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    HomeBusiness TipsIn-house V Outsourced Payroll – Which is Best?

    In-house V Outsourced Payroll – Which is Best?

    Payroll is an unavoidable aspect of running a business. At its core, it involves paying each of your employees correctly and on time, according to the terms of their employment contract, but it also requires you to make and pay deductions to HMRC too.

    The complexities of payroll (and the legal ramifications of getting it wrong) have led many businesses to offload this critical accounting function to third-party payroll providers. Yet others elect to retain payroll in-house, choosing instead to hire a payroll professional as an employee.

    With both options offering you a means to ensure payroll gets processed, which, if either, is the best solution? And is there a right or wrong approach when it comes to payroll management?

    To help provide you with an answer to this question, we’ve outlined the key differences between in-house and outsourced payroll, and briefly broken down the benefits that each approach offers.

    In-house payroll

    Managing your payroll in-house means managing it from inside your business. In other words, an employee on your payroll is responsible for processing your company’s payroll.

    Benefits of in-house Payroll

    1. You’re not reliant on anyone else

    The main benefit of in-house payroll is that you retain complete control. Payroll processing sits within your business and is handled 100% by your organisation. You aren’t reliant on an outside company for support, and you don’t have to hand over any business sensitive information to a middleman. Every aspect of payroll is dealt with within your company, by employees who are part of your business.

    2. You can access payroll whenever you need to

    Having instant access to your payroll means you can dip in and out whenever you need to. Whether you need to add a new employee or remove a departing one. Capture holiday absences or sickness leave. Or even just conduct a quick report or audit. Being able to log into your payroll at any point in time gives you a greater degree of autonomy and flexibility.

    3. You can integrate payroll with other internal systems

    Keeping your payroll in-house gives you the option to integrate your payroll with other systems your business uses. This can be achieved using payroll software, which saves you time and money by automating aspects of your payroll. Things such as rosters and timesheets can be directly synced to your payroll, rather than manually processed. This reduces the risk of human error, helping to ensure your payroll is accurate and compliant.

    Outsourced payroll

    Outsourcing your payroll means handing over responsibility for your payroll to a professional payroll provider; a third-party company who are experts in all aspects of running business payroll.

    Benefits of outsourced payroll

    1. The pressure’s off your shoulders

    Payroll isn’t an easy process to wrap your head around. Nor is it a quick fix that you do once a month and forget about. Managing payroll is a constant process, one that can quickly suck hours out of your day. Even in small businesses with few employees, payroll can still demand most of your time. Outsourcing your payroll to a third-party provider takes the responsibility off your shoulders, allowing you to focus on other profit-making aspects of running your company without the worry and distraction of payroll to contend with.

    2. Outsourcing can be more cost-effective

    The thought of having to pay to outsource your payroll can be a turnoff, particularly for those businesses still in the five-year danger zone, when most start-ups make or break it. Payroll, however, is an unavoidable part of owning a business and one of the easiest and most cost-effective ways of managing it is by turning to a third-party provider. In fact, rates for outsourcing payroll can be highly competitive, especially when compared with the costs of bringing on board an employee and investing in the necessary payroll software in-house.

    3. You have an expert in your corner

    By engaging a professional payroll provider to manage your business payroll you have the reassurance that your payroll is in the safest and most capable hands. You won’t have to worry about keeping up with the latest tax and payroll regulations or ensuring your employees get paid on time. All this falls to your payroll partner. Likewise, you won’t have the headache of having to re-recruit, as you would if your in-house payroll manager were to leave, nor the stress of making sure your payroll accounting is compliant.

    So, which is better – in-house or outsourced?

    Whether you opt to outsource your payroll or manage it in-house is a call only you can make.

    Much of the decision will depend on the budget. Larger companies with the funds to do so may decide to handle payroll in-house, forgoing outside support.
    Smaller to medium-sized businesses, however, are more likely to find outsourcing more beneficial. Not only does this route assure you that your payroll is being processed correctly – in line with the most up-to-date legislation – it can offer a more cost-effective means of managing and meeting your employer payroll obligations too.

    Related: How to Manage Wage Garnishment With a Payroll Application

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