Administering the company payroll can take up a disproportionate amount of time for small businesses. Even running a payroll for a few employees can entail a significant accounting burden, with the requirement to administer payments, manage tax codes, and pay PAYE income tax and National Insurance. Investing in a good cloud-based payroll tool, such as Xero, removes a lot of the work, automating most of your regular reports to HMRC and syncing payroll expenses with your accounting system.
However, for businesses with more than 5 to 10 people on their payroll, it can also be beneficial to take out payroll services outsourcing with an experienced accountant. Let’s look at the pros and cons of outsourcing your payroll.
5 Reasons To Outsource Payroll
1) Save money: Outsourcing your payroll is often more cost-effective than maintaining an in-house payroll personal department, especially for SMEs.
2) Save time: Using an outsourced payroll service frees your accounting and HR team to focus on other tasks, reducing the time spent on manual admin.
3) Accuracy: Working with a professional payroll outsourcing business avoids errors in payroll and tax calculations, keeping your payroll accurate and compliant.
4) Data security: Outsourced payroll services use strong encryption and cloud-based security measures to protect your employee’s sensitive information from breach, theft, and fraud.
5) Compliance: Outsourcing also keeps you up-to-date with tax regulations, avoiding the risk of penalties for incorrect or late filings.
Disadvantages Of Outsourcing Your Payroll
Whenever you make an outsourcing decision, it’s important to weigh up costs and benefits. For very small businesses, it’s sometimes more cost-effective to manage the payroll in-house, as it’s fairly straightforward to do that using a cloud accountancy platform. Large-scale corporate businesses may also prefer to handle their payroll in-house, due to the loss of control that comes with relying on an external provider. Usually however, mid-sized businesses stand to save more in terms of money and time by outsourcing than they would by doing the payroll in-house.
You should also consider the issue of integration. Ideally, your payroll provider should use the same accounting software as yours, and the systems they use should be capable of integrating with your HR and accounting platforms to maintain full visibility.
What To Look For In A Payroll Services Provider
When selecting an outsourced payroll provider, it’s important to look at their capabilities, reputation, and technological proficiencies to ensure that they match with your payroll needs. For instance, if your business is growing or you plan to recruit, it’s crucial that your payroll service has the capacity to scale with your needs. Check to see what you get for your money, and if your service plan covers your projected growth vector. You don’t want to be locked into a subscription for a fixed term contract that no longer accommodates your needs.
Some businesses specialise in payroll services only, but in general you’re best off taking the service as part of an accountancy package, which includes bookkeeping, tax reporting, and other financial management services.
What Next?
Get in touch with Vanilla Accounting today to find out about our payroll, bookkeeping, and accountancy services for small businesses.
