Managing the employee payroll is time-consuming and something you might not be fully equipped for. Besides ensuring you pay every employee what they are owed, you also have to ensure you comply with all the tax and labour laws. It can be quite a handful for most businesses, especially when coupled with other functions and operations of the business.
Besides taking most of your time, payroll comes with substantial financial risks for the business if you’re not fully compliant with the tax and labour laws. Changes in the workplace, like widespread remote working and constant changes in the legal and payroll policies, haven’t made it any easier for businesses to effectively manage their payroll.
However, these challenges have also accelerated the need for businesses to have resilient, reliable and secure payroll solutions, and one of those has been managed payroll.
What is Managed Payroll?
Managed payroll means that businesses outsource their payroll functions to an external specialist. This means the business manages its payroll, handles global payroll compliance, administers benefits and files taxes through a third-party platform or entity.
Managed payroll services can save your business time and money and reduce costly payroll errors. It can also eliminate the need for payroll personnel to undergo in-house training, which is an added cost for the business.
Managed payroll services are often tailored to match the size and needs of the business, ensuring that every business at any level can access the vital services. The services can benefit all sorts of businesses in all industries. Whether you’re a business with 500 employees or a large enterprise with more than 100,000 people, you can source managed payroll services to ensure your employees get paid accurately and on time.
Benefits of Managed Payroll Services
Managed payroll services offer many benefits for businesses, including the following;
Payroll management is not just challenging. It also consumes a lot of time and can be overwhelming. It takes time and dedication to manage payrolls, no matter how many employees you have.
Businesses spend valuable hours every month processing payroll. This is time that the business could use more constructively for more productive activities and instead outsource payroll management to more qualified personnel.
Outsourcing payroll services is a great way to cut costs and manage cost-inducing factors such as hiring payroll attendants, training payroll professionals and processing payroll. Outsourcing reduces expenses and saves the business lots of resources and money. To avoid any doubt, payroll service providers will charge you for the service. But compared to what you would be spending doing the payroll in-house, managed payroll is more cost-effective.
Eliminate payroll errors
In-house payroll processing is prone to errors, leaving you exposed to hefty fines and charges by revenue collection organisations. Using a reputable payroll service minimises the chances of errors, missed deadlines and inaccurate payments.
Avoid HMRC penalties
HMRC paperwork and returns require careful attention. The HMRC will charge you a penalty if you submit any paperwork that contains errors or misrepresents your tax liability. Equally, the HMRC assessment understates your tax liability. You can face a penalty if you don’t inform them.
Financial compliance is not something that businesses should take lightly. It is one of the toughest areas to manage, especially when running a global payroll. It doesn’t help that HMRC requirements are always changing, and businesses constantly struggle to keep up. Opting for managed payroll allows your business to work with a reputable service that specialises in mastering and updating itself with the requirements of HMRC, ensuring your business is always financially compliant and avoids any fines and penalties.
Better flexibility and scalability
Payroll service providers offer a variable payroll cost base, which is more flexible and gives the business a higher ROI. These services and the flexible payment plans are scalable as the business grows. Even though you might consider your business model to be very predictable with a fixed workload processing cycle, recent disruptions in the global economy have shown that you should always prepare for the unexpected. Working with an experienced payroll service provider makes it easier to cope with drastic changes and legally adjust your operations.
Reduce cost of ownership
When you consider the direct costs a reliable payroll provider can absorb, such as the required infrastructure, data security, compliance, payroll and HR departments and expertise, opting for managed payroll quickly becomes more practical and an investment that can be financially justified to stakeholders. Through managed payrolls, you can reduce your total cost of ownership by at least 20%.
Such services are designed to save time and money. The solution also allows the business to make informed financial decisions, thanks to powerful analytics and real-time calculations.
Managed payroll can drastically enhance security. Organisations might sometimes struggle with the costs and resources involved in managing the services internally to guarantee absolute security and accuracy.
Any reliable payroll services provider prides itself in providing confidential storage and protection of customer data in compliance with various legislation such as GDPR.
If you work with payroll providers with ISO27001 certification, you can rest assured the provider takes the security of information and processing of data seriously.
Peace of mind
Managed payroll service gives you peace of mind that your payroll and employees are effectively looked after. With changing work patterns and pay frequencies, you can be confident that you offer your people personalised and flexible payment packages that your payroll can keep up with. They can deliver their best work, and your business can continue to grow.
Is Managed Payroll Right for Your Business?
Most businesses looking to get a few things off their hands could use managed payroll services. But if you need some convincing on whether your business should also consider managed payroll, here are some hints you can use to determine if this would be a good fit.
You don’t have a skilled in-house team
Payroll administration requires precision, skill and specialised knowledge of payroll systems, processes, procedures and laws. If your current team doesn’t have the necessary expertise and you often find yourself with penalties and fines or have to correct the paperwork several times, it might serve you well to consider working with a payroll service provider.
You can avoid the many problems that come with having an unskilled team, including avoiding paycheque and compliance errors. Managed payroll providers have certified payroll professionals that will work out all the kinks and ensure you have flawless payroll without any compliance errors.
You would like to save time on payroll tasks
Even if you have a skilled team working on the payroll, it is a round-the-clock task that needs all hands on deck, and it takes a lot of time to administer, monitor and audit the payroll. Opting for managed payroll can save you all this time and allow you to focus on other core functions of the business that can help with revenue generation and the growth of the business.
Reduce payroll staffing costs
It’s easier and cheaper to pay a 3rd party to manage your payroll than to pay an in-house team wages, salaries, overtime, benefits and training costs. If your business is looking to trim the fat and become more efficient and effective, managed payroll is one of the solutions you should look into. It won’t just help you cut back. You will get value for your money and possibly even better and more accurate payroll reporting, saving you even more money from penalties and fines.
Your business has expanded to global regions
It’s a whole new ballgame once you start operations outside the borders. It’s common for your in-house team to start struggling trying to understand the different legal frameworks of different countries. Simply put, the global payroll can be highly complex because it needs sound knowledge of international payroll laws.
Managed payroll providers have experienced and skilled personnel, with some even having satellite offices that provide information on new laws that could affect payroll and how they should respond to them. Managed payroll proves to be more cost-effective, not just when your operations go outside the border but also when you have employees in different countries.
You cannot keep up with the ever-changing payroll landscape
It’s not enough that there are many payroll laws that you should be aware of. They are also changing regularly. You have to be in tune with the legislature and make the required adjustments within the required timelines. The new laws, mandates, and amendments can pop up anytime. Employers must be ready to implement them as required. Without a skilled and experienced team, some changes can easily slip through your fingers, putting your business on a collision course with the HMRC and other revenue collection agencies. Managed payroll providers are equipped with the tools and skills to keep track of any legal changes and help you remain compliant.
You’d rather not deal with payroll
For some businesses, getting a managed payroll provider is as simple as not wanting to deal with all that work yourself and letting someone else do the heavy lifting so that you can focus on your growing business.
All these are good reasons and indicators for considering going for managed payroll providers. With the right fit, a managed payroll provider can be a vital addition to your team that could set up your business for success.
How Managed Payroll Providers Can Help
Payroll is a series of processes that require careful planning and meticulous execution to be done successfully. There are always ongoing tasks that need attention and constant monitoring. When working with managed payroll providers, they can help with all three stages of payroll processing, including the following;
The first step of pre-payroll activities is defining the payroll policy. Companies have different policies that must be defined and approved by the management to ensure standard payroll processing. Managed payroll providers can prove helpful during this stage because they have experience in working with different payroll policies and can prescribe the best one for your business based on the size, cash flow and number of employees in the business.
Managed payroll providers will also work with multiple departments and personnel to collect and input various payroll-related data, such as attendance and salary revision data.
The task of gathering data can be substantial in larger businesses, but most providers have smart payroll systems with integrated features like leave and attendance management and have an employee self-service portal that makes input collection simple and trouble-free.
The managed payroll provider will also check for the validity of the data and ensure it adheres to company policy. The provider will ensure no active employee is missed out and that all inactive employees are recorded accordingly.
Actual Payroll Process
After the pre-payroll, the actual payroll process begins. This also involves several steps that the managed payroll provider can help with.
The validated input data is fed into the payroll system for actual payroll processing. After adjusting the salaries for necessary taxes and other dedication, the result is the net pet. Once the payroll process is over, the values are reconciled and verified for accuracy to avoid any errors.
The services offered at this stage of the payroll process vary depending on the managed payroll process service you use.
Many offer tax withholding services for statutory deductions to make it easier for the employer to remit their taxes accurately to the respective government agencies.
Every business keeps a record of its financial transactions. Salaries are one of the significant operating costs which have to be reported in the books of accounts. As a part of payroll management, it is essential to check that all salary and reimbursement data is fed accurately into the accounting system. Some managed payroll providers provide integration, making accounting and payroll accounting seamless.
The provider also helps ensure employees receive what is due to them. When looking at different managed payroll providers, it’s crucial to consider the available payout methods for cost and convenience.
Finally, the provider will send a report after each complete payroll run that the company’s top management can review. These reports usually offer vital insight into the company’s operation and any necessary adjustments that could save the company money and help it run more efficiently.
Keep in mind that managed payroll services are not built the same. The range of services offered differs depending on the provider’s size, capacity and experience. It’s crucial to find one that offers the services you’re looking for and has experience with it.
What to Look For When Choosing a Managed Payroll Provider
A managed payroll service is as good as providing it. With so much at stake, you need to ensure your payroll is working for your organisation and that you’re getting value for your money. You should ensure the provider checks on all the right boxes and answers your questions correctly.
The payroll vendor is also a data processor and must demonstrate that they have stringent controls to comply with data security and privacy legislation. Some of the factors you should look at as far as assessing the data security of the provider include;
- Their accreditations, including whether they are ISO 27001 certified
- Where their data centre is located, and who has access to it
- What is their disaster recovery model, and how effective is it
Before signing the contract, you should get clarity on the implementation process. You’ll want to start reaping the benefits of the service as soon as possible, especially when there are stakeholders to impress. A few factors to help you assess how easy (or difficult) it will be to implement the service include;
- Whether the managed payroll provider will manage the entire process or if there is an option to self-manage to speed things up.
- If you can upload information from your existing system and how quickly this can happen
- What are some of the safeguards to minimise downtime
- What support is available for the implementation period, and is the transition seamless?
Additional support options and cost implications
A great managed payroll service provider will go beyond providing legal compliance. They will also help you understand it.
Find out how the provider implements changes and whether they offer support and guidance. You should also check whether they can guide you through pitfalls when navigating the complex payroll issues that you can’t afford to get wrong.
Finally, do they offer support with other payroll-centric services that would make your life much easier, such as benefits in kind?
It also helps to work with a provider that can integrate with HR to maintain an agile and competitive business. Make sure that your managed payroll provider offers integration needs.
Ask them to explain their integration methodology and, where possible, provide testimonials and case studies about customers they have successfully integrated HR or Workforce Management.
Managed payroll is vital to every business looking to break through the legal quagmire surrounding employment and maintain clean books with the different government agencies. Managed payroll providers are shrews with a firm understanding of the workings of the law and understand how to ensure everything is done to utter completion, reducing exposure to risks like penalties, fines and expensive lawsuits.