What is payroll outsourcing?
When running payroll becomes too stressful or time-consuming, businesses can turn to third-party payroll specialists to get the job done – this is known as outsourcing payroll.
Employers outsource their payroll for different reasons. Some may want to rely on the legislative expertise of payroll providers. Others may simply be keen to free up internal resources and time.
You can also choose to what extent your payroll is outsourced, too; from a fully managed service handling your payroll end-to-end to a collaborative part-managed solution.
The benefits of outsourcing payroll
With the right outsourced payroll solution, you and your business benefit from:
- The expertise of payroll specialists who are up to speed with the latest legislation and compliance
- Potential savings when measuring outsource solutions against staff time and software costs
- Not having to worry about data security – a good payroll provider will have strong security measures in place.
Featured Guide
“Should I outsource my payroll?”: A complete guide to payroll outsourcing solutions
When it comes to your payroll, the stakes are already high – but outsourcing your payroll neededn’t feel like a gamble.
This free guide to payroll outsourcing is designed to support you in your search and includes information like:
- The ins and outs of payroll outsourcing
- Common concerns about outsourcing payroll
- Fully managed vs part managed payroll solutions
- Steps to successfully outsourcing your payroll
- Our recommended managed payroll solutions.
What kinds of payroll outsourcing models are there?
There are two distinct service models for outsourcing your payroll.
- Fully managed payroll service – Takes care of every aspect of your payroll, from keeping your data safe to paying your people; you just provide the data and final sign off.
- Part-managed payroll service – Helps run your payroll alongside your in-house team. Sometimes known as payroll bureaus, they typically take care of specialist payroll functions.
What to consider when asking “Should I outsource payroll?”
We understand that moving from an in-house payroll to an outsourced provision is a big step and one that generates many concerns.
Here are some of the most frequent concerns we encounter when talking to businesses looking into payroll outsourcing.
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“Will we lose control of our payroll?”
When you outsource a function of your business to a third-party, you don’t necessarily need to be giving up all control of your payroll.
A part-managed payroll solution, for example, involves bringing in specialists who can help with:
- Running more specialist parts of your payroll
- Ensuring you’re compliant with all legislation and law
- Taking some of the admin off your hands, like data entry and sending out payslips.
In this case, your payroll stays in-house – you’re just getting extra help to run it.
But even with fully managed payroll solutions, you still have control. For example, you will still need to review and sign-off the payroll before it goes out.
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“Will we still need some in-house payroll expertise?”
If you’re concerned about having to maintain an in-house payroll team while you’re outsource your payroll, you can opt for a fully managed outsourced payroll service.
With a fully managed service, you won’t need to retain a full payroll team. You will only need to assign an authorised contact within your business to liaise with the payroll company. They will be responsible for:
- Providing and uploading the employee data to the payroll provider
- Reviewing and approving the payroll report from the provider.
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“Is there any added value to outsourcing payroll?”
Many businesses find that having their own in-house payroll team works best for them. However, outsourcing your payroll can provide added value on top of just handing off a tricky job:
- Thanks to their experience and specialist software, payroll bureaus often work to greater levels of accuracy and compliancey
- Many payroll providers will offer payroll reporting; data you can use to make more informed strategic decisions
- By taking care of niche or more complex payroll, you can look into hiring talent you may not have otherwise felt confident bringing on, e.g. Contractors being paid under CIS.
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“Will the payroll service be reliable?”
It’s reasonable to be concerned about reliability when entrusting a third-party to handle such a critical function of your business.
When you’re exploring payroll outsourcing options, you might wish to seek out providers who:
- Provide insight into day-to-day functionality, like turnaround times, client guarantees, and business continuity
- Hold industry-standard accreditations, such as membership with the Payroll Assurance Scheme (PAS), which is overseen by the Chartered Institute of Payroll Professionals (CIPP)
By asking the right questions, you can have greater confidence when it comes to handing over your payroll.
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“How secure will my payroll data be?”
As an employer, you may well have reservations when it comes to sharing your employee and payroll data – the best payroll providers understand this completely.
Reputable payroll outsourcing services will look to establish and maintain top-class data security measures, including:
- Evidence of data security systems and protocols
- Adherence to international standards such as ISO270001 and GDPR policies
- Providing a secure and encrypted portal through which you can transfer data.
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“How much hassle will it be to change to a payroll provider?”
Switching systems can be a nightmare for businesses, especially when it comes to payroll – you can’t afford to have your pay cycle disrupted.
Outsourced payroll providers know this. In fact, they specialise in making the switch as easy and streamlined for their clients, with measures like:
- Providing a dedicated Implementation Team whose job is to migrate your data and set up the new payroll
- Carrying out parallel runs alongside your current payroll to ensure accuracy and allowing you to see the result for yourself, before hitting the ‘go live’ button
- Supporting you and your staff through the implementation period (e.g. providing training) and troubleshooting any issues.
Frequently asked questions
Discover what payroll outsourcing is all about – from the different kinds of services available to what it’s like to switch providers.
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There are any number of reasons businesses choose to outsource their payroll. However, they tend to boil down to two key motivators:
- Running payroll in-house is a lengthy, admin-heavy task – and businesses want to make better use of their staff’s valuable time
- When running payroll requires specialist insight (beyond standard legislation), businesses might prefer to leave it up to the experts.
It isn’t just the time it takes to run payroll that gets employers thinking about payroll outsourcing.
With an ever-growing list of regulations and legislations – 200 and counting! – to adhere to, many businesses prefer to have the professionals take care of their payroll. This also means employers avoid the legal repercussions of running a non-compliant payroll.
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A fully managed payroll service is a third-party organisation that takes complete care of running a client’s payroll. Some of this includes:
- Moving your payroll across to their system
- Processing the payroll every pay period
- Dedicated payroll staff who function as an extension of your team
- Paying staff via BACS or Faster Payments
- Paying HMRC and Pension Providers
- Completing and sending required reports to HMRC
- Taking care of pension auto-enrolment
- Managing starters and leavers
- Issuing P60s.
With a fully-managed payroll service, you are still responsible for collecting and submitting your employee’s data and approving the payroll before it’s issued.
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If you already use a payroll outsourcing provider and you wish to switch to another one, the level of complexity comes down to the support the new provider can offer.
Many payroll outsourcing services offers way to make the transition simple, with little to no input required for their client. That might include:
- Providing a dedicated Implementation Team who migrate your data from wherever it’s currently stored and set up your new payroll
- Running your payroll alongside your current provider so they can ensure accuracy and troubleshoot any issues before taking over
- Training your staff on any new software and offering dedicated support through the implementation period.
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A popular time to switch payroll providers is at the beginning of your fiscal or tax year.
However, an experienced payroll provider can bring you on board anytime, without any negative knock-on effects to your payroll functions. You may even find it beneficial to switch providers outside of those busier periods (particularly April) as providers have greater resource to support your migration.
If you want to change who you outsource your payroll to, you don’t need to wait for a particular moment – the right provider will take care of it all for you.
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As payroll experts, payroll bureaus and outsourced providers have the means to ensure your payroll is always compliant with current legislation.
As an employer, you are responsible for ensuring your payroll is compliant. This involves:
- Reporting to HMRC
- Reporting to the Pension Regulator
- Securing your employee’s data according to GDPR requirements.
On top of this, running payroll requires you to have knowledge of (or resources to ensure compliance with) nearly 200 pieces of legislation.
By outsourcing your payroll, you can rely on the experts to ensure compliance – and avoid any fines or legal repercussions.
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