Here are some of the reasons a business might opt for a managed payroll service:
- Maintaining an in-house payroll team is no longer viable, even with a functional SaaS solution, due to security and compliance issues when a high percentage of the team is working remotely.
- Educating and upskilling the in-house payroll team on the latest legislation and policies is time consuming and hiring an external HR consultant to help is expensive.
- As the business has grown across multiple locations and territories, the payroll processes are becoming too complex for the payroll team to handle.
- Internal services are overheads eat into your P&L.
- Your organisation is focused on business revenue efficiency and effectiveness. Payroll processing is not seen as core to your business because it doesn’t contribute to the bottom line.
- Statutory compliance of the in-house process is a concern. A service provider would implement the financial controls and audit businesses need.
- They would rather pay for a contractual quality of service than for hardware, software and resources.
- They don’t want to contend with annual upgrades, patches, outages, sickness, holidays and payroll resource turnover.
- They want a service provider to take full contractual accountability for the service. Suppliers cope with peaks and troughs throughout the year.
The opportunity to move to simplified and standardised processes improves contingency planning and business continuity – as in-house payroll knowledge is often contained within one or two key staff members.
There are many different reasons why moving to managed payroll could suit your business now and in the future. It’s wise to look at the value that outsourcing brings, including compliance, employee engagement, cost saving, accuracy, tighter controls and guaranteed service levels.
Managed vs in-house payroll
If in-house payroll vs. managed service is keeping you awake at night, or you’re just starting to research the options, here are the key differences:
- With a managed service, the provider takes on risk and accountability; including processing, compliance, service levels and scalability.
- In-house payroll requires the customer to maintain payroll processing expertise and resources. You’re in charge of processing all elements of the payroll and all associated administrative tasks. Plus, it’s your responsibility to ensure your system is compliant, secure and reliable.
There are pros and cons for both outsourcing payroll and in-house managed service. The burning question is what suits your business and culture? Regardless of any payroll outsourcing myths, hearsay or preconceptions, we encourage you to think about your own situation and explore what would make a real difference to your Payroll & HR delivery.
The benefits of payroll outsourcing
The advantages for organisations outsourcing payroll are numerous and span across efficiency, productivity and confidence that your payroll is in the right hands. Many businesses find that outsourcing takes the risk out of payroll. Here are some of the main benefits of switching to a managed payroll service:
Avoid HMRC penalties
HMRC paperwork and returns require careful attention, as any mistakes or late submissions could result in a penalty. HMRC will charge you a penalty if you submit any paperwork that contains errors, or misrepresents your tax liability, equally if a HMRC assessment understates your tax liability, you can also face a penalty if you don't inform them.
Financial compliance is one of the toughest areas to manage, especially if you’re running global payroll. Employment legislation and HMRC requirements are always changing and it’s a constant battle to keep up to date. Working with a managed service specialist means you, the customer, can rely on the provider’s ISAE3402 financial compliance controls, plus investment in on-going payroll training and career development.
Increased flexibility & scalability
Outsourcing offers a variable payroll cost base which is much more elastic with a greater ROI and is scalable as your business grows. You may consider your business model to very predictable with a fixed workload processing cycle, but in light of recent disruption to the global economy and working arrangements, we should all be expecting the unexpected. Is your current payroll agile enough to cope with drastic change overnight?
Reduced cost of ownership
Outsourcing is an investment and can be financially justified to stakeholders. When you consider the direct costs a reliable payroll provider can absorb such as infrastructure and data security, plus the indirect costs like compliance and Payroll/HR expertise, you can reduce your Total Cost of Ownership by at least 20%.
Managed payroll solutions are designed to save time, which also saves money. A solution from an expert supplier will accurately inform financial decision-making across the business thanks to real-time calculations and powerful analytics.
Having an managed payroll solution can enhance security. The costs and resources that are involved are sometimes difficult for organisations to manage internally to ensure absolute security and accuracy. At the heart of the solution of a reliable provider is the confidentiality, storage and protection of customer data in compliance with legislation such as GDPR.
What makes a quality payroll provider stand out from others? Look for the ISO27001 certification, an international standard and a key indicator that the payroll provider takes security of information and processing your data seriously.
Peace of mind
Ultimately, managed service gives you peace of mind that your payroll and people are being looked after. With changing work patterns and pay frequencies on the horizon, you should feel confident to offer your people personalised, flexible packages that payroll can keep up with.
Integrate your existing HCM system
If you already have a Human Capital Management (HCM) system that works for your business, it can seem like a lot of work to change things. So, what do you do if you want to keep your HR solution but outsource your payroll?