Top 5 Myths About Outsourcing Payroll
Misconceptions around payroll outsourcing could be holding back your business.
Our clients find that taking the step to outsource pays them back dividends, driving productivity and giving them the opportunity to focus on strategic rather than tactical initiatives. We understand that payroll outsourcing can be a daunting topic, so we have debunked some of the most common myths to help you make informed choices about your payroll.
1. It's more expensive to outsource payroll
Actually it’s more cost-effective to outsource payroll in most cases as a lot of people don’t realise the true cost of running their payroll, they tend to look only at the salary costs of the people running the payroll. There is a whole range of additional ancillary costs which organisations rarely take into account when calculating the true cost of processing their payroll in-house. There is a clear saving to be made in terms of payroll related stationery costs, when you take into account salary, NI and other payments, and the often overlooked costs of training, sickness, holiday and recruitment charges. In a small organisation, one person may have sole responsibility for processing the payroll, which can prove a big headache at times of holiday or sickness. Running your payroll in-house means you have to spend time and money keeping up with rapidly-changing legislation, identifying which regulations are relevant to your organisation and maintaining accurate records. The cost of running and maintaining a payroll software system can also be significant, particularly when additional upgrades to the system are needed on an annual basis. What’s more, if there are problems with the software system being used to process the payroll, your IT department or external IT support provider will often be called in to help. Backing up your payroll information system regularly, making sure you have good security, and having an active disaster recovery plan in place all takes time, and costs money. You also have to provide your own IT hardware and utilise IT department support time to keep your own payroll department working. Actual costs of your payroll stationery requirements shouldn't be underestimated either - payslips, envelopes, paper for reports and printer consumables all cost money. The benefits of using an outsourced payroll service mean that all costs are taken care of for you in one overall management charge, which can be much cheaper than businesses often expect. To outsource their payroll, a 100 employee business would spend less than £3,500 a year. You couldn’t even employ a part-time payroll person for this amount. An organisation with 500 employees would spend approximately £16,500 a year for their payroll to be outsourced, so the sums still add up. You have no need for any capital expenditure - no software, hardware or stationery to buy and you know all your costs in advance, making budgeting simple.
2. Switching payroll companies is too much hassle
Outsourcing your payroll may have benefits, but surely it’s fraught with difficulties – after all, every organisation has its own processes and procedures specific to them, but a good outsourced payroll provider will absorb any pain of change over. We have invested significantly in the implementation process, it is critical that we fully understand how a clients payroll operates, so we spend time to ensure that we get the information required to effectively set up the payroll. We publish an implementation timetable that clearly outlines who is responsible for each element and by which date. We work closely with the client at every stage to make the process as easy as possible. You might expect implementation to be a time-consuming process, but it can take as little a 3 working days to go live with Intelligent Payroll Limited for example, regardless of the size of the organization. Implementing an outsourced payroll solution can also have unexpected benefits as the existing process is audited: With a recent client it came to light that their previous supplier for the past 2 years had been calculating their employee Tax and NI contributions on their pension payments wrongly. Our implementation process is very thorough.
3. Our data won't be secure
Many Financial Directors fear that payroll data stored outside the organisation will be vulnerable to access or loss if systems break down. However, your data is likely to be more secure in an outsourced environment, as outsourced payroll providers invest heavily in the technology they use and will have robust disaster recovery systems in place. Intelligent Payroll can have full back up and recovery of their systems within 2 hours of a disaster at their offices and our systems use bank-level security as standard. Can you confidently say you could process your payroll in such a situation – and so quickly? Although organisations may have a contingency for system failure, this is unlikely to be sufficient should there be a breakdown at payroll close. “The majority of smaller businesses will have little or no backup or disaster recovery if their payroll system breaks down”, Some Financial Directors are also worried about the sensitivity of financial information being handled through the payroll process. Since the passing of the Data Protection Act, outsourced providers including Intelligent Payroll have been required to notify the Information Commissioner of their activities and comply with legislation associated with the Act. So any outsourced payroll data is in fact protected and kept ‘safe’ by law.
4. The service will be unreliable
If done correctly with an established provider, an outsourced payroll service should provide reliable, accurate data processing month after month, year after year. After all, processing thousands of payslips a month for many local and national companies, means our own service has to be reliable. The service must provide full confidentiality, processing accuracy and consistently meet payment deadlines otherwise its business will suffer. The high level of professional and personal service Intelligent Payroll provides, ensures we achieve payslip accuracy in excess of 99.98% - Can your own in-house payroll department boast the same statistics? Our clients consistently give us 5* ratings on service and our Net Promoter Score (NPS) is 100%.
5. We will lose control over our payroll
There’s a common perception among many businesses regarding payroll that ‘If it’s not here on-site, we can’t manage or control it’ – but this is a complete myth. Payroll data is submitted to us, we then calculate all the relevant payments and send it back to you for approval. The payroll is never processed without your final approval and any changes are applied exactly as requested. There is a distinct difference between the management and control of payroll – with an outsourced solution, “YOU” retain complete control over your payroll but it’s simply managed elsewhere. Therefore you gain the expertise required but don’t lose control. Any reports you need are also available 24/7 and custom reports can be generated when you require them.
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