Outsourced payroll – the complete guide to payroll outsourcing for 2024

As a business owner, you need to wear many different hats. From accounting to marketing, there is a lot that needs to be considered. This is why many business owners decide to outsource elements of their company, from looking for a viable outsourced HR solution or outsourcing their payroll.

https://youtu.be/JpoxFxmJTjs

What is outsourced payroll and what are the benefits?

Outsourcing payroll simply means hiring an external business to handle all of their payroll functions for each pay period. There are a number of different benefits that you may be able to unlock by going down this path. This includes the following:

• Save money
• Save time
• Stay compliant with updated PAYE Legislation
• Purchase and maintain appropriate software packages
• Reduce the need for in-house trained payroll staff
• Get help with international payroll requirements
• Enjoy peace of mind that this complex part of your business is taken care of for you

Whether or not outsourcing makes sense for your business will depend on the complexity of the payroll requirements at your business, as well as the effectiveness of the third party you choose to handle your payroll requirements.

Outsourced payroll services vs. in-house payroll – what’s the difference?

Now that you have a basic understanding of what outsourced payroll services are, we are going to take a look at all of the options available to you in further detail so you can get a better understanding of what you need to consider when choosing how to get your payroll services done.

Outsourced vs. In-house

There is no right or wrong answer when it comes to choosing between outsourced and in-house payroll. After all, every business is different, and has different requirements, budgets, and needs. Considering that, we will take a look at the pros and cons of outsourcing payroll processing and handling it in-house so that you can deduce which options will be the best for you.

Costings

Outsourcing can be a lot more cost-effective. This is because you pay for the service as and when you need it. Rather than paying for a team on a part-time or full-time basis, and all of the costs that are associated with this, you only need to pay for payroll services when they are required.

It is worth mentioning that there are many costs associated with taking on new employees, from training to employee benefits packages, and you will not need to worry about any of this if you go down the outsourcing route.

The best thing to do is work out the total cost over a year for your firm in terms of outsourcing and handling payroll in-house. This calculation should enable you to determine which option will make the most sense from a financial standpoint for your business.

Time constraints

Another benefit of outsourcing payroll is that you will be able to free up time at your business to focus on what you do best, i.e. your core services. While you may need to take some time to find a payroll service provider that suits your business well, once they’re in place, you don’t have to worry about training them or any of the other HR issues you might experience when taking on a member of staff.

Experience

You can also have the peace of mind that the people working on your company’s payroll administration requirements are experienced and have the necessary training and knowledge of PAYE and any other tax regulation, so long as you have chosen the company with care, of course. This will give you great peace of mind that everything is being handled effectively and in line with the current regulations.

Are there any drawbacks to outsourcing payroll?

At the same time, there are some potential drawbacks associated with outsourcing, so it is critical to be aware of these so that you can protect yourself accordingly. One of the concerns is a lack of control. After all, you will be handling over an element of your business operations to an outside provider, which a lot of people find quite daunting.

Quality and communication concerns do plague a lot of business owners as well. This is why you need to take the time to find someone who has plenty of experience and a good track record. Take the time to read reviews that have been left by others.

You also get on-site availability when you are handling everything in-house, which is something that is not possible with outsourcing. This means that you can address a problem straight away or get the answers you need immediately when your payroll personnel work at your business.

Outsourced payroll vs. Payroll software

Not only do you have the option of outsourcing your payroll requirements, but you could simply use a software solution to automate the process. This is something that more and more businesses are turning to today, as technology becomes more advanced.

If you do decide to use payroll software, you will need to make sure there is some competence within your business to be able to use and maintain this solution effectively. Nevertheless, it can cut down the amount of time your business spends on payroll activities considerably.

Outsourced payroll services – what to look out for

There is a lot that needs to be considered when looking for an outsourced payroll provider. One of the main factors you need to think about is what sort of features you are going to get. Typically, when you outsource payroll functions to a third-party provider, you can expect:

Running payroll and making calculations for employee pay and withholding

Withholding pension and social security contributions

Administering employee benefits

Filing required government reports

Calculating payroll taxes and making tax withholding payments

Depositing funds to employees directly

To make sure that you benefit from the best possible service from your payroll provider, there are a number of key questions that we recommend asking:

• Do you help with generating tax forms for tax filing purposes?
• How much do you charge for running payroll per employee?
• Do you provide a different pricing structure for higher volume?
• What is your basic package?
• What sort of add-on services do you provide?
• Do you calculate tax withholding for every employee?
• How many clients do you have?
• How long have you had these clients?
• How do you ensure that all data is kept confidential?

There are some key factors to consider to determine whether or not to outsource payroll at your business. Here are some of the main elements:

The cost of using an outsourced payroll team in comparison to the cost of using an in-house payroll team.

How productive your business is at the moment. Would outsourcing help this?

Accuracy of employee payroll. Do you find you are currently making a lot of mistakes? If so, outsourcing makes a lot of sense.

How quickly would an outsourced payroll provider be able to process payroll payments?

How much knowledge about the industry and the technicalities of payroll does the company have?

If things go wrong, where does the accountability lie? This is something that you always need to consider when you outsource any sort of service.

Does the provider give you the flexibility to make the most of the skills of your staff members where they would be more advantageous? If this is something you are thinking about, you may want to consider looking for a payroll company that provides a managed service.

The integrity and security of the payroll process and data management also must be carefully considered when looking for a company for payroll.

Outsourced payroll for small businesses vs. enterprise vs. public sector/education

One factor that you do need to consider is the nature of your business. For example, seeking payroll services for a small business can differ from requiring payroll services for an establishment in the public sector. This is why it makes sense to look for a service provider who has experience in your industry.

You may be wondering why this matters. However, it is worth noting that public sector organisations are subject to different rules and regulations when compared with businesses. You also need to consider the fact that companies with nationwide employees only will have different payroll requirements when compared with employees with a global presence. Therefore, it is critical to work with a company that understands your business and where you are positioned within the market.

Pricing – how much does outsourcing payroll cost?

There are a number of different factors that will influence how much you are going to pay in payroll costs. The size of your business will very much impact how much you can expect to spend. The typical cost for a small company of 10 people or fewer is around £4 per employee per month. However, prices can vary from £5 to £12 per employee depending on the size of your business.

Service	Feature	Cost
Advanced payroll	Advanced payroll includes everything your company could possibly require.	Around £12 per employee per month
Mid-level payroll	Includes basic elements and some other options as well.	Around £8 per employee per month
Basic payroll	The most basic package	Around £5 per employee per month

In addition to this, you can find that the cost of payroll also differs depending on the sort of payroll service you require. For example, do you want the service to be fully managed or are you looking to still have a hand in the payroll side of your business?

Also, a payroll service is typically going to be calculated as a monthly or weekly charge, with the fee being based on the number of employees you have. However, not every business is going to structure their service in this way, so make sure you check out the payment terms before proceeding with a certain supplier.

One thing we would say is that you should be mindful of simply looking for the cheapest payroll provider. When you do this, you could end up purchasing something that seems too good to be true. Yes, look for a good price and a fair price. However, do not simply go for the cheapest payroll provider you can find without considering other elements like experience and security too.

How to outsource payroll

There are a number of different factors that you need to consider when outsourcing payroll. With that being said, here are some of the factors to keep in mind to find the best payroll provider for your needs.

Feature	Good to know…
Accreditations	The first thing that you should look at is the accreditations the company has. The Payroll Assurance Scheme (PAS) accreditation is a good option, for example. When a company has accreditation, it provides a testament to the service they provide.
Experience	You should also take a look at how long the company has been providing their services. You want to be sure that they have plenty of experience in the industry so that they are best placed to provide you with the assistance you require.
Security	One factor that a lot of people tend to overlook is security. However, this business is going to be storing and managing critical data pertaining to your business, so you need to make sure that they have a high level of security in place.
Support	Aside from this, you will want to find out more about the support that is provided by the company. How will you communicate with the business? How often can you expect to hear from them? These are the sorts of questions you need to be asking.
Reputation	Finally, make sure that the company you select has an excellent reputation in the industry. Take the time to read reviews that have been left by others who have outsourced their payroll requirements to the company in question before. Use independent review websites so you can make sure the comments that have been left are genuine.

Best payroll outsourcing providers

Position	Company name	Why they made our list…
1	Jeffreys Henry LLP	Firstly, we have an accountancy firm that is based in London; Jeffreys Henry LLP. The company has an outstanding reputation in the industry, having been established back in 1880. They offer both part-managed and fully-managed services, ensuring they can be catered to suit your needs.
2	Payplus	Shining when it comes to customer support and customer service, you can expect a great experience when you choose Payplus for your payroll requirements. You can be sure that your staff will be paid the correct amount, on time. If you are not, you can get your money back!
3	Crystal HR & Payroll Ltd	We know that one thing a lot of companies are looking for is specialists that can provide them with a personal touch. We believe that this is what Crystal HR & Payroll Ltd do. They also provide a number of specialist packages, including one person payroll, carer payroll, and nanny payroll.
4	ADP Payroll	Another provider to consider is ADP. ADP provides both HR services and managed payroll so that businesses are supported throughout every stage of the employee lifecycle. If you want to fully outsource, this is an option to consider, but it is worth mentioning that a part-managed service is not possible. (Read our ADP Payroll review)
5	Just Payroll Services	If you want to work with a provider who only focuses on payroll services and payroll services alone, Just Payroll is the obvious choice. They have an online solution that offers lots of great features in a secure environment, so you can manage and store data with full confidence and peace of mind.
6	MHR	With one of the most sophisticated hosted payroll solutions you will find in the sector today, MHR is a great option to consider. You will experience a central business hub that consists of time-saving HR functions and powerful payroll processing capabilities. MHR work with a lot of big names too, including Experian and Microsoft Azure.
7	Moorepay	Of course, we had to include Moorepay; a company with more than 10,000 customers in the UK and 55 years of experience. They provide tailored solutions to suit companies of all sizes, from startups requiring payroll services to global businesses with many different locations. (Read our Moorepay review)
8	Ceridian	For those seeking a bespoke payroll software solution, Ceridian makes sense. You can apply different rules to your payroll and experience the benefits in real-time. This solution can be used to manage employees across 80 different countries at the moment, and this number is growing all of the time.
9	Equiom	This is an international business that handles a wide range of services for companies. Therefore, if you are looking for something a bit more than payroll, this is a good option to consider, as you can also leverage the likes of accounting and cybersecurity. The payroll service they provide will ensure that your business remains compliant.
10	Payescape	A fast-growing company that provides online payroll services. The system they provide is accessible from any device, giving you the ability to manage documents, track employee data, and organise your payroll with ease. Your employees can also view their payslips and request holidays using Payescape.

FAQ