Outsourced Payroll vs In-house
Transcript
Hello!
Welcome to the first in the Dains Payroll Webinar Series where we'll be discussing Payroll Outsourcing.
I'm Sam Johnson the Payroll Services Director here at Dains.
The key question that many Business Leaders will ask themselves about payroll is should we be processing payroll internally or outsourcing to an external payroll service provider?
It's important that I stress here. There is no right or wrong answer.
The decision will be based on your business and the various and individual factors that are unique to you.
However, in my experience I can provide some key items that should be considered when you're looking to make this decision.
Firstly, how will you process the payroll? You will of course need a payroll system.
There are many options out there with varying levels of capability, complexity, and automation; most carry a license fee. Although HMRC basic tools can be suitable for some very small employers and is available free of charge there's usually a cost consideration alongside training on who can use that system competently.
Payroll links directly with Finance and HR and it's important to think about how you manage that bigger picture.
Employment contracts need to be reflected through payroll. So salary, hours worked, overtime allowances, bonuses, commission payments and so on.
How can the data be captured and processed in the most accurate and efficient way?
Managing the status should not be time consuming.
It should be a streamlined as possible.
The total cost of your payroll can often be the biggest cost to any business.
This value needs to feed through to your finances accurately and ideally without manual intervention. Can you automate the transfer of data into your accounts?
And finally ask what does your employee expect?
We live in a Digital World; online payslips are usually the minimum requirement. They provide easy and immediate access without waiting for copy pay slips and that information is accessible whether they're at work, at home, or even on holiday.
It goes without saying as well that employees expect accuracy and prompt responses to queries and it's really important to remember that inaccurate payroll can have an impact on an employee's entitlement to Universal credits.
A payroll system does some but not all of the work and in deciding whether to outsource payroll or keep it in-house you must be clear on the individual who is responsible for the payroll.
Consider who you want to see your payroll.
Payroll is personal and confidential data. You must have high levels of trust in whoever is looking after that data and also be confident that they have a complete understanding of their GDPR responsibilities.
Consider cover in the event of absence or attrition; that is absolutely essential in my experience. The lack of consideration on this point is often the catalyst for chaos in payroll processing.
It's an important question if you're outsourcing, too. Ask and understand the size of the organisation that you're thinking of working with and their capacity to manage if a payroll processor is absent for any reason.
For example, at Dains, we allocate two technicians to your account in addition to comprehensive instructions on how to process your payroll.
Your business needs accurate payroll and it's important to ask if those looking after your payroll have the necessary time and attention to detail to avoid unnecessary mistakes.
Compliance, well this is a whole subject in itself and I'll be hosting some future webinars that will touch on a few key topics here. At this point. I'll simply say that you have to be certain that the person administrating your payroll has knowledge to run a fully compliant payroll process.
There are some serious consequences to getting it wrong HMRC fines and penalties, pensions regulator as well as employment law consequences to name just a few.
And finally, if you're operating payroll in-house, I encourage you to ask the question, is that the best use of that internal resource and inevitably the costs associated with that resource?
So having explored the question of what you should be asking when considering whether or not to outsource?
I want to debunk some Myths around payroll outsourcing these assumptions can often mean that Business Leaders keep with their providers that they're unhappy with or maintain in-house processes where there are too many risks attached to them
So firstly, I can only move my payroll at the start of the tax year. This is a complete myth.
Payroll systems are built to allow all essential data to be extracted at any point during the tax year and then transferred to another system or provider. The sixth of April should not be part of your thinking when you're looking at moving payroll.
It costs too much to Outsource payroll.
Outsourcing payroll can often be delivered at a cost saving to businesses where you don't have the necessary skills or resources internally to deliver an accurate and timely and compliant payroll.
When considering the cost of payroll services its so essential that you look at all the associated risk factors to ensure you are receiving quality.
As consumers we know that we can find cheaper products.
But with payroll it’s so essential that quality is a key driver and the decision alongside cost often, the cheapest option will produce the highest risk of unwanted consequences in the long term.
Our business is too big or too small to outsource.
I can say with confidence that payroll with just a single employee and payroll with tens of thousands of employees are all delivered in outsourced environments. The size of your payroll is not a barrier to your decision to outsource payroll
It is difficult to move from one service provider to another.
As with the tax year myth. This is absolutely untrue.
The onboarding experience is something many payroll professionals are experts in.
Speak with your perspective providers. Ask them about the onboarding journey, and the right provider will give you confidence in their response. They'll talk to you about the expertise of their team and the robustness of the payroll process and will give you clarity on how you will be supported on every step of that journey.
Ultimately the right decision for you should be what effectively mitigates those risks associated with payroll processing.
I encourage you to ask these questions of your Outsource provider too. They should be confident in their ability to explain their processes and how they are built to mitigate risk to your business.
In compliance, these are just some of the areas of knowledge required to run a successful payroll process: RTI reporting pensions, auto enrolment, minimum wage, statutory payments, and allowances.
Your payroll data management is also about establishing process ownership; being confident that that owner has the skill set to run your payroll and ensure that the resources are there in the event of someone leaving or someone being absent.
And maintaining that data confidentially and with GDPR at the forefront. Ultimately delivering and maintaining services of a high standard and high level of accuracy.
And finally, technology choosing the right payroll system and don't rely on that system to deliver compliance and accuracy in isolation and ensure data is stored and retained in a safe place and in line with GDPR and think about your employee access to payslip information. Ideally that needs to be supported by an online portal.
I do hope you found this session useful, and I've given you some food for thought in managing payroll in your business.
If you're interested in more about the services here at Dains, or you just like to have a chat about payroll outsourcing.
I would be delighted to hear from you.
I'm Sam Johnson and thank you so much for listening. Please come back for the next payroll webinars series where we'll look at your obligations for operating pensions auto enrolment in your business.
Thank you very much.
Sam Johnson
Director of Payroll Services
T: 01543 263484
E: Sam
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