How Can You Reduce Payroll Cost and Grow Your Business?
Your clients whether they are big or small employ a bunch of staff to conduct their business smoothly. Your clients incur expenses, such as salaries and other benefits, to take care of these staff. These expenses are referred to as payroll costs. Along with what your clients pay to them, payroll cost also includes what it cost to pay them.
Conducting the payroll on time and accurately is important because any delay or inaccuracy in the employee’s salaries will lead to loss of trust, demoralisation, and in the long-term losing experienced employees. That is why many businesses including your clients are spending a substantial part of their revenue towards payroll costs, thus making it a considerable burden on them.
To make matters worse, payroll regulations in the United Kingdom also goes through constant updates which makes it difficult for your client’ s to keep up with. That’s why they are increasingly assigning the payroll tasks to accounting practices like yours. Hence, it is important to know more about the payroll cost and how you can reduce its burden on your client’s and on yourself.
Types of Payroll Costs
To effectively manage your client’s payroll costs, you must understand that payroll costs are divided into direct and indirect categories. Let’s take a closer look at them.
Direct Payroll Costs
Under direct payroll costs come the salaries and other benefits your clients have to pay to their employees, which surely make up the largest portion of your client’s payroll cost.
Under direct payroll cost come the following:
- Salaries
Your clients regularly pay their regular employees salaries regardless of the number of hours they work. Usually, companies pay salaries on a monthly basis.
- Hourly Wages
Hourly wages are paid to employees based on the number of hours they have worked. The hourly wage rate is generally fixed and paid on a regular pay period.
- Contractor Payments
Payments are made to non-employees hired for a specific purpose, and once they fulfill their contractual responsibility, they receive payment. For example, companies make payments to freelance accountants.
- Benefits
Your clients will offer multiple benefits for their employees, starting with health insurance, travel allowances, and wellness programs. Some of these benefits are mandatory, and some are optional, which your clients opt for to retain existing employees and attract new ones.
- Bonuses
Your clients have used bonuses to boost their employees’ morale. Clients exercise discretion in paying bonuses, which constitute additional financial compensations beyond the contractually agreed salary. During festive occasions or as performance-based incentives, clients typically use bonuses.
Because your clients employ staff, they indirectly incur payroll costs, even though they do not directly pay these expenses to the employees.
Things that come under indirect payroll cost are as follows:
- Payroll Taxes
The government taxes a certain percentage of your client’s employee’s salaries, called payroll taxes.
- Administrative Costs
Running payroll, making payments to the staff, and ensuring the benefits reach all staff members are all administrative expenses. Also included in the administrative costs are tax filings, sending direct deposits, and the costs of checking papers.
How to Reduce Payroll Costs for Business Success
If your clients are asking for ideas to reduce their payroll costs, do not worry. There are ways. Firstly, you can ask them to keep an eye on the trends and help them design efficient payroll systems. But that does not always work.
Hence, we have come up with ways for your client to reduce their payroll cost.
Management of Overtime
When your client’s employees work overtime more frequently, their payroll costs are out of control. To reduce overtime expenses, your clients can set up an alert in their employee scheduling software. Whenever an employee completes their regular working hours, the software will automatically try to assign the remaining task to other employees, thus avoiding paying overtime and reducing the payroll costs.
Keep a Balance in Staffing
Your clients must not recruit new talent every now and then but should focus on training the existing employees with new skills and allowing the existing staff to handle a heavier load. Furthermore, if training is not feasible, they can utilize freelancers or accounting outsourcing to accomplish the task. By balancing between the two, your clients can significantly reduce their payroll costs.
Use of Payroll Software
Working on payroll manually and on paper is prone to human errors and misplacement. In the digital age, companies utilize payroll software like Sage, Brightpay, and Xero for payroll processing. The software will catch any irregularity before it becomes an issue. For example, auto-generated reports generated by the payroll software will give you a perfect breakdown of the payroll cost.
Outsourcing Payroll
It is one of the simplest and most popular ways of reducing your clients’ payroll costs. Outsourcing accounting to a service provider will reduce the burden of your client’s payroll responsibilities, thus helping their in-house team manage it. A service provider will charge your clients as per the services they avail. When your clients compare these charges to the cost of recruiting and training an in-house staff, they will find that outsourcing saves them money.
Automation of Recurring Tasks
Certain recurring tasks that do not require human intervention and can be automated may be present for your clients. This will reduce the need for staff, making technology an integral part of your client’s payroll process. Thus, reducing the need for human intervention will decrease payroll costs and boost productivity.
How Much Does Payroll Cost?
Currently, your clients might face significant expenses due to payroll costs, but they can substantially reduce these by implementing the mentioned methods. However, your clients may be hesitant to adopt these methods for various reasons, such as a lack of time or expertise. Therefore, they will hand over the payroll task to your accounting practice.
But let’s face it, handling such high volumes of payroll related work requires a highly experienced team at your disposal. Without it your process will slow down leading to your client’s losing faith. To avoid such a situation, you must consider the option of outsourcing accounting to a service provider such as Corient Business Solutions.
Our bookkeeping, year-end, VAT, and payroll outsourcing services are designed to give your practice an edge in the market, thus saving you time to invest in other important tasks.
Conclusion
In conclusion, by choosing Corient, you are solving two problems. Firstly, reducing the payroll costs of your clients, and secondly, avoiding yourself from becoming overburdened by outsourcing to us. With our help, you can offer your client better client services. We can connect at your convenience by phone or online meeting to discuss about our services in detail.