You put your head in your hands and sigh with frustration. You’ve been over these numbers 4 times now and you’re no closer to figuring out how payroll is costing your business £300 every month.
“How is that possible” you say aloud. You’ve heard of business expenses but your payroll is haemorrhaging money.
You never thought paying your staff on time would be one of the major headaches you’d face when you started a business.
The whole payroll process is so time consuming and on top of that you haven’t got any expertise in house that can manage your payroll effectively.
You found out very quickly from your newly hired HR manager that human resources and payroll are two very different things!
So, paying your employees costs you money, can you believe it?
In this article we will explain the reasons why, how outsourcing your monthly payroll could save you a small fortune and how Phase 3 can stop you stressing about payroll management all together.
A recent study released by Tide Finance aimed to uncover why UK payroll was costing small businesses so much. It found that on average, a UK based business with less than 50 employees was spending £300 a month running payroll. This adds up to over £3500 a year paying staff. So collectively, small businesses in the UK are spending an eye-watering £1.7 billion each month running payroll.
The study sent surveys out to these small businesses. From the respondents they learned that 10% were spending between £500 and £1000 a month on payroll and 8% were spending over £1000.
These numbers are all very depressing but they still don’t answer the question of why payroll costs so much.
Payroll is expensive for two main reasons. The first, is the amount of time it takes to administer payroll due to its complexity. The second is due to the lack of in-house talent many small businesses have in their payroll department (They often don’t have any). We’ll explore these two reasons in detail below.
The world of the 9 to 5 worker is over. Nowadays businesses have complex working arrangements with freelancers, part-time workers and agencies. This means a one size fits all approach to paying staff doesn’t work.
You can’t just take a staff member’s hourly rate and multiply it by 40 to get their weekly wage anymore. There’s flexible working to think of, the method of payment along with an ever more confusing array of tax codes to monitor and update.
All this added complexity equals lost time. Time that not only costs a business owner money through wages but it also means productivity is stifled in other areas of your business.
Out of the businesses surveyed in the Tide Finance study 41% said they ran payroll via a dedicated payroll software. Another 31% said they let their accountant take care of it.
Both of these solutions cost more and are less effective than having a dedicated payroll expert in house to help you manage your payroll administration.
But finding a competent payroll specialist to work with your business can be tricky for a lot of companies. Many don’t have the resources to undertake a lengthy hiring process or find a payroll partner they can outsource to. This means most businesses stick with their inefficient payroll processes and take the hit in their wallets.
If you’ve got a dedicated payroll expert on your books on a slick HR team that can turn their hand to sorting the monthly payroll then keeping this function in house isn’t a bad idea. But for most small businesses this just isn’t possible.
Whether it’s because of time constraints, financial limitations or a lack of experience most SMB’s opt to outsource their payroll services to reduce stress, avoid fees from HMRC and keep their staff engaged and happy. The list of benefits outsourcing your payroll can bring is almost endless. We’ve listed the biggest ones below:
Every business owner looks to save money when it comes to running their business and payroll processing is one area in which this is possible. By choosing to outsource your payroll, you will benefit from saving money for other business expenses.
Business owners are under a lot of stress when the end of the tax year arrives and they have to tie up all the accounts. The books must be up to date, P60’s must be organised, and tax preparations must be undertaken. However, if you know that everything is taken care of properly, you need not worry about this thanks to outsourcing the task.
In the last tax year, HM Revenue & Customs fined over 28000 people for incorrect tax returns, and the figure appears to be growing every year. This is often because of how complex filing tax returns can be. By outsourcing the payroll, you will have total peace of mind knowing that everything has been filed correctly.
A properly managed payroll will also benefit your employees since they will receive their salary on time. This creates more trust in your company’s processes and as a result can lead to more committed employees.
Phase 3 is a payroll and HR consultancy. We help clients process their payroll accurately and promptly every month. We will fully integrate into your business and can take on as much, or as little of your payroll services as you require. Essentially we’ll become an extension of a company’s current HR team.
Whether you’d like us to perform some monthly calculations for your internal payroll team or become a full, in-house, service for your company we can provide a range of tailored solutions that mean you don’t need to worry about anything.
We pride ourselves on being an ‘independent’ consultancy (it’s a bit of a motto of ours). This means we’ll always work with a client to find the best solution for them.
We don’t partner with third-party payroll platforms so we’ll never advocate the use of any software or tool before we’ve seen your business and processes in action.
Operating in this way lets us get to the bottom of your businesses payroll problems and solve them. We’ll never enter a client’s office with a solution already in mind and then try to fit a square peg into a round hole.
We’ll work with your internal teams to improve processes and we love sharing knowledge. If we find a better way to run your payroll we’ll 100% tell you about it. At Phase 3 we like to say “sharing knowledge isn’t diluting it”.
Outsourcing your payroll to us gives you access to a dedicated team of payroll experts and the latest payroll software all without having to purchase them yourself for your business. Working with Phase 3 will likely save you money running your payroll every month as the efficiency and time savings we can provide lets your staff work on other projects (ones that’ll make you money).
We’d love to have a conversation with you about how we could improve your payroll services. If you’d like to learn more and find out if a Phase 3 consultant would be right for your business you can contact one of our specialists today.