How Does Payroll Outsourcing Works?

How Does Payroll Outsourcing Work?

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 works. Making the decision to outsource a payroll 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 provider.

Understanding the main stages of how payroll outsourcing works

  1. 1. Identify what you need to outsource

payroll outsourcing identify

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 it 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. 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 outsourced payroll providers to shortlist.

  1. 2. Review your company plans

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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 outsourced payroll services: if you are anticipating an increase in headcount you need to explore what additional costs this could potentially create from an outsourcing perspective.

  1. 3. Shortlist then select your outsourced payroll provider

Payroll System CPS

There are many outsourced payroll providers 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 companies straight away. Some will have payroll expertise that focuses on smaller businesses. Others will provide their 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.

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.

  1. 4. Prepare and fine tune the deployment plan

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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.

You will then work with them to further refine the plan, identifying the timelines and milestones that need to be achieved to keep the plan on track.

  1. 5. Data migration and parallel pay runs

data backup

The next stage involves the 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 the payroll.

The length of time that this will all take will vary considerably because no two payrolls are the same. 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.

Once the outsourced payroll is up and running…

IR35 ready

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 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.

Payroll outsourcing in your company

payroll outsourcing identify

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. An outsourced payroll removes this problem completely.
  • Outsourcing results in a more efficient process that frees up valuable resources.

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.