What is outsourced payroll?

Payroll processes expose businesses to a wealth of risks, so what is outsourced payroll and why is it beneficial?

What is vetting and screening?

Payroll refers to the payment of employees. It encompasses the sum of all the financial records of salaries for an employee as well as bonuses, taxes and deductions. From an accounting perspective, a payroll refers to a list of workers and the amount paid to these individuals for the services rendered by them for a certain period.

In a nutshell, payroll outsourcing – or managed payroll - simply means to transfer or subcontract payroll processing to another company. Figures from EY show 64% of businesses now either primarily co-source or primarily outsource payroll operations.

Compared to the costly in-house practice, outsourced payroll gives you the benefits of a secure and more affordable service that’s compliant with tax and regulatory requirements.

How does outsourced payroll work?

A full-service payroll provider manages your payroll from beginning to end. You simply hand over your business and employee data. They look after everything else.

What will a payroll provider deliver for you?

After you have handed payroll processing over, you can rest assured your provider will not only pay your people the right amount at the right time, but also deliver associated services. These include:

Making sure processes and pay comply with the latest legislation
Calculation of payments including statutory payments such as sick pay and maternity pay
Payments of wages and salary payments via BACs or Faster Payments
Creating and sharing employee payslips, P45s and P11Ds
Keeping payroll records
Producing, reconciling, and submitting documents required by HMRC
All Year End processing including employee P60s

What to look for in a payroll provider?

Finding the right payroll partner is crucial. According to EY data, less than half of companies (42%) say conducting business with their payroll provider is easy, but it doesn't have to be difficult. Here are qualities that should be non-negotiable when you’re deciding which outsourced payroll provider to partner with:

Simplicity of use – user experience is everything, so make sure that potential payroll partners won’t require you to navigate clunky systems and interfaces. Here at Comensura, our end-to-end payroll solution simply removes the administrative headache associated with non-permanent talent. Workers submit timesheets online, we pay them, and then you receive one consolidated invoice.
Cutting-edge technology – a key advantage to outsourcing payroll is sophisticated tech that you can gain access to. Today, technology, such as AI or robotics can be maximised to optimise payroll processing. Our c.net platform provides full oversight of ‘payrolled’ workers, ensures complete compliance, and offers comprehensive reporting - all in one place.
A solution that integrates with your existing systems – select a payroll provider whose tech communicates and integrates with your finance and HR systems. This means your administrative and back-office functions become infinitely more efficient. It sounds simple enough, and you’d be surprised how difficult it could be.
Visibility and control – the best payroll providers enable businesses to gain control of all assignments with full visibility, as well as data analytics that support pay, assignment, and workforce planning. For example, through leveraging functionality such as tenure controls, firms can eliminate assignment overrun, and benefit from bespoke real-time reporting.
Flexibility – your provider needs to flex their offing to suit the needs of your workforce now and in the future. Settle on a partner which can efficiently manage the pay and invoicing process on hourly, weekly, or monthly payment cycles, and enables your business to choose to approve and manage worker timesheets either centrally or locally. It’s always best to choose a payroll provider which can respond to the needs of your business as you inevitably expand and diversify.

It’s cost effective

Outsourcing payroll is better value than managing this function in-house, particularly when you consider the hours that can be spent inputting data, sending payments, reporting to government agencies, and correcting admin errors. This perhaps explains why data from YouGov suggests 64% of businesses outsource payroll for financial reasons.

Increased compliance

While ensuring accurate - and timely - payment of salaries and wages is obviously important, staying on the right side of the law and meeting statutory compliance requirements is also critical. Non-adherence with regulations can result in serious legal and financial consequences.

Expert support

Your payroll provider is a true expert in their field and well placed to offer advice and support in this area. When you consider the complexities of Award Interpretation in Australia and that there are at least 174 pieces of legislation affecting payroll in the UK – and changes to these rules are perpetual – specialist knowledge is needed to keep on top of compliance and regulatory updates.

Employee engagement

Getting payroll wrong can have a significant impact on the everyday lives of your workers – and cause employee engagement to plummet. Getting pay wrong sends a message that you don’t care about the wellbeing of your workers and can leave them in a financially precarious position. Errors happen more often than you may think. In fact, research suggests 60% of workers in the UK have noticed errors on their pay slips - and 20% have actually quit their job after a poor payroll experience.

Focus on what your business does best

Around a quarter of organisations (24%) choose to outsource payroll specifically to focus on other areas of their business. When you are busy with your day-to-day activities, managing payroll can be a distraction, even if you have a dedicated person in-house to manage the process. According to the recent Future of Payroll Report, from the Chartered Institute of Payroll Professionals, over half of survey participants reported they don’t have a succession plan within their payroll department – meaning that for many businesses, the payroll department consists of one person. What happens when that individual is on holiday, sick, or leaves? Upgrade to outsourced payroll and you don’t have to worry about such occurrences, freeing up time, resources, and headspace which can be directed towards growing your business.