Why should you outsource payroll services?

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    Payroll responsibilities can be time-consuming, costly and daunting, especially for owner-managed SMEs trying to scale their small business and build a team. As business owners grapple with evolving payroll laws, compliance challenges, and the need for precision, many are turning to payroll outsourcing services.

    Business owners outsource payroll to save time, reduce errors, maximise cost savings, ensure compliance, and dedicate more attention to business growth. Payroll specialists provide expertise, advanced technology, and accuracy, ensuring a streamlined and stress-free payroll process.

    In this blog, we’ll explore what outsourcing your payroll means, the benefits of outsourcing and some red flags to avoid.

    Outsource your employee payroll to Jameco Group today to save money, maintain tax compliance and relieve the administrative burden when it comes to paying employees accurately – and on time. Contact us.

    What does it mean to outsource your payroll?

    Outsourcing payroll involves hiring an external service provider, such as a payroll company or accounting firm, to handle various payroll-related tasks on your behalf.

    This can include tasks like processing payroll, calculating and distributing employee salaries, withholding taxes, managing deductions and benefits, and staying compliant with ever-changing payroll regulations.

    Who can manage payroll?

    Accountants: Accountants like Jameco Group often provide outsourced payroll solutions. They can assist in calculating payroll taxes, creating financial reports, and ensuring regulatory compliance. The benefits of outsourcing to an accountant are that they can align payroll with other financial functions and strategies within the business and give business owners a single point of contact for all of their accounting and financial needs.

    In-House Payroll Department: Most large companies employ an internal team of qualified payroll managers and administrators. This internal team manage all aspects of payroll, from calculating and distributing salaries to ensuring regulatory compliance.

    Specialist Payroll Service Providers: Many small to medium-sized companies outsource payroll to a specialist payroll company. These companies offer comprehensive payroll processing.

    What is involved in the UK payroll process?

    Processing payroll is very time and labour-intensive. It involves collating the number of hours worked and then making the necessary deductions and/or reimbursements, such as:

    • Income tax deductions – based on the employee’s tax code, tax bands, and allowances.
    • National Insurance Contributions (NICs) – Including both employee and employer contributions.
    • Pension contributions – If the employee is enrolled in a pension scheme, (their contributions, as well as the employer’s if applicable), must be deducted.
    • Student loan repayments – When an employee reaches the threshold for repayment, it is the job of the payroll function to deduct the right amount from their salary.
    • Workplace benefits – many companies offer incentives like health insurance or employee savings schemes.
    • Employee reimbursements – For example, business travel costs or work-related expenses.

    6 reasons why business owners choose to outsource payroll

    1. Timely payroll processing

    Outsourcing payroll processing ensures that staff are paid accurately and on time to help maintain employee satisfaction.

    Payroll outsourcing also keeps you on the right side of the tax authorities, as your provider will make sure your RTI payroll data is submitted directly to HMRC using professional payroll software.

    2. Minimise payroll processing errors

    When it comes to tax filing, payroll services can save your company from costly mistakes. Our payroll professionals remove any catalyst for employee disputes or potential legal issues, thus removing any disparity costs involved in the payroll process.

    With professionals handling your payroll, you can trust that income taxes, holidays, statutory leave, deductions, and tax submissions are meticulously managed.

    3. Save on resources and costs

    Outsourcing payroll can result in significant financial savings. You can reduce the expenses associated with maintaining an in-house payroll department, such as hiring, training costs, and retaining payroll staff, as well as a costly payroll system.

    By outsourcing, you can allocate your resources more efficiently and gain significant cost savings while still ensuring that your payroll operations are handled professionally.

    4. Incorporates pension auto-enrolments

    Managing payroll taxes can be complex enough without the added pressure of pension auto-enrolment, for which the regulations are ever-evolving.

    Outsourcing your payroll to Jameco Group includes auto-enrolment-compliant accounting software to ensure your business remains compliant with pension laws while relieving you of any administrative burden.

    5. Accuracy and peace of mind

    Outsourced payroll services allow you to focus on growing your business, driving forward the core objectives of the business.

    Whether your payroll team are off ill, on leave, or you’ve struggled to fill the position – payroll outsourcing makes certain your payroll obligations are fulfilled on time, every time.

    6. Construction industry scheme (CIS) obligations

    The Construction Industry Scheme (CIS) adds a layer of complexity to payroll. Outsourcing payroll management ensures compliance with CIS regulations, relieving you of the burden of managing subcontractor payments and deductions.

    Jameco Group is well-versed in CIS, guaranteeing accurate verification of subcontractors, on-time submission of returns, and adherence to HMRC requirements.

    This relieves the business owner of the administrative intricacies of the CIS, allowing them to concentrate on the core business and construction projects while ensuring all necessary obligations are met.

    How does payroll outsourcing work?

    Basically, you provide the necessary data to your payroll provider or accountant, including hours worked, overtime, deductions, and any additional compensation details.

    They will integrate the data into their payroll software and do the rest, including withholding the right amount of income tax and National Insurance, distributing pay and maintaining and filing records.

    Is it better to outsource payroll?

    Small businesses, in particular, often find that outsourcing is a practical and cost-effective solution, while larger companies with complex needs may choose to keep payroll in-house for greater control.

    It’s essential to evaluate your specific needs, the costs, and the available resources when deciding whether outsourcing payroll services is right for your business.

    Are there risks to outsourcing payroll?

    Outsourcing payroll offers several advantages, but it’s essential to be aware of potential risks:

    • Data Security: Sharing sensitive employee data with a third-party provider can pose security risks. Ensuring that the payroll outsourcing provider has robust data protection measures and complies with data privacy regulations is critical. They should be registered with the ICO at a minimum.
    • Errors and Compliance Issues: Payroll providers can make mistakes or overlook changes in compliance regulations, potentially leading to penalties or legal problems. Thoroughly vetting your payroll provider and establishing clear expectations for accuracy and compliance are crucial. Ideally, check they hold some form of credentials within the payroll or accountancy industry. Whilst there is no guarantee, you often find the cheapest providers using unqualified staff or outsourcing your work overseas – these are the ones to watch out for!
    • Loss of Control: Outsourcing payroll means relinquishing some control over your payroll processes. If you prefer more control, payroll outsourcing might not be the best option for your small business. Equally, your payroll functions may become highly reliant on the provider’s expertise and technology. If the provider experiences issues or goes out of business, it can disrupt your payroll operations.
    • Communication Challenges: Miscommunications between your business and the payroll provider can result in payroll errors and delays. Clear communication is vital.
    • Service Quality: The quality of service can vary among payroll outsourcing providers, making it crucial to choose a reputable and reliable provider to minimise this risk.

    To mitigate these risks, it’s important to conduct thorough research when selecting a payroll service provider.

    Find out more about payroll with Jameco Group today

    Intrigued by how outsourcing payroll can benefit your business? Contact Jameco Group today to learn more about the benefits of outsourcing. We’re here to simplify your payroll processes, enhance compliance, and provide cost-effective solutions.

    James Wheeler, founder and managing directors of Jameco Group
    James Wheeler

    James has over 10 years of experience in accountancy and taxation. He has a real passion for business and truly believes SMEs are the heart of the UK economy. In 2017, he founded Jameco Group to provide first-class accountancy, taxation, and business advisory services to individuals and SMEs across the UK.

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