Can larger organisations benefit from payroll outsourcing?

Did you know that, according to YouGov, a third of UK businesses outsource their payroll processes? 

And it’s not just smaller firms delegating this crucial process either. Some research suggests that up to 70% of Fortune 500 companies pay for specialists to handle their ongoing payroll too. That’s seven in 10 of some of the biggest, most successful businesses on the planet entrusting external firms to manage this business-critical process. 

So why do they do it, and what benefits could a large organisation enjoy by entrusting a partner like Phase 3 to manage your end-to-end payroll processes?

Ultimately, it comes down to three factors – costs, compliance and mitigating errors.

Reduce errors and risk

Payroll errors are costly… literally. Surveys suggest that in 2022, almost nine in 10 businesses made payroll errors, and the average cost of each mistake was £500.

This is a core reason why many larger firms look to outsource their payroll processes to a specialist provider. And those firms who do outsource typically enjoy accuracy rates as high as 98%. 

Payroll errors are not only financially costly, but they can also damage rapport with staff and cause reputational damage too. 

Employees expect to be paid accurately and on-time, every time. Failing to do so once is an issue, but continued and regular errors over a period of time can reduce engagement and even lead some top performers to start shopping around for new employment options. 

Damage to reputation can come not only from in-situ employees complaining publicly about issues getting paid, but also regarding legislation and security. 

Organisations that fall foul of the law regarding pay, or suffer a data breach of their employee’s personal information, can see their company name in the press in a less-than-positive light. 

Stay compliant

Compliance is important for all businesses – and the larger you are, sometimes it can feel the more rules and regulations there are to comply with! 

Payroll in particular, is an ever-changing and complex legislative environment to work within. Tax rates and statutory payments are often on the move, whilst the outcome of tribunal cases can change the understanding of different government guidelines almost overnight. 

The now famous (in the HR world, at least) Brazel vs. Harpur Trust case is a pertinent example of why payroll needs to do a lot more than pay employees. 

International businesses have even more work to do with legislation and pay rates differing across most territories in which they operate. 

For in-house payroll teams, this means a lot of time and salaried expertise are taken up on staying abreast of all these factors to remain compliant. The costs, and associated risks, are a big factor as to why firms look to outsource this headache to a specialist firm.

Cut costs

In-housing doesn’t always equate to cost savings. In fact, sometimes it’s far more cost-efficient to outsource to a specialist provider, including to manage and run payroll processes. 

Research from PwC confirms this to be the case, with its data showing that organisations which manage payroll internally tend to spend 18% more compared to rivals that outsource. 

Read more: Is outsourcing payroll cost-effective?

When in-housing, especially at larger firms, costs start to ramp up due to various IT, software, automation, infrastructure and security demands. Multinational companies may also have additional staffing requirements too, as well as differing national legislation and rules to follow and stay abreast of.

Larger firms who outsource their payroll processes can rely on one partner to manage all of these elements, and just have to worry about checking their work before payroll is executed. There should only be one monthly bill to manage too, instead of various payroll clerk salaries, software subscriptions and tech charges!  

Learn what outsourced payroll can look like for your large organisation 

If you’ve read this far, then we can assume you’re a large organisation interested in potentially outsourcing some or all of your payroll functions. 

And if that’s the case, then you’re already in the right place!

Phase 3 has been named CIPP’s Payroll Provider of the Year two years running and has achieved the payroll assurance scheme accreditation, as well as official accreditation for information security, cyber essentially and quality management. 

Our friendly team of fully CIPP-accredited specialist consultants work with large and multinational firms each day to deliver accurate and timely payroll processes. 

Whether you’re looking for specific help and advice in one area, or an outsourced team to take care of the full end-to-end payroll process, then learn more about our outsourced payroll services here. 

Want to explore the benefits of outsourcing payroll further? Download our free guide on choosing the right model between managed payroll and an in-house team. Get your copy here.