Whilst outsourcing payroll can appear as the most obvious choice for larger business, it can be difficult to know whether or not it is a viable option as a smaller organisation. Whilst small businesses still face high levels of stress, and can be just as busy as a larger business, finance can be a factor seriously holding them back from outsourcing business functions.
There are pros and cons for managing payroll in house, and for outsourcing it, but the key thing is to make the decision that is right for your business, and works in line with your budget and processes. Take a look at some of the pros and cons of outsourcing below.
One of the most obvious cons associated with payroll outsourcing is the cost, it can be expensive, and in some cases is ultimately not a justifiable cost as a small business. It can appear the more suitable choice is to manage payroll in-house, limiting this cost and putting funds available to ‘better’ causes. However, it’s easy to miss the hidden costs associated with managing payroll in-house; whether this be the time you put in, or the software you use. If you are not competent dealing with payroll, then time on this can compromise the time spent on your business and can actually end up costing you more. Furthermore, the initial cost or subscription to payroll software you are required to use can also be costly – and these costs can really add up for a small business. Not to mention the fines you may face if you do not comply with HMRC.
There are more cost effective options available, you don’t have to fully outsource your payroll. There is the option to use a payroll bureau, which is where you manage some aspects of your payroll in-house, but outsource the primary process to a payroll provider. Using a payroll bureau can add an element of flexibility to the process, and also reduce costs, therefore is worth looking into.
Running a business comes with its fair share of stress, and more than enough tasks to carry out with simply day to day running. By choosing to outsource your payroll, you can help to reduce your stress and have one less thing to worry about. Over the years, payroll has become more and more complex, there isn’t just the correct paying of your employees to worry about, but remaining HMRC compliant, calculating the correct NI contributions, filling out P11D forms and sorting out auto enrolment (to name a few). Quite simply, it is much easier to outsource your payroll – whether you’re a small or large business.
Similarly, another advantage of outsourcing your payroll comes with the time it’ll save you; managing your payroll in-house can take more time than you originally anticipated. However, the amount of time it’ll take will be highly dependent on the amount of staff you have. If you only have a couple of members of staff, and feel competent to do so, managing your payroll in-house is most likely to be the more viable option. You may also have members of staff who have experience dealing with payroll, so they could be the ones to take on this role. Ultimately, it’s about weighing up the time and resource you have available to figure out which is the best option for you and your business.
Depending on the payroll provider you choose to go with, and the way that they operate, it’s easy to face communication issues when it comes to outsourcing payroll. Payroll providers deal with many companies, of a range of sizes, therefore it’s easy for communication and details to get lost – meaning you may have to spend more time sorting these out than actually managing the payroll in-house in the first place. Take some time to speak to your shortlisted payroll providers to see whether you’ll have one point of contact, and what to do when it comes to submitting any information or if you add a new staff member.
Payroll software available
To manage your payroll, you will need to use some type of payroll software, and there are an array of option to choose from. The good news is, if your business has under 10 employees you may be able to get a free version of the software; which is a great option as a small business. However, if you are planning on growing your business it’s worth doing your research into the scalability of your chosen software. What happens when you add more people to your payroll, and what are the costs associated here?
So as you can see, there are pros and cons of both choosing to outsource your payroll and managing it in-house. There is no ‘one size fits all’ approach that can be applied to choose whether or not to outsource your payroll as a small answer – the answer is it depends! It depends on the size of your business, your time and resource available, your experience as well as your future plans.