Why are businesses choosing to outsource payroll?

Everyone in business wants to reduce their overheads and this will include staff costs.  Payroll functions are just one of the areas where a company can still perform this necessary service but also reduce its costs by outsourcing the work.




Why are businesses choosing to outsource payroll?
 
Everyone in business wants to reduce their overheads and this will include staff costs.  Payroll functions are just one of the areas where a company can still perform this necessary service but also reduce its costs by outsourcing the work.
 
Popularity
 
Outsourcing is the new buzzword; the growth of the Internet and developments in telephony mean that companies can use third parties to process many essential company functions that were previously kept in-house.  Rather than employ a full time accounts team, with all the PAYE and benefit expenditure that this will entail, many companies have engaged the services of a professional team to take over these responsibilities.  Payroll is tedious and the new monthly real time reporting regulations introduced by the HMRC make this task even harder. Staff employees may have to be sent on expensive training course to learn how to use the new software correctly and if mistakes are made in the monthly tax reporting then HMRC will penalise the company.  The fact that the third party option consists of the payment of a fee rather than full time staff costs is an attractive option. 
 
Benefits 
 
Most business directors would far rather work at developing their company and spend their budget on production and marketing. If accounting costs are reduced then more people can be employed to carry out these core company development roles.  By employing an umbrella company to look after the company payroll, employees can rest assured that their pay slips will always be correct and on time. Legislative changes that seem to occur on an annual basis - following the Chancellor’s regular statements - frequently produce a lot of extra work for an in-house accounts team.  The third party should guarantee that they are always able to accommodate these changes and will keep the company compliant.  Outsourcing companies do vary in the services that they offer, as do their monthly fees but an important factor to take into account is that they will guarantee that staff records will always be correct and that the HMRC returns will also be completed in a timely fashion.  The payroll company should also sign an agreement that ensures that should there ever be any problems with the tax returns that may lead to a fine, they will cover this.
 
Staff  
 
Many companies retain a part time bookkeeper that will record employee pay details, absenteeism and holidays, and then forward these to the third party so they will always have the correct details.  This will free up any other company accountants to plan financial projections, deal with the Company accounts for the year-end, and also give them more time to do their jobs properly and examine the bigger picture.  Outsourcing takes away many headaches for a business.  The problems that are often connected with the employment of temporary, causal or contract workers can also be diminished by use of an umbrella company.  As the tax system becomes increasingly more complex, the idea of passing over these problems to an outsourced company becomes ever more appealing.
 

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