Is Your Payroll Stress-Free?

27 June 2017

We’re being asked to measure performance on more metrics than ever thanks to analytics and better MI. But did you know that you can even benchmark your payroll? The CIPP’s benchmarking survey is designed to measure four key strands of providing a payroll service:

  • Accuracy, timeliness and completeness and the evaluation of the effectiveness payroll process
  • Compliance with statutory filing/payment deadlines
  • Data security/confidentiality
  • An average cost per payslip which will help demonstrate, efficiency and value for money

If you’re starting to consider outsourcing, these four points above provide a useful guide to the efficiency of your current service or in-house process. Add to this – the presence of KPIs and service improvement commitments -  if you’re already using a payroll provider

So how does your payroll service stack up?

At the 2017 HRD Summit in Birmingham we asked participants about what their businesses are prepared to outsource. 49% told us they outsource payroll and just 16% outsource HR. When we asked the same group ‘what’s keeping you awake at night?’ only 12% of worries relate to processes such as payroll which is great news – so long as there’s some correlation between outsourcing payroll and a lack of stress!

If you’ve been reluctant to outsource payroll in the past, these are the areas where, in my experience, I believe an outsourced service adds most value: in areas where in-house teams are often just to stretched, and where offshore providers can be lacking in specific expertise: 

  • Speed: One of our clients asked us to bring a sister company on board. In April, the client informed us they wanted to go ahead there and then, and for payroll to be run by us from that month onwards. Using March pay information as a basis, we quickly imported the client’s data, set all the employees up and went live for 35 additional employees in under a month, ensuring all those we had taken on were paid correctly and on time with no disruption.
  • Legislation: As payroll experts, we stay abreast of any changes to the law, recent examples being the apprenticeship levy and gender pay gap reporting. One of our clients recently appointed us to assess whether they needed to make deductions in line with the apprenticeship levy, to calculate those deductions and implement them. In this case, we were able to advise the client to split the allowance between companies within the organisation to maximise efficiencies across the group. We’re already helping clients prepare for reporting on gender pay gaps as the 2018 disclosure deadline looms.

A payroll provider can also help with the auto-enrolment and auto-re-enrolment process. According to Employee Benefits, “some lower-paid or part-time staff may not be eligible, but those on variable pay can slip in and out of eligibility. One of the main benefits of payroll outsourcing is the peace of mind it brings for an employer in knowing that its payroll is being calculated and processed correctly.”

Managing legislative matters that impact payroll in-house also “requires ongoing investment in training to keep payroll staff up to date with legislative changes, while regular changes to legislation put additional pressure on the payroll team” says Colin Jackson of CIPP.

  • Tax matters: Every month we manage new tax codes for our clients. Although we don’t know about personal circumstances, we know enough about our clients to know when to raise a query. For example, we have a client that pays a number of staff close to the £8000 monthly tax threshold. However, when bonuses are paid this affects the employees’ tax position and because we monitor their data closely we are able to make those employees re of what might happen as a result of the additional earnings.
  • Global workforce: We’re supporting one client with calculating their hypo tax at the moment. The client brings people into the UK and also posts UK workers overseas as expatriates. We ensure that expatriates don’t pay more tax as a result of working outside the UK, and we work out hypothetical allowances for those overseas and those coming to work in the UK. As we have access to the client’s pay data it’s a service we can offer that otherwise would need to be calculated by an accountancy firm.

Nat Davison, partner at payroll specialist and foreign exchange broker writing for Employee Benefits says: “If an employer is moving into a territory, particularly if it is not a large player, there are a host of things it is not going to be aware of, for example, how to make compliant local tax payments.”

Cost and value

In an age when we’re all being asked to work smarter and more efficiently I believe the outsourcing payroll has the potential to be a huge time and money saver as well as reducing stress for HR and the broader employee population.

According to Alison Dodd of Moorepay, “Outsourcing can be considerably cheaper”. “Consider the costs of employee salaries and benefits, national insurance contributions, the price of payroll software and the maintenance fees” she says. According to Dodd, “Hiring internally could cost £15,000, while outsourcing the same hire can cost as little as £800”. 

More and more businesses, both large and small, need support navigating legislation, dealing with the complexities of a global workforce and reducing administration time spent on processes. Average small business owners will spend between seven and 25 per cent of their working hours handling employee paperwork according to Real Business - one of our objectives is to reduce this significantly.

You can register your interest for your chance to take part in the CIPP’s benchmarking survey later this year.  Andy Green’s post on the balancing act – build or buy also has some useful points for selection a potential payroll partner.

To read more about payroll services for SMEs, expatriates and larger businesses click here.

Toying with the idea of Outsourcing? My four point useful guide.

If you’re starting to consider outsourcing, these four points above provide a useful guide to the efficiency of your current service or in-house process. Add to this – the presence of KPIs and service improvement commitments -  if you’re already using a payroll provider.  Read more here

Author: Andy Green.

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