Is outsourcing your payroll the most cost-effective solution to managing a business-critical task?
In short – yes, most of the time, and some of the reasons why might surprise you.
Payroll is up there as one of the most important operations your organisation will need to handle on a monthly basis, covering everything from calculating taxes to managing employee time sheets and their personal data.
It’s a big job, and staff expect it to be carried out accurately and on time every single pay day.
How much it costs to run payroll in-house will naturally vary depending on a range of factors, from organisational set-up and size to location and sector.
But there is a general rule of thumb we can use to get a sense of what things might cost.
For a reasonable-sized organisation of 100 full-time employees, you would ideally want two or three dedicated payroll staff to handle the following:
That’s a lot of work, and you also need to factor in if one or more of your dedicated payroll team are away from work at the same time for whatever reason.
According to Total Jobs, the average pay for a payroll professional in the UK as of December 2022 is £32,500. So that’s not far shy of £100,000 / year in salary costs to manage the salary payments of your 100 employees. Once you factor in payroll software costs, staff perks, training, recruitment costs, computers, desks, chairs, employer pension and NI contributions… the real-world figure could be more like £150,000 each year – or £1,500 per employee.
Outsourcing payroll has become an increasingly attractive option for organisations of any size because it offers potentially significant cost savings and a more streamlined and effective solution to a business-critical task.
Just some of the ways in which outsourcing payroll can be more cost-effective than managing it in-house include:
When you outsource your payroll, you know exactly how much you will be charged each month. This is critical for businesses of all sizes to ensure they can accurately budget and forecast their finances.
If your team grows rapidly, or you unfortunately need to make mass layoffs, your outsourced payroll provider will likely be better able to adapt than a static in-house payroll team.
In-house management of payroll functions is less flexible in this sense. For example, if your team grows quickly, you’ll need to hire additional staff which can take time and certainly take some budget to advertise and recruit.
As noted above, there are many facets to running a streamlined payroll operation. Payroll professionals will usually be experienced in most areas, but if you run into a specific issue where your team has less expertise, it can present a real headache, and additional resources may need to be hired to deal with that challenge.
An outsourced payroll provider will already have dedicated professionals in all areas of running payroll, from legislation and tax to pensions and documentation.
To run payroll, you need payroll software (which isn’t cheap!). Outsourced payroll providers make it their business (literally) to utilise the best payroll platforms on the market to support their clients, and they themselves are responsible for the cost of researching, selecting, onboarding and maintaining their platform choice.
Whilst perhaps not a direct monetary saving, one of the biggest fears for many business leaders is that they have inadvertently acted in a way that violates some legislation or business law.
This is especially true regarding finance and payroll, and legislation is constantly shifting when it comes to how to calculate pay, or new tax bands or pension contributions.
When you outsource your payroll operations, you’re essentially passing this headache on to someone else – a dedicated company whose job it is to stay abreast of any changes and ensure all their clients are compliant with them.
If you’re considering outsourcing your payroll requirements to a dedicated company, then you are already in the right place.
For the last two years, Phase 3 has been named as Payroll Provider of the Year by CIPP and achieved the payroll assurance scheme accreditation – as well as official accreditation for information security, cyber essentials and quality management,
Our outsourced payroll services are delivered by a friendly and helpful team of CIPP-accredited specialist consultants experienced in the full end-to-end payroll process.
We help hundreds of businesses of all sizes every day – some in specific areas of payroll management, others as their entire outsourced payroll department.
But that’s enough about us, we’d like to hear from you!
If you have a question about outsourcing payroll, want to learn more about our services specifically, or are interested in how the process works in practice, then speak to our team here.
Laura’s role as Head of Marketing sees her continually looking for new opportunities to tell the world how great Phase 3 is.
