Last editedJan 20203 min read
Payroll is a vital part of keeping your business running smoothly, which is why it can also be such a time-consuming task. While you may be put off by the risks of outsourcing payroll, or simply the idea of handing this crucial piece of admin to someone outside your organisation, there are plenty of benefits to consider. Here, we outline the advantages and disadvantages of outsourcing payroll services, so you can find out whether it’s a viable option for your business.
Why outsource payroll processing services?
The heart of payroll, and of all businesses, is finance, so you should look first and foremost at the effect payroll is having on your figures and see if outsourcing would be a help or a hindrance to your overall cash flow. You should also consider whether your business has the right personnel for a dedicated payroll accountant. As a task that can carve out a significant portion of the finance team’s time, you may find that outsourcing takes a weight off their shoulders and increases business efficiencies.
What are the benefits of outsourcing payroll function?
For many companies, reduced costs are one of the biggest benefits of outsourcing payroll function. While you may already have the personnel and software in place, there are other costs to consider such as on-going training, ever-changing legal obligations – including pensions, desk costs, software update costs and overtime pay – as well as the possibility of staff turnover. Hiring internally costs around £15,000, whereas outsourcing could cost as little as £800.
Automation payroll function can be a great way of keeping your company up to speed with modern business practices, with 25% of UK accounting firms making automation a priority. Outsourcing to a specialist company will save you from having to build a system from the ground up, spend time on IT maintenance, or dedicate resources to staff training, enabling you to enjoy the benefits of outsourcing payroll function.
What are the risks of outsourcing payroll?
The downside of outsourced payroll is mainly associated with the lack of in-house personnel. While many HR and payroll companies have 24/7 help to ensure you’re never caught in a payroll emergency, the lack of face-to-face contact can be a pain-point for some employees.
Similarly, the loss of control that is inherent to outsourcing may not be suitable for your business, as you’ll be permitting another company to access your team’s private information. GDPR has been designed to offer better security around data, but the idea that your information is no longer secured within your business may not rest easy with you or your staff.
You should also be aware that your legal responsibilities won’t lapse because you’ve chosen to outsource. Keeping channels of communication open and constantly updating your supplier is important, and of all the risks of outsourcing payroll, the assumption that your chosen provider no longer requires your involvement is perhaps the most likely to cause issues.
Benefits of outsourcing payroll function: UK and beyond
International companies may also consider outsourcing payroll. The advantages and disadvantages of outsourcing payroll remain similar, though there may be a couple of additional benefits. If your business is moving into a new territory, or is already operating in several different regions, you will need to invest time and money into ensuring that your teams are familiar with local laws and regulations around finance management.
Payroll specialists can help ensure international payments run through one central point, and are compliant – an easier and potentially more cost-effective alternative to training in-house staff. However, this makes communication doubly important, as you have different currencies, cultures and time zones to take into account.
Who should outsource payroll?
Ultimately, this decision comes down to what you think is best for your business. However, small to medium sized companies stand to benefit the most from handing their payroll function off to an external resource. At this scale, businesses can usually run their payroll through a single member of staff, which is good for costs, but potentially disastrous if this staff member is struck down by sudden illness, books a holiday, or encounters software failure. By outsourcing, you’ll have the resources of an entire firm committed to your payroll, with safety nets in place to guard against failed deliveries, leaving you with more time to dedicate to leading your brand to success.
We can help
If you’re considering simplifying your payroll by outsourcing, why not sort out your billing system as well? Find out more about how GoCardless helps take the pain out of getting paid.