Many businesses continue to embrace outsourcing as a modern solution. Employing a third-party organisation, group or individual to complete a specific task within the business. Whilst outsourcing takes many different forms, with business owners delegating tasks such as customer service and marketing- it’s often payroll which proves most popular. This is unsurprising as payroll can be time-consuming, complicated and requires specific expertise in order for you to remain compliant. It’s for this reason why many companies choose to pass this task on to a third-party vendor, who specialise within this area.
With this in mind, should you consider outsourcing your payroll? What are the benefits and potential drawbacks to utilising this new approach to business?
Outsourcing Payroll
When a business chooses to outsource their payroll to a third-party, this can be an accountancy firm, a specialised vendor or even an individual. Payroll involves many different processes, all of which can be outsourced. These can include employee account set-up, payment method set-up, withholding the relevant income and payroll taxes, managing and recording any employee deductions and of course, end of year taxes. The business can choose to outsource the entirety of their payroll or adopt for a more hybrid approach, where some processes are outsourced, and others are completed in-house.
Now we have established what outsourcing your payroll entails, why do so many companies choose to go down this route?
Time
Payroll responsibilities can require a substantial investment of time and effort. This can be particularly taxing for smaller businesses and those without dedicated staff. Therefore, outsourcing this task to a third-party frees up valuable time that can be used for other aspects of the business.
Staff
Payroll services often require time, effort and specific expertise, particularly when we consider the ever-changing rules and regulations. It is for this reason why businesses will often employ specialised staff, who will be trained to handle payroll duties. This requires money, resources and many companies simply can’t afford this. Therefore, outsourcing payroll offers a simpler and cheaper alternative to hiring new employees.
Payroll System
Just like with staff, businesses who complete payroll in-house will have to invest in a payroll system. The cost of purchasing and continually running a payroll system can be expensive and therefore it may be more cost effective to just outsource.
Expertise
The financial aspects of running a business can often be particularly stressful for business owners, especially if they don’t have any prior experience in this field. One of the main financial responsibilities that is expected from businesses is managing their payroll. This is another benefit of outsourcing as you can utilise a specialist vendor, with experience and training, offering peace of mind that your payroll will be handled correctly.
Future-proof
Another aspect of payroll which can sometimes become an issue for businesses, is the continual changing of expectations, rules and regulations governing taxes and PAYE. We know how quickly policies can change and it’s important to keep on top of these changes. A lack of compliance with the rules, even if by mistake, can lead to penalties and fines. By outsourcing payroll to a dedicated team, whose job it is to know about the relevant legislation, you can be rest assured that your business will remain compliant.
What to keep in mind
It’s fair to say that outsourcing your payroll can offer many advantages and may be the right call for some businesses. However, there are limitations to keep in mind as this approach isn’t ideal for every type of business. For example, it may cost more money to outsource your payroll when compared with an in-house solution. This can often be the case with smaller businesses, who don’t have the capital and resources to fall back on.
Another factor to consider is trust. You need to be able to trust that the third-party who you are outsourcing to is reputable. Not only will they be in charge of an extremely important aspect of your business, but they will also be handling sensitive information. Any way in which your payroll is mismanaged will reflect poorly on you and your brand and could even lead to penalties. Therefore, it’s vital to do your research before choosing the right vendor.
Payroll is an important part of any business but it can also be time consuming, costly and complicated. Therefore, outsourcing this service to a specialist third party can offer a wealth of benefits but only if it makes financial sense and you’ve done your homework.
Fund Flow offer expert financial services, including comprehensive payroll management. If you’d like to find out more about this solution or Fund Flow in general, feel free to get in touch with them directly.
