Making the choice to process payroll in-house or to use an outsourced payroll provider is a big decision. After all, the timely, correct payment of your employees will rest in your (or their!) hands.
Recent research by global professional services firm, EY found that there is a growing transition away from fully outsourced payroll services to an in-house operation. With the number of global companies with a fully outsourced payroll function dropping by 7% in just two years; it’s clear that attitudes towards outsourced payroll are rapidly changing in favour of an in-house operation.
Further research by YouGov in 2019 found that just 28% of UK businesses outsource their payroll to a third party.
So why have so many businesses chosen to keep their payroll operations in-house?
1. You’ll have more control over the payroll process
Outsourcing your payroll process means you relinquish a certain amount of control. Naturally, one of the biggest advantages of processing your payroll in-house is the level of control you’ll have over the entire process.
From ensuring the security of sensitive employee data to controlling who is able to see salaries, benefits and bonuses; an in-house payroll process means you can keep all your employees’ information private.
Moreover, your in-house team can effectively manage the payment of new starters, leavers, payments, taxes, payslip printing and reporting to HMRC in an accurate, timely manner. After all, an in-house team will be solely focused on your payroll process in its entirety rather than the hundreds that an outsourced provider will be managing on a daily basis.
2. It’s lower cost
Despite the obvious need to hire a payroll specialist, an in-house payroll function will save your company money in the long run, compared to if you were to outsource it.
External functions will often lump you with hefty setup costs and a recurring monthly fee depending on the number of employees and level of complexity your pay runs involve. Prices can often be upwards of £10-12 per wage slip. So, if you employ 300 people, your cost of processing payroll will be in excess of £3,500 per month.
While hiring a payroll specialist is not cheap in terms of salary, having an expert on site to answer questions and support employees will be hugely beneficial. What’s more, they can work closely with your HR and finance departments to produce management reports and detailed analysis into your payroll operation.
3. It’s more accurate
An outsourced payroll provider is only as good as the information they have at hand. As such, mistakes in pay can be commonplace if your company doesn’t consistently supply correct or up-to-date payroll information to your provider. Generating hefty payroll reports every month (or more often when there are salary changes, bonuses, new starters or leavers) to send to a third-party provider with the objective of saving time is not only counterintuitive but involves the collation of a lot of information from HR, finance and heads of department.
When processing your payroll in-house, you can access more accurate data from HR, accounting and time and attendance systems. And an in-house HR and payroll system that is not only integrated but provides one single version of information for both your HR and finance/payroll departments can ensure little to no inaccuracies in pay.
What’s more, you will only need to update one system when any pay rises, bonuses or new starters occur to ensure your employees are paid on time and without mistakes. And key employee documents relating to payroll (payslips, P60s and P11Ds) can be added to your HR system to ensure employees can self-serve and have access to important information.
4. More control over payroll reporting
With an in-house payroll operation, you’ll also have full control over the reports you need to generate. Every business is different, with different pay structures, rates of pay, full and part-time employees and bonus or commission plans; as such every business’ payroll reporting needs are equally as different.
An in-house payroll team can deliver a comprehensive overview of compensation and can help in your workforce planning for the future in its reporting. These can be customised precisely to what your business’ needs.
5. More flexibility for last-minute changes or corrections
As all payroll professionals know, changes to payroll at the 11th hour are not uncommon. Using an outsourced provider when these changes crop up can mean that a supplementary payment run needs to be processed to accommodate these changes (at a cost to you) or fees are charged to modify an existing pay run before it hits the bank.
Managing your payroll process in-house means that you will have maximum flexibility over any last-minute changes while ensuring that payments are on time and suit your business’ schedule. Using an outsourced provider means your process is just one of many that they have to manage and any changes will be made according to their schedule.
Bonuses, changes in salary or deductions can be made quickly and accurately, ensuring employees aren’t under or overpaid. To boot, using an integrated payroll system that integrates with your HR software ensures that any changes to employee details or those of new starts is always up to date and accurate.
