The decision to outsource payroll is a huge step for most businesses. Switching to outsourced payroll can be a hugely beneficial strategy, but that doesn’t take away from the large commitment that comes with choosing a payroll provider.
Like most services, there is no one-size-fits-all outsourced payroll provider. Payroll companies have different technology, support and expertise that make some a better fit than others.
By doing your research and asking these important payroll questions, you can make sure you are choosing the right external payroll provider for your business!
What does outsourcing payroll mean?
Outsourced payroll or payroll outsourcing refers to the process of hiring an external company to professionally manage all payroll functions from end to end.
This reduces cost and risk by ensuring compliance in record keeping and updates of PAYE legislation, ensures access to the best technology and expertise, and saves time for business operators.
Why do UK employers choose to outsource payroll?
Bookkeeping is an admin-heavy task, so it’s understandable that some business owners might believe it’s easier to outsource it. Bookkeepers provide various different service levels which can cater to different budgets as companies grow.
Outsourcing can also reduce the need for in-house training when payroll is handled by qualified external professionals. This can be a significant weight off an employer’s mind.
This blog will help you with what to look for in a payroll service, questions to ask when implementing a new payroll system, as well as questions to ask payroll providers.
Questions to ask your outsourced payroll provider
1. Are you using the most advanced and up-to-date payroll platform?
What technology will your outsourced payroll provider use? When was this technology developed? What can it offer? Many external payroll providers use software developed decades ago. This can make it difficult to customise, costly to implement and limit its ability to integrate with other platforms.
Take the time to evaluate an external payroll provider’s technology. Does their chosen system demonstrate functionality? Is it a stand-alone system or scalable? Does their system allow you to have transparency and oversight over the process?
The most advanced payroll platforms are cloud-based and offer an Application Programming Interface (API) which means they interface with other systems such as Xero and QuickBooks Online.
2. What support can my business expect from my outsourced payroll provider?
Some low-cost outsourced payroll services only help to calculate the wages and basic income tax and then provide you with a bank file.
Others collect timesheets, apply pay rule conditions, calculate wages, taxes and other contributions and then distribute all payments to the relevant agencies, authorities and clearing houses.
Will the outsourced payroll provider support your business as you grow and scale? Employment Hero’s managed payroll offering allows you to free up administrative time for your staff and gain access to payroll expertise, whilst you can refocus your time on growing your business.
Ensure you ask exactly where your external payroll provider’s services start and stop.
3. Can your payroll system manage compliance?
It’s more important than ever for businesses to use payroll software that automatically interprets wage requirements. We’ve seen businesses big and small get caught out making major payroll errors. The solution to compliance issues is a smart technology that helps ensure nothing falls through the cracks.
One of the most difficult and time-consuming parts of payroll is applying a set of complex pay conditions based on minimum wage and enterprise agreements. Furthermore, navigating RTI, pension auto-enrolment and ever-evolving payroll compliance is a time consuming process.
You want to have peace of mind that your payroll is being managed by experts who can provide advice and do the hard work for you with regards to payroll compliance tasks. Employment Hero payroll is kept up to date in real time with UK tax codes and HMRC legislation.
Make sure that your outsourced payroll provider uses software that automatically interprets wage agreements and has other procedures in place to help you remain compliant and simplify the payroll process.
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4. How do you manage time and attendance?
Collecting time and attendance data is a critical component of payroll, however, not all external payroll providers have a time and attendance system or tools. Ask your payroll provider if they collect time and attendance data and if they do, ask how it’s done.
Nowadays your payroll provider should be able to provide you with a fully integrated online rostering and time and attendance system.
Or better yet, make it easier for everyone to access one set of verified data to conduct an accurate payroll. With Managed Payroll, you can be sure that all payroll data is synced with Employment Hero in real time. This revolutionises how teams can clock in and out for a shift.
Use dynamic rostering, templates and shift bidding to understand your team’s availability. Ideally, you want to be able to manage the entire employment lifecycle in the cloud to reduce double handling of data or imports/exports required to keep systems up to date.
This is why it’s an important question to ask, and why it’s a core feature of Employment Hero’s Managed Payroll.
5. Does your payroll system include General Ledger (GL) integration with accounting software?
Unless your payroll system is already integrated with your accounting system you’ll either need to pay for integration, manipulate CSV files or manually enter your payroll data for your accounts. This is a very important question to ask any payroll provider.
6. What add-on services do you include?
Some payroll providers can integrate with a wide range of add-on services such as accounts, time and attendance and HR. If you look around you can find a single platform that provides a full HR, safety, performance and payroll solution.
Your payroll provider should also provide your employees with a complete Employee Self Service (ESS) module and employee benefits.
The best-outsourced payroll service providers also include a broad range of in-house employment management services including employment law, migration, human resources, recruitment and workplace health and safety experts.
Via Employment Hero Managed Payroll, documentation is readily available for your employees to view via our mobile app or employee self service portal. You can have full visibility of the pay run progress via our cloud technology.
7. Do you offer transparent pricing?
Don’t get caught out by hidden costs. Many payroll services appear to be cost-effective but contain a pile of additional costs for regularly occurring payroll activities. These hidden costs can significantly increase the cost of managed payroll.
Ask questions about all potential costs before you sign on with any outsourced payroll provider. Look for comparisons that make it easy for you to be able to understand the different service levels, and to make sure you get what your business needs.
8. What are your service levels?
Your outsourced payroll provider should provide a clearly defined service level agreement, with turnaround times and implementation strategy. It should be flexible enough to adapt to your changing needs.
A good payroll provider will offer various choices transparently, and be able to provide support every working day.
Assess how quickly they respond to calls and how long it will take to correct an error. Also, be careful about locking yourself into a long-term payroll service contract. Anything over 12 months is unnecessary.
Make the most of special offers, bundles and deals, and consider agreements that suit your business operations, like month-to-month pricing.
9. What experiences and results have you achieved?
Ensure your payroll provider can provide you with a range of referees who are willing to promote their services just as much as they are.
Many external payroll providers include success stories on their websites, this can be a good place to start.
The wrap up
Making the move to outsource payroll can feel like a big step for many business owners. But it can also be a weight off your mind, plus a massive time and cost saving when you can trust that your payroll is managed by dedicated experts.
We’re here to help business owners manage their businesses and their people the best way possible – the easy way. Whether you decide to outsource payroll, or keep it in-house, we can support you every step of the way.
Whilst payroll is a core service, our team can also help to assess your unique situation to understand how they can save you manual work and drive efficiencies. Eliminate paper processes, chasing staff for timesheets and so much more using our powerful technology stack.
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