Why Businesses Choose to Outsource UK payroll?
The decision to outsource UK payroll is rarely one that is taken lightly. With wages and employment costs typically representing a significant percentage of turnover, accuracy in salary and deduction calculations is critical. So regardless of whether it’s small business looking to avoid the hassle of processing payrolls internally or a multinational organisation looking to outsource payroll for the UK Branch, the decision to outsource UK payroll requires careful consideration.
Outsourcing UK payroll can prove more cost-effective and efficient than recruiting and managing an internal team. Additionally, access to fully trained payroll experts offers organisations greater assurances that their compliance and legislative responsibilities are being met. Consequently, many firms will outsource UK payroll to a payroll bureau because of the peace of mind that comes with knowing that a business-critical function is being managed in a compliant manner. This in turn means that you have more time to focus on running your business, improving productivity and profitability, and driving the company forward.
In this article we examine the four most common reasons why business choose to outsource UK payroll.
Outsource UK Payroll to Increase Compliance
In the UK, Payroll management is subject to regular legislative change which includes the electronic submission of data to HMRC via the PAYE RTI system, and increasingly strict regulations regarding pension contributions (auto-enrolment etc) and leave entitlement.
These general legislative changes combined with the 2018 introduction of the GDPR (General Data Protection Regulation), have significantly increased the opportunity for costly compliance breaches. With maximum penalties for data breach at €20million or 4% of global turnover (whichever is greater), the cost of non-compliance is significant.
This is especially true for businesses that employ an international workforce. Payroll legislation differs from country to country depending on local regulations. As such, it is these local rules that need to be applied to ensure compliance. In the 2017 Global Payroll Complexity Index (GPCI), 65% of the UK payroll experts and professionals surveyed said that managing legislative, HR, and payroll updates presented their biggest challenge. Each country has its own economic conditions, currencies, culture, and statutes regarding payroll, making local knowledge essential to avoiding non-compliance fines. As a result, any multinational organisation which has centralised its in-house payroll function is likely to face an increased risk of compliance errors and financial penalty.
The advantage of deciding to outsource UK payroll is that external payroll providers are specialists in what they do and will have experts with local knowledge who can ensure that legislative, HR, and payroll updates are implemented correctly. By appointing a specialist outsourced payroll company like Paycheck Plus to process your UK payrolls, you are mitigating the risk of compliance errors and resulting financial penalties.
Outsource UK Payroll to Reduce Operating Costs
One of the key factors driving organisations to outsource UK payroll is its ability to reduce operating costs.
With everchanging payroll legislation, auto-enrolment, IR35 and minimum wage and wage subsidy regulations, recent years have seen the complexity of payroll processing increase significantly. As a result, the skills, training, systems, and knowledge base required to operate an in-house payroll function effectively can be very costly and time consuming.
A large part of the payroll service is data entry – transferring hours worked, pay rates and leave from internal systems or timesheets into the payroll system. Data entry is time-consuming, but an essential part of ensuring employees are paid accurately, presenting accountants with a difficult balance between paying their data-entry staff enough to ensure that those they employ will deliver a high degree of accuracy, and yet not so much that labour costs become prohibitive.
By deciding to outsource UK payroll, you are effectively receiving the benefits of employing a team of highly trained payroll experts, but without the related high salaries and ongoing training costs. Thus saving time and money.
Furthermore, with an outsourced function, you receive year-round support and do not need to consider the minutiae of payroll management.