amounts of holiday pay or gross pay do not add up to what they have computed. Well, in such cases you could simply forward their queries to your payroll outsourcing company.
  6. Audits: 
    If you have a surprise NMW compliance check or any such attention from the HMRC it is always worth your weight in gold to know that you were doing things as you should have. Negative publicity on the accounts front or needless penalties or tribunal hearings are not things that anyone wants.
  7. Statutory Payments: 
    You can reclaim 103% on your SMP payments if you fall into the right category. However, the right reporting and information are required. Also, you need to keep records. The same applies to SSP in which you can even make reclaims for COVID 19 cases. Thus, it pays to be well informed by an expert.
  8. Compliance Issues: 
    There are frequent updates and changes that occur in the legislation. This makes things difficult for most employers to keep up with. For instance, the personal allowance for the year 2020-21 is the same as the tax year 2019-20. Thus, it makes sense to have someone else tackling these things for you.
  9. Software: 
    You do not need to invest in expensive payroll software or bother about printing payslips as your outsourced payroll provider will do this for you.

Outsourcing Payroll Services Disadvantages:

  1. Guidance: 
    You cannot merely hand someone the work of processing payroll and not co-ordinate with them. You need to treat your payroll provider like your inhouse employee and give them all the necessary help and support so that you get what you want as you want it. 
  2. Deadlines: 
    Be realistic as to deadlines as just providing information an hour ago and expecting your payroll to be wrapped up within a few hours could be detrimental. Pressure might lead to possible bits of information being left out so give yourself time to collect all the information before sending and ensure you have a glance at what you receive.

Therefore, there are more pros than cons of outsourcing payroll services. However, just because someone is handling your payroll does not mean that you can completely abstain from responsibilities in relation to handling your payroll. Outsourced payroll services will help in saving your time and money but you need to bear in mind that there can be a few teething problems that can be easily dealt with.