Is Outsourcing Payroll Cost Effective?

outsourcing payroll

Every company’s circumstances are different. Every company’s payroll requirements are different. There’s no simple formula that quickly answers the question of how cost effective it is to outsource payroll, and we’d be the first to say that outsourcing isn’t automatically the best choice for everyone.

For instance, if you own a small company with a very simple payroll where employees work set regular hours, it may turn out to be more cost effective to run it in-house. But based on experience, we also know that many companies have found outsourcing their payroll to be a sage business move.

Sometimes it’s because their company has a larger workforce. Sometimes it’s due to the need to accommodate more complex requirements like varying employee hours or shift patterns. There are many circumstances in which it turns out that outsourcing payroll is the more cost-effective option.

Before you make the decision, you need to weigh up the costs of doing it yourself versus outsourcing it to a payroll provider. Here are some of the key considerations.

How much of your own resource do you want to commit to running payroll?

Think about how much time it takes to run payroll. Even the most basic payroll can still be quite demanding to run. You could opt to employ specialist staff if you’re prepared to pay for the expertise. If it’s very straightforward, you might even decide to try to manage it yourself.

Whichever way you go, you’ll need to make sure the employees responsible are fully trained and competent and receive regular refreshers to keep knowledge up to date.

Getting up to speed and staying on top of all the requirements connected to running a payroll can take up a lot of time. That’s a time that could be spent on other activities for your business. When you’re considering outsourcing, you need to balance it against the financial, time and opportunity costs of doing it in-house as they could end up being quite significant.

If you’re running your payroll in-house remember there are other costs you need to factor in alongside employment costs too. You’ll need the right equipment and payroll processing systems in place. You must also make sure you’re backing up payroll data and meeting legal and security requirements for the management of sensitive data.

If you would prefer to avoid having to deal with all this, it’s worth looking at what outsourcing can offer you.

What could payroll errors and non-compliance cost your business?

Getting it wrong can turn out to be costly. There’s the time wasted sorting out errors plus the upset it can cause individuals who’ve been affected. And you are also exposing your company to the risk of fines (potentially with considerable financial penalties) if you don’t provide the necessary information on time to HM Revenue and Customs.

There are so many aspects to payroll, and the reality is that keeping on top of every detail and variation can be challenging. Take pension auto-enrolment, for example. Employees on variable pay at the lower end of the pay scale may sometimes, but not always, meet eligibility criteria and that can end up causing some real headaches. The expertise of an outsourced payroll professional helps manage these kinds of scenarios.

Would you have a payroll “Plan B” if you had a sudden problem in-house?

Any consideration of the cost of outsourcing should include thinking about the reliability of your payroll arrangements. Payroll might not be perceived as the most exciting part of business operations, but it’s absolutely critical. If something happened unexpectedly, would you have arrangements in place to ensure continuity?

Employees still need to be paid even if the person responsible for doing it in-house suddenly takes time off for any reason. You could consider bringing in some emergency cover – but there will undoubtedly be costs associated with that. Outsourcing takes away that vulnerability, ensuring you always have payroll continuity.

Do your homework when choosing your provider

One crucial aspect of how cost-effective outsourcing your payroll solution turns out to be lies in picking your provider wisely. Make sure you know what you are getting for your fee and unearth any hidden costs. Does the provider you are looking at charge for software updates, for example? At Corporate Payroll Solutions, we give our customers the peace of mind that the price per payslip includes all reporting, legislation changes and software upgrades.

Choose carefully, and you are likely to find that in most instances, outsourcing your payroll can be very cost effective. And don’t forget that even if you don’t feel a fully outsourced solution is right for you, you could also consider a blended managed payroll solution.

If you’d welcome an idea of what your preferred option could cost you, we’d be delighted to provide you with a free no obligation quick quote.