In-house vs outsourcing payroll costs – is outsourcing payroll cost effective?

Before we look into the core benefits of switching to outsourced payroll, you first need to consider the workloads involved.

If you employ around 100 members of staff within your organisation, the workload of managing all aspects of your payroll is quite significant. For each employee in your workforce, there’s a lot to be done, such as:

• Setting up and maintaining staff records
• Employee schedule management
• Holiday leave/sick leave
• Taxes and national insurance calculations
• Shift allowances
• Timesheet management
• Reporting

To keep your payroll system running smoothly for a business of this kind of size, you’ll probably need to hire two - maybe three - dedicated payroll staff. With the current average salary of a payroll administrator set at £25,000+, that’s a huge outlay.

So, if you adjust this comparatively for your company’s size, you start to get an idea of the salaries you’ll need to cover to manage your payroll internally. This gives you a great starting point when you start to compare outsourcing payroll costs with the investment needed for permanent staff.

One major benefit of using an outsourced payroll service is that the provider’s team will be organised in such a way as to provide maximum efficiency. They will have specialists in different areas all working towards to same goal – to distribute the workflow for a fast, accurate service. 

At the same time, your internal teams can now devote more focus to other business activities, such as those that will drive growth.

When pitching the idea of outsourced payroll to the decision makers of your business, they will no doubt ask the question “Is outsourced payroll cost-effective?”. 

As a payroll or HR professional, it is your responsibility to highlight the benefits of outsourced payroll. But don’t worry, we have done the hard work for you…

Here are some of the key reasons that payroll outsourcing prices will work out to be lower than using your internal resources:

Fixed payroll outsourcing costs

Things change, and your business needs to adapt accordingly. As your payroll requirements alter - or if something needs extra attention - it can be hard to flex a static internal team to rise to these challenges efficiently. 

If you’re outsourcing your payroll, your provider will have the capacity to adjust accordingly as workflow increases, complexities arise, or anything changes.

Payroll technology savings

If you’re managing your payroll in-house, it’s not just staffing costs you need to consider. You’re also fully responsible for the technological equipment, payroll software and associated licences and hosting costs that come with in-house payroll. 

Not just buying and installing it but maintaining it too. This means diverting your IT team away from other matters to deal with glitches, outages, patches, updates and upgrades – representing an additional cost on top of the original technology investment. 

Plus, there’s desk space, general computer equipment and an additional load on your business amenities and facilities.

Outsourcing payroll to avoid potential penalties

There’s a science to compliance – and the formulas are ever-changing. Your HMRC submissions need to be accurate and on time, otherwise, you’ll face financial penalties. 

The bigger the problem, the higher the penalty cost. Payroll outsourcing allows you to put this in the hands of trusted professionals who will ensure your complete compliance at all times.

Security and data compliance

Payroll management involves the storage of a lot of sensitive data. If you’re taking care of it in-house, you need to ensure your security measures are robust and that all the information you hold is stored in line with data compliance legislation, such as GDPR.

For your complete confidence, choose an outsourced payroll partner that carries the ISO27001 certification.es…

Access to advice

The payroll department covers a range of responsibilities and is impacted by HMRC legislation and employment law. Can you be sure that a busy internal team under fluctuating levels of pressure has time to keep completely up to date with this? 

What about getting advice on how any changes impact your payroll system and calculations? Any kind of consultation comes at a cost, but your payroll outsourcing prices will already have this covered. This means you’re always in line with the latest legislative requirements, without having to pay for additional advice.

Staff training

Another way you’ll save costs by outsourcing your payroll is in staff training. Whether you’re upgrading your payroll system, adding new functionality to your existing software or bringing your team up-to-speed with compliance issues, staff training comes at a price. 

Both financially and timewise. This is something you’ll never need to worry about if you outsource to a specialist payroll partner.

Troubleshooting

If something goes wrong with an employee’s salary payment or calculations, the buck stops with the person processing the information! 

If an issue occurs, your team will need to find time to identify the issue, rectify it and field any frustrations from the affected employee – thus holding up other important aspects of their role. 

These issues when managed externally are much less of a bind to your business and will save disruptions to your staff’s working day.

Disruption to service/recruitment costs

What if a staff member suddenly gets sick, or decides to leave? Not only do you have the added pressure on your staff (and possible overtime to pay while they pick up the slack), but you also need to find a replacement. 

Whether this is on a temporary or permanent basis, it will come at a cost. From advertising the role, commissioning a recruiter and time spent conducting interviews, recruiting a new team member is costly and time-consuming.

With an outsourced payroll provider, you don’t have to worry about your payroll being affected by in-house staffing issues. 

The exact savings you’ll make by outsourcing your payroll to a specialist provider will vary depending on the size of your business and its workforce makeup. 

Overall, you can expect to see a significant reduction in your overheads by moving this crucial and often complicated aspect of your business management to an external partner.

Of course, payroll outsourcing prices will differ depending on the provider too, so it’s worth getting a couple of quotes to make a cost comparison and reap the maximum rewards.

Get In Touch With SD Worx

SD Worx is an award-winning provider of innovative HR and Payroll solutions. For more than 75 years, we have been helping SMEs and large enterprises around the world transform their business with HR, payroll and workforce management solutions. This included exceptional outsourced payroll! 

If you’d like to learn more about our outsourced payroll, including the costs and benefits, please get in touch with our team for a no-obligation chat.