The unshakeable business case for outsourcing your payroll
Here are some of the fundamental whys and whats you need to make an airtight plan for future-proofing your payroll.
Keeping payroll in-house can mean your processes end up out of control. Whilst informed HR and finance leaders know the benefits of outsourcing payroll, others remain cautious. This is understandable; looking after your people is crucial now more than ever as we move towards the flexi work revolution and remote ways of working.
However, outsourcing offers a wealth of advantages that help you stay in control of several business areas including finance, security, compliance, performance, business continuity and data insight. Debunking outsourcing myths, this blog explains how you can confidently move to fully managed payroll whilst retaining and even improving control.
The more obvious costs associated with retaining an efficient in-house payroll team throughout the employee lifecycle include recruitment, training, benefits and salaries, not to mention annual leave and sickness. The more ‘invisible’ costs encompass automated payroll technology (plus maintenance, licences, upgrades, IT support etc.), overheads and any consultancy or outsourcing (to tax specialists, for example).
Outsourcing your payroll wraps these costs up in one management fee. It also offers a variable payroll cost base rather than a fixed cost associated with in-house payroll, resulting in a more elastic and scalable operation, with increased ROI. Unless you have a very predictable business model and can anticipate staff levels in this volatile climate, outsourcing is likely to provide greater cost control, reducing your total cost of ownership (TCO) by at least 20% when you partner with a credible supplier.
Responsibility for payroll compliance, data security and HMRC submissions can feel like a full-time job, trying to stay in control of legislation, audits and deadlines. Even if you outsource aspects to specialists, accountability is likely to sit with you and your organisation.
Outsourcing your payroll, however, passes responsibility to the provider, including maintaining ISO20071, ISAE3402/SAS70/SOX, saving you the cost, time and stress of on-going management in-house. A best-of-breed payroll provider will invest in business-grade security to protect your people’s data and remain compliant with standards such as GDPR. Consider it a case of outsourcing accountability, rather than losing control.
The cost of non-compliance can be considerable, not to mention brand damaging. Missing HMRC deadlines, tax errors or failing an audit (such as a Check of Employer Records or Employer Compliance Review) incurs penalties and sometimes interest. Outsourcing your payroll means you are always ‘audit-ready’ and 100% in control.
Compliance is intrinsically linked to payroll performance, ensuring calculations adhere to the latest guidelines and legislation. This can change frequently and be very complex especially when applying local legislation to a global workforce. In-house teams may not feel confidently in control or spend too much time getting to grips with legalities and troubleshooting. If you resort to consultancy for help with compliance, these costs can quickly spiral out of control. By comparison, a fully managed service will include expertise and advice – on a global scale – as part of your package.
If your payroll is currently processed in-house, are you continually measuring and improving it? Do you know your accuracy levels, for example? One myth of outsourcing your payroll is that you lose control of standards and service levels, but the opposite may be true by establishing an SLA. A credible partner could agree to provide a minimal service level of 99%+ for accurate and timely payroll. This not only puts you in control of performance but also in control of benchmarking. Other KPIs include payroll schedule key dates adherence, third party payments, level of live errors, out of pay cycle calculations and response time for general payroll queries. Adhering to the agreed payroll processing schedule through a managed service provides a ‘safety net’ for catching errors before payday.
Staying in control of payroll performance positively influences the employee experience; indeed, 71% of C-Level employees feel that the visibility of payroll has increased in recent years. Good payroll is becoming increasingly key to attracting and retaining talent, with firms like Glassdoor providing transparent reviews of salaries and payroll. Check out the net promoter score (NPS) or customer reviews to help evaluate potential managed service providers.
Whilst in-house payroll may provide end-to-end control, this also necessitates a business continuity plan without a single point of failure. Ironically, this could leave you feeling out of control in the current climate. Covering staff absence or dealing with major technology issues are common problems but you may now face implementation of job support schemes and regional lockdowns. As the recent COVID-19 pandemic has shown, upheaval can occur almost overnight. Are you really in control of business continuity with a resilient plan that safeguards payroll? When you outsource, ensuring teams can work remotely and efficiently is no longer your problem, and payroll will not be negatively impacted.
A final point to raise is that outsourcing your payroll will provide insight-rich people data. Through regular reports and also ad-hoc analysis, your organisation will benefit from the ability to monitor KPIs such as absence, performance, turnover, gender and diversity statistics. If your in-house system doesn’t allow quick and accurate reporting capabilities, outsourcing will certainly give you greater control over data. Drive strategic decision making and gain a real-time snapshot of your teams and departments.
In summary, greater financial control is a major benefit of outsourcing your payroll compared to retaining it in-house. Besides direct labour costs, consider CapEx, technology and additional resources. One overall management fee could well be more cost effective and efficient. Passing accountability to a professional payroll provider gives you more control over conformance and performance, with minimal service levels to ensure correct pay is transferred to employees on time, every time. Outsourcing your payroll is an investment when you select a provider that feels part of your team and ensures a smooth implementation. They will put you in the driving seat whilst taking care of your greatest asset – your people.