Let’s Understand the Payroll Outsourcing Cost in Detail
What is Included in Payroll Costs?
When we talk about payroll costs, we include all the costs related to employee payments. That includes salaries, taxes related to payroll, and administration fees. Accounting practices do payroll-related tasks on behalf of their clients, but when these clients increase their employee count, it brings in additional burden. Not to forget the complications that may arise due to the complexity of payroll regulations. In that case, accounting practices such as yours can opt for payroll outsourcing.
How to Outsource Payroll
When your clients expand their business more employees will be recruited which is good news for you but there is a catch. You are already handling the payroll for your clients and additional work will only burden your in-house team and reduce their efficiency. Hence, it becomes a necessity to outsource payroll to a service provider. By outsourcing to a third-party payroll service provider, you are handing over extra work to them which has a positive impact on your services.
Types of Outsourced Payroll?
Taking care of payroll in-house will naturally be a burden on your pocket therefore to reduce your burden you must choose to outsource payroll. But for that, you have to research what type of payroll service will meet your requirements. Yes, you read it right: there are types of payroll services, fully managed and part-managed payroll services.
Fully Managed Payroll Service: Under this type you are completely handing over your payroll responsibilities to a payroll service provider. The service provider will handle all dealings with HMRC and respond to your clients’ queries.
Part-Managed Payroll Services: Here you will get the option of outsourcing certain payroll responsibilities while retaining the rest. Under this type, experienced payroll specialists handle the most complex payroll tasks, which you outsource.
What is The Cost of a Payroll Service That is Fully Managed?
On the one hand, part-managed, the cost of payroll services will be less because you are not opting for a full handover. You are only outsourcing certain payroll services while remaining in complete control of the day-to-day processes, such as maintaining employee records and updating wage information. However, your payroll service provider will take care of the tricker parts, such as filing year-end reports and making payroll complaints regarding HMRC regulations.
On the other hand, under fully managed payroll service, you hand over complete control of your payroll service to a third-party service provider. The cost of a fully managed payroll will depend on the frequency with which your clients pay their staff. Furthermore, this type of payroll service divides into four parts, each incurring a separate cost. Let’s understand each of them.
- Payroll Service: If you select to outsource through a fully managed payroll service, it will cost you approximately £4 to £6 per employee per month, but only if your clients employ 1 to 10 people. The larger your client’s workforce, the lower the individual cost.
- Setup Cost: This cost will undoubtedly apply, but it will be a nominal cost.
- Pension Plan Auto-Enrolment: When you auto-enrol your client’s staff into pension plans, the cost should not exceed a certain amount. Also, make sure to ask questions about the auto-enrolment price because there are tendencies to overcharge.
- HR Integration: If you want to integrate HR and payroll management, then you will have to pay more.
The Advantages and Disadvantages of Completely Managed Payroll Services
Gone are the days when payroll means just dealing with payslips. Nowadays, you will have to deal with a host of payroll-related issues, such as dealing with HMRC regarding the submission of necessary details to make PAYE payments on time. All this has increased your payroll staff’s workload, so you would love to outsource payroll services to a service provider. But is it worth it? To answer that, you will need to understand its advantages and disadvantages.
Advantages
Focus on Accuracy
Third-party payroll service providers always make it a priority to recruit experienced payroll specialist to do the job. This way they are ensure accuracy in the payroll process especially when huge numbers are involved.
Reduces Time Wastage
Even for accounting practices like yours, managing payroll in-house is becoming time-consuming. Nowadays, payroll processing involves keeping records of benefits, deductions, new hirings, and termination and frustratingly monitoring regulator changes. Of course, this consumes much time, which can be better utilised for other important purposes. To save time, you can choose to outsource payroll services to a third-party service provider.
Reduces Hassle
When your client expands its business, it has to increase its employee count, which has a direct effect on your workload regarding keeping track of deadlines and processing payroll. You don’t need to worry about it; the payroll services provider will take care of everything.
Resolves Queries
Employees can submit queries about deductions or salary calculations directly to the payroll services provider if they have any concerns.
Ready for Audits
With professional third-party payroll services providers handling your client’s payroll, they will be compliant with the National Minimum Wage mandated by the Low Pay Commission and HMRC regulations. So they would not have to worry about penalties or face negative publicity due to non-compliance.
Compliance Issues
Payroll regulations are subject to frequent changes that become difficult to track. Missing out on these changes will lead to non-compliance, which will be costly for you and your clients. Hence, handing over such a delicate task to a payroll services provider makes sense.
Use of Payroll Software
There are multiple payroll software programs in the market, such as Sage, Brightpay, Xero, Moneysoft, Earnie, and Star Payroll. These programs are expensive and require experience to handle. But payroll service providers are already using them, so just outsource and save your money.
Disadvantages
Loss of Control
Once you hand over all your payroll-related tasks to a payroll services provider, you lose control over the day-to-day processes. Hence, it is important to be aware of the type of payroll outsourcing you are choosing. If you’re interested in retaining control for yourself and your client, then choose a part-managed payroll service.
Realistic Deadlines
You cannot expect that you will suddenly give important information to your service provider, and they will implement it in the payroll at once. Also, in the haste of sending information, you may miss out on certain crucial information. So, you must give yourself some time to collect all the information and then send it.
How Much Does It Cost to Outsource Payroll UK in 2024?
Now, you may be wondering how much it will Cost to Outsource Payroll in the UK. Firstly, it is a valid question, and secondly, it will certainly cost you much less than doing in-house payrolling. If you select to outsource through a fully managed payroll service, it will cost you approximately £4 to £6 per employee per month only if your clients employ 1 to 10 people. The larger your client’s workforce, the lower the individual cost.
How Does Payroll Outsourcing Work?
Under payroll outsourcing, you hire a third-party payroll outsourcing service provider. You have a choice of completely handing over your payroll tasks to the service provider or giving them only certain complicated tasks while retaining control over others.
Once payroll outsourcing is done, the service provider will perform the following tasks:
- Monthly or weekly payroll processing
- Handling payroll on various schedules: weekly, fortnightly, four-weekly, monthly, quarterly, or annually
- Calculating PAYE and NI (National Insurance)
- Preparation of P11D forms, which includes P11D, P9D, P11D(B), and P46 (car) forms
- Completion of statutory forms, such as year-end returns, for distribution to employees and submission to HMRC
- Managing timesheets, generating reports, and submitting them to HMRC
- Data entry for all employees, including updates that may occur throughout the year
- Setup assistance for new companies and employees, along with ongoing updates
- Administration of pension schemes, including auto-enrolment compliance
- Compliance with Real-Time Information (RTI) and submission
- Processing of Construction Industry Scheme (CIS) related tasks.
- Creating government gateways
Conclusion
If interested in outsourcing payroll services, you’ll pay for them, yet the cost remains significantly lower than handling payroll in-house. The blog’s goal is to help you understand payroll outsourcing, its advantages, and its disadvantages in detail. We hope that after considering your requirements, you will choose the best payroll service provider, such as Corient Business Solutions.
We specialise in offering tailored accounting services for accounting practices. Our teams have vast experience in multiple payroll applications, such as Sage, Brightpay, Xero, Moneysoft, Earnie, and Star Payroll. Our designed payroll, year-end, VAT, and bookkeeping outsourcing services give your practice a competitive edge, saving you time for crucial tasks. We can connect at your convenience by phone or online meeting to discuss our services in detail.