There comes a time in every business owner's life when juggling payroll yourself is simply no longer an option. Business expands, customer lists grow, staff increase in number and then you start wondering if you should outsource your payroll.
Hiring an entire payroll team is not always a possibility for some businesses. That's why in order to keep costs low, many companies will try to handle payroll themselves or hand it over to existing staff members such as administrators.
The problem here is that payroll is juggled with other responsibilities or is handled by untrained staff. While this might seem like a great way to save money, it can become more costly in the end if expensive mistakes are made.
The next option is to outsource to a payroll services company. This is usually a more cost-effective measure without compromising on quality and service.
However, if you are unsure whether it's the right time to get your payroll outsourced, we have put together seven key signs that show you why it may be a good time to do it now.
Benefits of outsourcing payroll
As a business owner, it's up to you to decide which jobs should be performed in-house and which are better outsourced. In some cases, in-house payroll can be the best option. However, this comes with a great amount of responsibility and cost which many smaller companies prefer to avoid.
A fully-managed, outsourced payroll service ensures you get the care and attention you need without the cost of hiring an in-house team. Outsourcing payroll has plenty of benefits, including:
- It can save you money - Outsourced payroll options are usually far cheaper than hiring in-house
- Saves time - Without having to manage payroll, you can start to focus on other areas of your business instead
- No need to recruit - Recruitment can be costly, time-consuming and there's always a training period to go through. With outsourced payroll solutions, you don't have to worry about any of that
- Ensures compliance - With a professional, experienced payroll team, you can rest assured that all regulations are followed by the book. Payroll providers will keep you up to date with PAYE returns each month, P45 forms and P60 forms each year
- You may be able to bundle services - Payroll services are often offered alongside accounting and tax services as an add-on. This means you could get all your accounting and payroll requirements met in one move, without having to look for other payroll firms.
Why you should outsource payroll
The next question you may have is when or why should I outsource payroll? If you are not yet decided, these are some common signs that now is the perfect time to do so.
1. Mistakes are being made
Mistakes can happen to anyone. However, payroll errors can end up costly and time-consuming to fix.
If you have left payroll to an inexperienced staff member, mistakes are bound to crop up.
Mistakes such as entering the wrong amounts, making the wrong deductions or missing out Statutory Sick Pay (SSP) can cause significant problems for your business.
That's why outsourcing to a team with payroll experience is often the safest bet.
Payroll specialists are used to dealing with the complexities of payroll and will have strict procedures to protect your business from mistakes.
2. Staffing costs are increasing
Businesses with a growing workforce often struggle to keep up with all the new payroll responsibilities for each employee. For fast-growing companies and start-ups, the best thing to do with that extra payroll work is to outsource it.
This is a much more cost-effective method to deal with a growing workforce rather than growing an in-house payroll team alongside it.
One reason why outsourcing payroll is beneficial is that it combats the problem of all those hidden payroll costs.
The costs of in-house payroll functions are not just limited to staff salaries. There are also indirect costs such as payroll software, office space, equipment and staff training to consider.
Businesses with a growing workforce typically reach a point when it becomes more cost-effective to outsource it instead. This is particularly the case for smaller businesses, as larger companies can usually swallow the cost of a whole payroll in their accounting department.
3. Payroll is taking up too much time
Managing payroll for a company, big or small, is no small undertaking. It can take up lots of resources, one of the most valuable being time.
Business owners with in-house payroll staff will have a responsibility to oversee and manage the payroll department. The problem is that this can pull your focus from other areas of the business. To save time and maintain focus on more profitable areas of your business, outsourcing payroll is a simple solution.
4. You're having difficulty meeting regulations
Payroll is a tricky system to get right as it involves following strict regulations as set out by the government. Without the right training, compliance with any regulations or changes that HMRC makes can be difficult.
Managing payroll, Real Time Information (RTI) reporting, National Insurance, and informing HMRC of new hires can feel like a great big balancing act.
If you have found your business is struggling to keep up with the latest payroll regulations, it could be a sign that you should outsource.
Outsourcing takes a lot of that hassle and stress out of your business. Payroll professionals will also be able to do all of the above much faster, efficiently and accurately.
5. Keeping up with technology is a struggle
Like tax, payroll rules have also seen big changes in recent years, with RTI especially. With a move towards digital record-keeping and software, it means that many businesses have had to play catch up and invest in new technology. The problem with this is that there are hidden costs to be aware of.
One of the hidden costs of hiring an in-house payroll team is keeping up with technology. Payroll software is usually required these days, which means purchasing licenses, upgrading, investing in servers, hardware and IT support alongside it.
A great way to get around the overwhelming costs of managing it all yourself is to outsource payroll to a team that already has all that covered.
6. You have seasonal staff or a high staff turnover
For businesses with a high staff turnover, for example, seasonal businesses, managing payroll can be more difficult. Also, if you need to deal with regular payroll changes, this creates an additional burden on whoever is running payroll.
An outsourced payroll team is used to dealing with frequent changes in a business' payroll requirements so there's less pressure on your staff to deal with it all themselves.
7. Missing deadlines
Another issue that many businesses have is failing to report to HMRC on time. If the person or people handling payroll are doing it alongside other duties, hitting those deadlines is going to be hard.
In this case, you may think you're saving money by not outsourcing but the reality is far costlier.
Failing to make the correct payments and deductions or submitting a Full Payment Submission (FPS) late could lead to penalties.
That's why the safest thing you can do for your business is to outsource to a payroll team to handle it all on your behalf.
Are you ready to outsource payroll?
There are many benefits to outsourced payroll. If hiring in-house is not an option, outsourcing your payroll to a dedicated team is a happy medium that a lot of businesses choose.
Business owners often think they can save money by doing it all themselves but payroll is far too important to overlook. For instance, mistakes, delays and confusion could end up getting your business in deep water with HMRC.
If any of the above signs sound familiar, it may be time to start working with a payroll provider.
At BrooksCity we've been helping growing companies offload their payroll operations for more than a decade. Working with us means you'll have access to your dedicated accountant to handle all the payroll processing on your behalf. We aim to become a key partner in your business journey and an extension of your team. If you'd like a free consultation with one of our payroll experts request a free quote here.
