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Payroll is one of the most crucial financial functions of every business. The process must be taken seriously because of its impact to the business and to your employees. A simple mistake on tax reporting could result in a bigger issue and worse, losing money or getting into lawsuits and employees who receive incorrect or late salaries may lead to loss of confidence and motivation to perform at their best.
To avoid the complex process and dedicate themselves to more essential tasks, some companies are outsourcing payroll to third-party organizations or dedicated payroll service providers to get the job done more effectively and on time.
Outsourcing payroll comes with several pros and cons, so you must evaluate the right signal on when to outsource payroll or not.
- Cost Effective. The first thing to consider in outsourcing payroll is cost; generally hiring a regular personnel is somewhat costly considering the whole recruitment process including training and orientation plus salaries, benefits, and office equipment. This has a huge effect on your bottom line especially for small businesses and startups. There are several third party companies and dedicated payroll service providers who offer a reasonable price to work for your account, you just have to sort them out. If you want to combine a cost-effective provider for running payroll and an HMRC-recognized accounting software, try Wise batch payment and its integration with Xero.
- Time Saving. A typical payroll processing usually includes gathering employee information for a selected time period, managing benefits and deductions, computing income tax to be withheld, and distributing employee pay for that period. Considering the time and effort you’ll dedicate into this stuff can be frustrating, compared to outsourcing, you can have more time to focus on essential business functions to generate sales and income. This will also help your human resources and accounting to work more on strategic tasks that can protect your bottom line.
- Secured. Aside from being a complex process, payroll processing is also risky, it involves critical information that must be kept confidential to avoid issues and complications. Even with your most trusted employee, there would come a time that effort to benefit for personal gain could be a problem. There are also risks for in-house payroll software; your network security can get bypassed resulting in loss of important data or worse, theft. Compared to third party service providers, these companies use the latest state-of-the art systems to keep your payroll data confidential and secured.
- Access to the Best Experts on the Field. Outsourcing payroll offers you the opportunity to get the best experts on the field whose expertise is in demand even with large corporations. So, you don’t have to worry about the laws and regulations regarding employee compensation. It also offers advantages for employers who have staff overseas, wherein different territories have different regulations, tax laws, and currency.
- Risk of Data Privacy. Handing your payroll to third party service providers can result in loss of confidential data or leads to be exposed and this could be a problem. The challenge is to look for a reliable partner that takes data security seriously, and most importantly you can include these terms in your agreement contract.
- Quality to Cost. One of the problems in outsourcing is that you cannot control the quality of work that they do, sometimes the results you get is far from what was promised and it can be frustrating to business owners especially if you paid them nicely. It is advisable to try trial and error first before engaging completely to payroll outsourcing.
Wise. Wise Payroll is especially useful for salaries in different currencies which is handy if you have employees overseas. Through an integration with Xero, payroll tax can be reported to HMRC digitally. Wise is a groundbreaking company with over 5 million customers globally taking an innovative, fresh approach to financial services. They are known for offering one of the fairest exchange rates in the business instead of inflating them with hidden fees.
Gusto. Launched in 2012 as Zen Payroll, this US based company serves more than 100,000 businesses nationwide and offers one of the lowest cost full-service options. Gusto offers full service software for businesses; it handles all basic payroll processes and tax compliance such as running payroll each period, calculating deductions and net pay and remitting payroll taxes.
Its main feature a Core Plan¹ costs 6$ (£5)per person plus $39 (£32) monthly subscription; they also offer Concierge, Contractor and a Complete Plan for full service payroll processing solution.
ADP Payroll. Named as one of the FORTUNE Magazine’s “World’s Most Admired Companies”², ADP offers Payroll and HR solutions that meet your industry needs. It offers easy-to-use payroll software and manages your entire payroll with its seamless system of record. It offers several service³ options from 1-49 to 50-999 employees, for pricing you are required to submit a quotation.
QuickBooks Payroll. Quickbooks Payroll is best designed for small businesses and startups who want to create payroll, calculate taxes, and send direct deposits to bank accounts. Quickbooks have several pricing structure, Standard Payroll £4/mo, while Advanced Payroll £8/mo.⁴
Sage Payroll. One of the worlds’ most recognized cloud based payroll platforms, it targets small businesses and offers a guide in running your payroll rather than conventional fully-managed payroll processing. Pricing is structured as; £7 + VAT per month for Payroll up to 5 employees, Payroll 10 at £12 + VAT per month up to 10 employees, and £17 + VAT per month for Payroll 15 with up to 15 employees and £27 for Payroll 25 for up to 25 employees.⁵
Payscape. Payscape offers web based and customisable payroll solutions to your business. Payescape's online payroll processing service requires no accounting experience for you to run payrolls, it is reliable, affordable, secure and compliant with HM Revenue & Customs regulations. Pricing is at base price of £50+2.50/mo per employee.⁶
MHR. MHR’s pride iTrent makes payroll processing easy and ensures clients to achieve desirable results. It also offers automated payroll processing without any human interaction using their latest technology.⁷ For pricing structure you should get a quote providing them the details of your company and number of employees.
Before outsourcing payroll, you must assess your business environment and capability first, weigh the pros and cons to help you decide whether to outsource or not. At the end of the day, if you think payroll processing is somehow too complicated for you and your staff, then you can outsource the process since payroll errors means you’re welcoming much heavier penalties from HMRC. You can do trial and error for the best service provider that will fit for your needs.
- Gusto price page
- ADP about page
- ADP website
- Quickbooks Intuit website
- Sage payroll price page
- Payescape payroll pricing
- MHR website
This publication is provided for general information purposes and does not constitute legal, tax or other professional advice from Wise Payments Limited or its subsidiaries and its affiliates, and it is not intended as a substitute for obtaining advice from a financial advisor or any other professional.
We make no representations, warranties or guarantees, whether expressed or implied, that the content in the publication is accurate, complete or up to date.
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