Published Wednesday 17th April 2019
Approximately 1.4 million UK companies employed staff last year; all of them with a legal requirement to run payroll. Such a task can take up vital time each month, with multiple processes required to comply with legislation. Just as importantly, failing to pay staff on time can have catastrophic effects on employee morale and their personal lives. Payroll is commonly performed monthly through the HMRC’s PAYE system, which also collects the tax and National Insurance Contributions from staff. Another requirement is the automatic enrolment of eligible staff (aged between 22 and state pension age, on an annual salary of £10,000 or more) into a workplace pension scheme, integrating government regulations with your own system. Enrolment records have to be maintained – often automatically – such as contributions, staff who have opted out, as well as those who have left the company.
The number of benefits a business can offer its employees is increasingly broad, including things such as sickness and death insurance, health cash plans and retail voucher schemes. With the UK employment market becoming squeezed, particularly post-Brexit, benefits can make the difference to a potential employee deciding where to accept a job. ERA Employee Benefits offer a truly independent assessment of the benefit plans which best fit an organisation’s needs and the relative value of the many providers.
Late Filing Penalties
Before businesses pay their staff, they must submit full payment summaries to HMRC, detailing staff pay and deductions. Late submissions can be fined, ranging from £100 for PAYE schemes with under ten workers, up to £400 for companies with over 250 employees. If the report is submitted over three months late, a further fine of 5% of due tax and NIC payments can be expected.
The challenges outsource payroll?
Often, the advantages of outsourcing payroll will outweigh the negatives. However, there are some potential pitfalls:
- Choosing the wrong firm can make payroll operations worse.
- If your business only employs a few members of staff, outsourcing may be more expensive than it is worth.
- Regardless of whether payroll is outsourced, ultimate compliance responsibility remains with your business.
The positive results of outsourcing payroll
For many, however, outsourcing payroll will allow more time for investment in further business growth. An experienced provider will be able to absolve the stress of payroll operations, while also ensuring total compliance with the latest legislative changes and best practices from HMRC and The Pension Regulator. The cost of outsourcing payroll can vary on many factors, such as the size of your workforce and the frequency of payments. However, in most cases, the cost of employing staff to manage payroll in-house will be greater than the cost of paying an external provider to handle it on your behalf.
Is now the right time to outsource?
Most UK businesses will eventually reach a point when it is no longer feasible to handle payroll internally, often due to the need to be aware of constantly evolving regulations. Also, the integration of realtime information (RTI) legislation into PAYE has led to businesses being fined for missing submissions every time they pay a worker. Since the RTI system was implemented in 2013, more businesses have looked toward specialist outsourcing companies for some or all of their payroll operations to avoid non-compliance.
Throw in the GDPR legislation, introduced in May 2018, and the need to ensure employees’ data is confidential and secure is making payroll more critical in the agenda. A specialist payroll provider will secure personal information, such as that of your employees, in an encrypted online environment.
Some accountants provide a cost-effective service for companies with small workforces, but specialist payroll providers generally offer a better value solution for a workforce of more than a couple of dozen. In the majority of cases, outsourcing your payroll will not only save you money but give you more time and provide peace of mind. An exploratory discussion with an ERA Payroll Specialist is completely free; our independent assessment of your needs will help to identify the best value solutions.
If you are interested in learning more about how you can reduce your payroll costs then contact us today and discover exactly how Expense Reduction Analysts can work with your organisation.
About the Author: Alastair Baker, as one of ERA’s leading Client Managers in the ‘Northern Powerhouse’ region has delivered substantial savings for clients in; Retail, Import-Export, and Engineering, as well as a growing number of professional services, such as Accountancy and Legal practices. Alistair has also been able to help charitable and public sector organisations such as Universities and Academy Schools find sustainable ways of maximising resources on front line educational activity.
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