How Does Payroll Outsourcing Works?

Managing a payroll is a complex and extremely time-intensive activity and this is why many companies are interested in learning more about how payroll outsourcing services works. Making the decision to outsource payroll solutions is an important one as is the choice about who you should outsource it to. So the more you know about how payroll outsourcing works, the better placed you will be to make the right decision when you are at the point of choosing your outsourced payroll outsourcing company.

While obviously the very short answer is your payroll, what we are referring to here is the need to put together a plan of all of your payroll processes as they stand now. Identifying the main elements at this stage will help you to review exactly what you have currently and then go on to assess which parts of payroll process you are considering outsourcing to an external provider.

You might come to the conclusion that there are some elements of your current payroll provision that you would prefer to retain in-house rather than transfer across. Or you might end up deciding that it would be more beneficial to outsource your entire payroll management. Either way, it is useful to go through this process to start clarifying what you need. Whatever conclusions you draw from this stage, the information will help you to narrow down what you are looking for once you start considering which payroll outsourcing company to shortlist.

Your level of involvement will depend on how much of your payroll you have opted to outsource. Outsourcing payroll services can be configured to enable direct timesheet uploads, expense input, and approval workflows. Queries related to payroll taxes and employee benefits can often be handled directly by the payroll department of the provider. Additionally, your provider can assist with compliance for initiatives like pension auto-enrolment, ensuring all statutory requirements are met.

If your company is planning for growth or expansion, make sure that is incorporated into your initial outsourcing planning too. It will need to be part of your conversation when you start talking to providers about their payroll outsourcing services: if you are anticipating an increase in headcount you need to explore what additional costs this could potentially create from an outsourcing perspective, including handling payroll taxes.

There are payroll outsourcing companies on the market so expect to have to invest some time reviewing what is on offer. The requirements you have already identified will help guide you towards more suitable types of payroll outsourcing services straight away. Some will have payroll expertise that focuses on smaller businesses. Others will provide their managed payroll services to a range of different sized companies. And there will be some providers who specialise in larger organisations.

Look for evidence of their approaches to quality standards by checking out their accreditations. Read any reviews and case studies available that give insights from their clients into the service they are providing. And take a careful look at the payroll software that will be used and check its compatibility with your existing accounting software.

Depending on your company requirements, you might need to explore the possibility of having it customised to handle all of the specifics of your payroll processes. So if that’s the case make sure you ask about the level of flexibility available so you don’t come up against problems further down the line.

Your new payroll provider will then guide you through the main steps that need to be taken. (As you’ll see on our payroll services page, we break them down into 5 main stages.) Expect to have a dedicated project manager assigned to you; they will spend time gaining a detailed understanding of your current payroll arrangements and will take the lead in constructing a deployment plan that works towards a mutually agreed target migration date.

The deployment plan will also include milestones for tasks like employee data migration, software training, and setting up processes for post-tax deductions.

The next stage involves the employee data migration and completion of the required customisation of the payroll software. Once this has all taken place, everything will be thoroughly tested. Training in the software will also be provided to ensure a smooth data flow once the outsourced provider takes over running payroll.

The length of time that this will all take will vary considerably because no two payrolls are the same, including factors like employee benefits and health insurance integration. And the size of your company and complexity of your working patterns will all have a bearing too. Large and complex payrolls are likely to require parallel pay runs before reaching the point when the outsourced provider is ready to start running your payroll.

Beyond this point, your level of involvement will depend on how much of your payroll you have opted to outsource and the way it has been set up. Payroll outsourcing software can be configured to enable timesheets to be directly uploaded for example. Expenses can be inputted directly by employees and signed off by managers. Employee queries, like those related to employee benefits, can often be dealt with directly by the payroll provider and they can also be set up to deal directly with HMRC too if you choose.

Now you know more about how payroll outsourcing works, would you like to know more about how it could help your company? These are just some of the benefits of outsourcing your payroll.

• Outsourcing your payroll means you lose less time in-house keeping track of payroll legislation changes, and then having to work out how to implement them.
• The use of payroll experts means that you’re far less likely to face payment errors that are time consuming to sort out and can cause upset and bad feeling amongst your employees.
• If you have in-house payroll, it can be a major problem if you suddenly lose a key member of staff due to sickness. Even planned leave can sometimes be difficult to cover, you also need to be aware of the rights for planned maternity or paternity leave.l An outsourced payroll removes this problem completely and helps you calculate statutory sick pay. 
• Outsourcing results in a more efficient process that frees up valuable resources.

How Much Does It Cost?

The cost of outsourcing payroll depends on several factors, such as company size, the complexity of the payroll process, and the level of customisation required. Many providers offer tiered pricing models based on the number of employees or services like HR services and compliance with tax laws. Contact us for a tailored quote based on your specific needs.

Why Should You Outsource Your Payroll?

• Efficiency: Outsourcing simplifies payroll processing and frees up resources.
• Compliance: Payroll experts ensure adherence to changing tax laws.
• Error Reduction: Minimise payment errors that can upset employees.
• Continuity: Avoid disruptions caused by staff absences in your payroll department.
• Focus on Growth: Allows your team to focus on strategic HR services and business goals.

If you are looking to talk to a well-established company with an excellent reputation for reliability please do get in contact with us for more information about our services and a demonstration of our payroll software. We have more than 20 years of experience taking care of outsourced payrolls for companies across the UK and we would be delighted to have the opportunity to tell you more.