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Outsourcing payroll is a difficult task as you need to make sure the payroll outsourced company is reliable and affordable for your business. This guide aims to explain how payroll outsourcing works and key things you need to consider before outsourcing your payroll to a payroll service provider .
In order to streamline both HR and accounting functions and save money outsourcing payroll would be an ideal option. This guide aims to explain an overview of the benefits of outsourcing payroll and key things you need to consider before outsourcing payroll companies.
What is Payroll Outsourcing?
Use a third-party service provider to process payroll, prepare payslips and handle all of the administrative and compliance functions of paying your employees. It is your responsibility as an employer to ensure your employees are getting paid correctly, you are complying with HMRC requirements, and Pension Regulator requirements or get someone else to do it for you. Outsourcing your payroll to a reliable payroll provider will reduce a huge burden off your shoulders and your business will have access to expert payroll service and business advice.
When should you outsource payroll?
It depends on the size, the budget and other resources available for your business. As an employer you need to make the payment and deduction correctly to your employees otherwise they will backfire on you. Now the question is, should you recruit someone to do it in-house payroll or should you just outsource it to a payroll provider? If you own a small company then it is recommended to outsource your payroll function as you will get access to expertise. If you own a large company you can either do in-house or outsource it.
Payroll is a complicated, regular basis task. If you do not complete the tasks on time it will keep piling up which will delay the payroll process. As a result of delayed payroll processing, you might get a penalty or your employees might backfire at you for getting paid late.
What is Included in the Payroll Outsourcing Service?
The payroll functions typically outsourced to a third-party provider include:
- Running payroll and making employee pay and withholding calculations
- Processing a BACS payment or issuing checks to employees
- Calculating HMRC payroll taxes, and making tax payments to HMRC
- Filing required government reports
- Administering employee benefits
- National Insurance and pension contributions
Running an in-house payroll can be a challenge for smaller companies or businesses without HR and accounting professionals on staff. Outsourcing is one method to avoid hiring additional employees or contracting with specialists.
Companies choose to outsource payroll for several primary reasons:
- Cost savings by avoiding the need to use in-house resources to comply with complex payroll requirements
- Ease of ongoing administration of payroll through changes in personnel, reduction or increase in compensation structure and filing of reports to government authorities
- Avoiding mistakes and tax compliance penalties
- You do not need to pay for the software and implement it.
- You do not need to deal with HMRC, pension regulators, employment law, court earning order.
- You do not need to send payslips as the soft
What Payroll Functions Can Be Outsourced?
Depending on their needs, a company may customize the outsourced payroll services, while retaining control of other aspects. The payroll functions typically outsourced to a third-party provider include:
- Running payroll and making employee pay and withholding calculations
- Depositing funds directly or issuing checks to employees
- Calculating state and federal payroll taxes, and making tax payments to HMRC.
- Filing required government reports
- Administering employee benefits
- National Insurance and pension contributions
Benefits of Outsourcing Payroll
The advantages of outsourcing payroll for both small and large companies are numerous, and a large percentage of businesses use this type of service abroad. The benefits of cost and time savings, filing of reports and avoiding compliance issues make payroll outsourcing a popular service. Those advantages are multiplied in foreign markets where payroll rules and tax laws are unknown to a new business, and a local payroll provider can be a valuable partner.
Outsourcing payroll is a limited, administrative foreign employment solution, and does not guarantee compliance with taxation, immigration or labor laws in the host country. The payroll provider does not offer the foreign company a local employment entity, so incorporation is still required along with registration and other compliance measures.
Other practical disadvantages include losing control of compensation and employee data, security issues and lack of service quality or timely reporting. These can be offset by thorough research of the payroll providers in the country and selecting the best firm available.
What to Ask When Outsourcing Payroll?
Outsourcing your payroll to a payroll service provider can be very risky as it involves a lot of information about your business. There are a few key questions to ask any payroll provider prior to outsourcing, to minimize any issues with service quality:
- How much do you charge per payslip?
- Are your service includes auto-enrolment and pension?
- Are there any hidden costs?
- Are you compliant with GDPR regulation?
- How do you secure my employee’s confidential information?
- Do you have experience in payroll outsourcing?
- Is your firm regulated by any accounting body?
THINGS TO CONSIDER WHEN CHOOSING PAYROLL OUTSOURCING PROVIDER
1. How flexible is their service?
Different businesses have different needs, so it is important that your payroll provider can offer a flexible service tailored to the specific needs of your business. Additionally, your needs may alter over time, especially when experiencing growth and change – you don’t want to have to look for a new payroll provider, you want to have the option to adjust your agreement and package when necessary. Are they willing to be flexible on time scale and deadlines? For example, if you provide the information later than normal, will they still manage to process the payroll on time?
2. Are they willing to fix their prices?
Ensure that the price is a reasonable and affordable solution, which fits within your budget. Find a service that is tailored to your needs. It is also important that you choose a payroll provider who sets a fixed price; to ensure that there are no hidden charges and that the final bill is as you expected.
3. How responsive are they?
It is crucial that you have a point of contact with the payroll provider who is easily accessible and responsive to your needs. Ideally, your payroll provider should be proactive and constantly looking for ways to manage your payroll matters more effectively.
4. What experience do they have?
As HMRC requirements are constantly changing with more obligations on the employer, it is crucial you use the third party providers who have specialists who are used to these obligations. It is their responsibility to make you aware of the ever-changing legislation so you can feel at ease knowing that your business is compliant with all new legislation, so having a wealth of experience is essential. Without experience, your provider could be prone to making mistakes, which can quickly become expensive. A consideration that you must take into account is who will be in charge of your account once you have agreed to outsource your payroll. It is a common criticism of payroll providers that they outsource or ‘pass down’ the payroll matters. Ideally, you should look for a provider where all staff dealing with payroll have years of experience.
5. Do they have the necessary expertise?
Given the increased compliance and burden of Real-Time Information (RTI) and Auto Enrolment, it is crucial that your payroll provider has the necessary expertise to ensure you comply with the new legislation.
Why would choose Tax Care as your payroll outsourcing provider?
It can sometimes be difficult to calculate the cost of servicing payroll in-house, but when you consider wages for employees (full and part-time), software costs, training costs and printing, you may be surprised by how much you actually spend. If you take into account the penalties for mistakes and missed deadlines then in-house processing may become costly. TaxCare Accountants can offer a fixed-price service, which is tailored to the needs of your business. This makes outsourcing your payroll to TaxCare is an affordable and quantifiable solution.
Different businesses have different needs, so it is important that your payroll provider can offer a flexible service tailored to the specific needs of your business. As your needs are likely to alter over time, especially when experiencing growth and change – you don’t want to have to look for a new payroll provider. Instead, you want to have the option to adjust your agreement and package when required. Additionally, if you provide the information later than normal, will your provider still manage to process the payroll on time? At TaxCare we pride ourselves on being flexible and able to adapt to our clients’ needs. We do not impose rigid deadlines or time slots, and if the information is provided by you later than usual we will work hard with you to ensure the payroll is still processed on time.
HMRC requirements are constantly changing with more obligations on the employer, with Real-Time Information (RTI) and Auto-Enrolment as recent examples. Small business owners simply cannot be expected to keep abreast of all of the changes. Instead, using a third party like TaxCare Accountants, who have experienced specialists which are used to these obligations and constant changes, can be extremely helpful. We stay well-informed of the changes and provide guidance to help your business comply with all new legislation. This will undoubtedly reduce the number of mistakes made during the payroll process and, as mistakes can quickly become expensive, it is crucial you eliminate these where possible. Real-Time Information (RTI) for PAYE RTI was introduced in April 2013. It meant that all employers must make an FPS (Full Payment Submission) to HMRC on or before each payday. An employer may also be required to submit an EPS (Employer Payment Summary) on a monthly basis to HMRC. An employer with a weekly and monthly payroll could be required to make as many as 76 online submissions to HMRC each tax year. If the submission is not made on or before the payday then HMRC will issue penalties and charge interest on late payments.
Why have the burden of meeting the deadlines yourself when TaxCare Accountants can deal with the submissions on your behalf. TaxCare have been ensuring that their clients comply with the new legislation since it began.
Auto Enrolment and the requirement for all employers to set up a workplace pension scheme has been phased in for large employers since October 2012 with all employers being required to comply with the legislation by February 2018. It means that from an employer’s staging date all employers must assess staff every pay period to determine whether they would be required to make compulsory pension deductions based on their age and earnings. Most employees between the age of 22 and 65 will be required to have deductions made against their pay. An employer will also be required to provide a file to the pension provider each pay period containing various details in a specified format. TaxCare can liaise directly with you and your pension provider to ensure the process runs as smoothly as possible. We already have a large number of clients who have been complying with the legislation and have had to write numerous bespoke reports for different pension providers. Auto Enrolment is a legal requirement so it is very important that your company complies with the legislation as the penalties can range up to £50,000 and employers can be prosecuted. Tax Care can assist you so that you have peace of mind.
4. TIME SAVINGS
Regardless of the size of your business, the payroll process demands a great deal of time and effort – time and effort that could be spent growing the business or relaxing with friends and family. Ready? Steady? GROW. Outsourcing your payroll will allow you to have the opportunity to spend your time more effectively; with more time to support your employees and work towards business objectives. Focusing all of your efforts on your core business is crucial as the more time spent on sales, the faster your business will grow. Work-Life-Balance Get your work-life balance right for you. The payroll process is difficult to manage and can take over your evenings and weekends; time that should be spent relaxing or with family and friends.
5. STRESS RELIEF
As well as having impacts on cost and time, attending to the payroll process in-house can be a heavy burden to carry. Spending your evenings and weekends worrying about whether the details are right, your business is fully compliant or if you’re going to meet the strict deadlines can be extremely stressful. Outsourcing your payroll services to TaxCare Accountants can take away the headaches and stress of doing it in-house and give the owner peace of mind to carry on what they do best – running their business.
It is extremely important that your payroll is processed accurately and free from mistakes. If you are not experienced with attending to your payroll matters, then it is easy to make mistakes, and these can quickly become expensive. Submissions to HMRC must be made on time and error-free in order to avoid monthly penalties and possible interest charges. The penalties HRMC imposes can range from £100-£400 per month, depending on the size of your organization. Outsourcing your payroll services to TaxCare Accountants will take away the risk of financial penalties and ensure your payroll is submitted on time and error-free.
Companies sometimes want to process their payroll in-house because they are protective of wage information. However, from our experience, it is better if someone unconnected with the business is dealing with payroll information rather than an internal employee. Even with a trusted employee, there is always the risk of identity theft or tampering. Additionally, without the most up-to-date software packages, there is always a risk that information is not completely safe and secure.
8. INFORMATION SECURITY AND DATA PROTECTION
Whilst payroll data has always been treated with the highest level of confidentiality, organizations should also be aware of the risk of significant fines that can be issued by the Information Commissioner’s Office. Failure to protect personal data as required by the GDPR can result in a fine of up to £500,000 for the employer. Payroll data including national insurance numbers, bank account details, names and addresses, dates of birth, etc. are some of the key ‘ingredients’ for identity theft; hence the stringent fines for failure to comply with the Act. You can’t outsource your data protection responsibilities When businesses outsource their payroll function they do not also outsource their Data Protection Act responsibilities. Employers have the responsibility to protect personal data irrespective of who is processing the payroll. As a result, businesses need to choose their payroll provider carefully to ensure that data is secure at all times whether it is in storage or transmission.
Ensure your data is encrypted Employers need to select a payroll outsourcer who takes care of their data as if it were their own. As data is moved backward and forwards between the employer and the payroll processor it should be encrypted during transmission. Data should also be encrypted if it is stored or exchanged on the internet, for example: on an internet portal. TaxCare Accountants encrypted payslips to your employees. We also send the payroll summary to the employers on a monthly basis.
Why choose Tax Care? Tax Care is one of the leading firms of cloud-based certified accountants in England. Formed in early 2018, TaxCare Accountants has recently received four nominations and 4 awards for offering innovative cloud-based accounting and payroll services to their clients. The firm offers a flexible cloud-based payroll solution for your business so you will get access to live information about your business.
Whether you need payroll business advice or furlough your staff, the TaxCare payroll expertise team will help you to provide a simple payroll solution at a competitive price.
Our payroll specialists TaxCare Payroll are a dedicated team of experienced Payroll specialists who provide an integrated and fully comprehensive range of services. They each have extensive experience in all aspects of payroll matters and have worked with a wide range of clients of all types and sizes.
TaxCare’s payroll outsourcing UK can take the ever-increasing burden of operating a payroll off your shoulders, allowing you and your workforce to concentrate on building a successful business. TaxCare payroll outsourcing offers a fixed-price service, tailored to your own needs. We are not a bureau or call center and aim to replicate the benefits of an in-house payroll function by being flexible and responsive. Our integrated and fully comprehensive service offers the following:
- Set up and customise your payroll department.
- Payslip preparation Customised management reporting on payroll information
- Unlimited business advice regarding payroll and pension
- Year-end HM Revenue and Customs returns
- Maintaining statutory sick pay
- Statutory maternity pay records
- Maintaining Employment Law and relevant compliances
- Deal with pension regulators on your behalf
- Pension and auto-enrolment
- Dealing with HM Revenue and Customs and DWP on your behalf Payments of salaries and wages Compliance with existing and new legislation
- Sickness and absence recording Dealing with employer and employee queries Provide statutory forms to staff Give guidance on various payroll issues and legislation and so on.
- Deal with court orders and all other third party correspondence
Contact TaxCare Accountants today to discuss further about your payroll requirements.
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