Why businesses choose to outsource UK payroll?

Payroll Outsourcing a considered approach

The decision to outsource UK payroll is rarely one that is taken lightly. With wages and employment costs typically representing a significant percentage of turnover, accuracy in salary and deduction calculations is critical. So regardless of whether it’s small business looking to avoid the hassle of processing payrolls internally or a multinational organisation looking to outsource payroll for the UK Branch, the decision to outsource UK payroll requires careful consideration.

Outsourcing UK payroll can prove more cost-effective and efficient than recruiting and managing an internal team. Additionally, access to fully trained payroll experts offers organisations greater assurances that their compliance and legislative responsibilities are being met. Consequently, many firms will outsource UK payroll to a payroll bureau because of the peace of mind that comes with knowing that a business-critical function is being managed in a compliant manner. This in turn means that you have more time to focus on running your business, improving productivity and profitability, and driving the company forward.

In this article I examine the four most common reasons why business choose to outsource UK payroll.

Outsource UK payroll to increase compliance

In the UK, Payroll management is subject to regular legislative change which includes the electronic submission of data to HMRC via the PAYE RTI system, and increasingly strict regulations regarding pension contributions (auto-enrolment etc) and leave entitlement.

These general legislative changes combined with the 2018 introduction of the GDPR (General Data Protection Regulation), have significantly increased the opportunity for costly compliance breaches. With maximum penalties for data breach at €20million or 4% of global turnover (whichever is greater), the cost of non-compliance is significant.

This is especially true for businesses that employ an international workforce. Payroll legislation differs from country to country depending on local regulations. As such, it is these local rules that need to be applied to ensure compliance. In the 2017 Global Payroll Complexity Index (GPCI), 65% of the UK payroll experts and professionals surveyed said that managing legislative, HR, and payroll updates presented their biggest challenge. Each country has its own economic conditions, currencies, culture, and statutes regarding payroll, making local knowledge essential to avoiding non-compliance fines. As a result, any multinational organisation which has centralised its in-house payroll function is likely to face an increased risk of compliance errors and financial penalty.

The advantage of deciding to outsource UK payroll is that external payroll providers are specialists in what they do and will have experts with local knowledge who can ensure that legislative, HR, and payroll updates are implemented correctly. By appointing a specialist outsourced payroll company like Paycheck Plus to process your UK payrolls, you are mitigating the risk of compliance errors and resulting financial penalties.

Outsource UK payroll to reduce operating costs

One of the key factors driving organisations to outsource UK payroll is its ability to reduce operating costs.

With everchanging payroll legislation, auto-enrolment, IR35 and minimum wage and wage subsidy regulations, recent years have seen the complexity of payroll processing increase significantly. As a result, the skills, training, systems, and knowledge base required to operate an in-house payroll function effectively can be very costly and time consuming.

A large part of the payroll service is data entry – transferring hours worked, pay rates and leave from internal systems or timesheets into the payroll system. Data entry is time-consuming, but an essential part of ensuring employees are paid accurately. This presents a difficultly in striking the balance between accuracy, and labour costs.

By deciding to outsource UK payroll, you are effectively receiving the benefits of employing a team of highly trained payroll experts, but without the related high salaries and ongoing training costs. Thus saving time and money.

Furthermore, with an outsourced function, you receive year-round support and do not need to consider the minutiae of payroll management.

Outsource UK payroll to improve data security & confidentiality

In terms of data security and confidentiality, payroll departments hold possibly the most sensitive information within a business. Not only do HR and payroll records contain personally-identifiable information which falls under the remit of GDPR, but should personal details fall into the wrong hands, commercially sensitive data such as employee salaries, bonuses, and employment benefits could become widely known, leading to resentful staff, a loss of competitive advantage, and potentially large financial penalties.

When an organisation’s payroll is run in-house, the risk of a confidentiality breach is significant. Regardless of whether the in-house payroll processor is diligent and trustworthy, there are many opportunities for accidental data breaches.

By utilising an executive payroll service from an outsourced payroll provider such as Paycheck Plus you eliminate these risks altogether, as well as ensuring GDPR compliance.

Integration and the streamlining of operations with improved analytics

Another factor driving organisations to outsource UK payroll is the availability of detailed, accurate and insightful reports.

Many in-house payroll departments or payroll administrators do not have the time, resource, or software available to produce detailed reports; nor do they have the capability to integrate their systems and data with other departments. This leads to analysis without context or detail, making meaningful insight difficult.

Outsourced payroll providers such as Paycheck Plus invest heavily in market-leading reporting software to ensure that we can produce detailed, accurate and insightful analytics. This allows management to make better, more informed decisions, which in turn can help to streamline and improve operations, as well as guide investment decisions.

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