Outsourcing a Modern Payroll

There was a time, but it seems a century ago, when the wages clerk would go to the bank with a guard to collect cash and make up brown envelopes with all the employees’ weekly pay inside together with a hand written payslip explaining gross wages, deductions and net wages. He or she then walked around the various departments and handed out the envelopes. Times have certainly changed and everyone from the bank to the person making up those envelopes is happy about that.  Perhaps the clerk is the least happy because increasingly companies are seeing the benefits of using an external service company to do the payroll; in house wages clerks are becoming a thing of the past.

The Finance Department

You will have your own finance department to prepare budgets and management accounts with reports looking at performance against budget. The Chief Accountant is central to the financial controls that a company must have in place to operate profitably. He or she will be constantly on the lookout for areas where money can be saved. However, that financial function does not need to include the processing of the company payroll which can be given to a third party with security and confidentiality assured.

Obligations

Your company has obligations to the staff and to comply with UK tax legislation. That whole process can be handled by a specialist service company with the staff paid by BACS direct into their banks on a specified date and notified by private email. At the same time of course, gross tax and NI can be run off and sent with a remittance to the ‘taxman.’

There are penalties for incorrect submissions and late payment. An automated system should guarantee that never happens. The payroll company can handle all correspondence with the tax authorities on your behalf and ensure that the year-end figures are sent at the correct time.

Your only obligation will be to provide details for each of your employees including their bank details, NI number and current tax code so that the system identifies them properly. You need to advise on new starters and their salary level and give notice when anyone leaves. Other than that, if you provide any details specific to a particular month such as any overtime or bonuses that need to be paid, everything will be handled off site.

Variables

The other variable is the changes in tax coding, different tax rates and allowances that come into play with a new government budget. They are automatically absorbed into the payroll so that the changes are implemented when they come into effect.

There is no question of any security problems. It can actually be an advantage having the payroll elsewhere so that nobody other than the real decision makers have any information on the salary levels you are paying.

If you opt for payroll outsourcing and you find the right company, then that is the end of your worries. It will have the software to do the whole exercise and the updates when there are budgetary changes.