Big benefits of outsourcing your payroll
Whether you are a small or large business owner, you may have considered outsourcing your payroll matters. There are various reasons why companies often initially process payroll themselves. Indeed, some companies consider in-house processing to be a more cost-effective and efficient method.
However, for a lot of companies, this is usually not the case. In fact, there are several benefits that can be obtained through outsourcing your payroll.
This article looks at the numerous benefits your business can achieve through outsourcing your payroll.
It can sometimes be difficult to calculate the cost of servicing payroll in-house, but when you consider wages for employees (full and part-time), software costs, training costs and printing, you may be surprised by how much you actually spend. If you take into account the penalties for mistakes and missed deadlines then in-house processing may become costly.
Different businesses have different needs, so it is important that your payroll provider can offer a flexible service tailored to the specific needs of your business. As your needs are likely to alter over time, especially when experiencing growth and change – you don’t want to have to look for a new payroll provider. Instead, you want to have the option to adjust your agreement and package when required. Additionally, if you provide the information later than normal, will your provider still manage to process the payroll on time?
HMRC requirements are constantly changing with more obligations on the employer, with Real Time Information (RTI) and Auto-Enrolment as recent examples. Small business owners simply cannot be expected to keep abreast of all of the changes. Instead, using a third party like Hawsons, who have experienced specialists which are used to these obligations and constant changes, can be extremely helpful. We stay well-informed of the changes and provide guidance to help your business comply with all new legislation. This will undoubtedly reduce the number of mistakes made during the payroll process and, as mistakes can quickly become expensive, it is crucial you eliminate these where possible.
RTI was introduced in April 2013. It meant that all employers must make an FPS (Full Payment Submission) to HMRC on or before each payday. An employer may also be required to submit an EPS (Employer Payment Summary) on a monthly basis to HMRC. An employer with a weekly and monthly payroll could be required to make as many as 76 online submissions to HMRC each tax year. If the submission is not made on or before the pay day then HMRC will issue penalties and charge interest on late payments. Why have the burden of meeting the deadlines yourself when Hawsons can deal with the submissions on your behalf. Hawsons have been ensuring that their clients comply with the new legislation since it began.
Auto Enrolment and the requirement for all employers to set up a workplace pension scheme has been phased in for large employers since October 2012 with all employers being required to comply with the legislation by February 2018. It means that from an employer’s staging date all employers must assess staff every pay period to determine whether they would be required to make compulsory pension deductions based on their age and earnings. Most employees between the age of 22 and 65 will be required to have deductions made against their pay. An employer will also be required to provide a file to the pension provider each pay period containing various details in a specified format.
Regardless of the size of your business, the payroll process demands a great deal of time and effort – time and effort that could be spent growing the business or relaxing with friends and family.
Outsourcing your payroll will allow you to have the opportunity to spend your time more effectively; with more time to support your employees and work towards business objectives. Focusing all of your efforts on your core business is crucial as the more time spent on sales, the faster your business will grow. Get your work-life-balance right for you. The payroll process is difficult to manage and can take over your evenings and weekends; time that should be spent relaxing or with family and friends.
As well as having impacts on cost and time, attending to the payroll process in-house can be a heavy burden to carry. Spending your evenings and weekends worrying about whether the details are right, your business is fully compliant or if you’re going to meet the strict deadlines can be extremely stressful.
It is extremely important that your payroll is processed accurately and free from mistakes. If you are not experienced with attending to your payroll matters, then it is easy to make mistakes, and these can quickly become expensive. Submissions to HMRC must be made on time and error free in order to avoid monthly penalties and possible interest charges. The penalties HRMC impose can range from £100-£400 per month, depending on the size of your organisation.
Companies sometimes want to process their payroll in-house because they are protective of wage information. However, from our experience, it is better if someone unconnected with the business is dealing with payroll information rather than an internal employee. Even with a trusted employee, there is always the risk of identity theft or tampering. Additionally, without the most up-to-date software packages, there is always a risk that information is not completely safe and secure.
Information Security and Data Protection
Whilst payroll data has always been treated with the highest level of confidentiality, organisations should also be aware of the risk of significant fines which can be issued by the Information Commissioner’s Office. Failure to protect personal data as required by the Data Protection Act 1998 can result in a fine of up to £500,000 for the employer. Payroll data including national insurance numbers, bank account details, names and addresses, dates of birth etc. are some of the key ‘ingredients’ for identity theft; hence the stringent fines for failure to comply with the Act.