Payroll: In-house vs Outsourcing

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The in-house vs outsourcing debate continues to rage in organisations right across the UK.

Both startups and larger companies ask themselves the same predictable questions: "Should we use someone outside the company?" and "Have we got the capability or resources to do this in-house?"

In the UK, one of the most commonly outsourced business services is payroll. There are several reasons for this: first, payroll is a complex task that requires a certain amount of pre-existing knowledge and spare time; second, a lot of companies do not have the resources to perform the task in-house; and finally, a lot of companies already outsource their finance function and therefore decide to outsource payroll too.

We’ll look at the pros and cons of in-house and outsourcing and determine if businesses can get the best of both worlds.


The pros

One of the main pros of outsourcing is receiving expert support. Payroll is a complicated and recurring task that is continuously evolving. If companies are unable to stay on top of legislation changes, they run the risk of not being compliant, which can have severe legal and financial consequences.

Therefore, it is vital that the person administering payroll knows what they are doing and is aware of any changes.

Another advantage of outsourcing payroll is the time saved. Payroll administration is often a very manual process that can take up a great deal of time.

However, by delegating these responsibilities to an external supplier, companies don't have to worry about fiddly tasks such as processing HMRC and pension submissions and can instead focus on their core and more high-value tasks.

The cons

Despite all these perks, there are several challenges associated with outsourcing.

One is the price—outsourcing something to an industry expert doesn't come cheap. But while cost may be one of the issues associated with outsourcing, there are other areas of greater concern.

Outsourcing payroll is great if the right person or provider is doing it.

Many businesses choose to employ the services of their accountant or finance provider to deal with finance-related admin. A significant number will often extend payroll responsibilities to them too.

While financial experts may be able to consult, advise and support clients in decision-making processes, payroll is not necessarily their area of expertise. This means that companies could unwittingly leave themselves exposed to payroll errors, particularly if their provider continues to use outdated or manual systems.

A further issue is the loss of control of important company data. For the majority of companies, payroll is their most considerable expense. Outsourcing can mean poor visibility and leave companies uninformed about costs and month-on-month evolutions.

Things can quickly snowball, and for those that rely heavily on budgetary controls, the impact of inaccurate data can be severe.


The pros

Keeping things in-house certainly has its advantages.

For a start, companies can have full transparency and control over the entire payroll process.

Furthermore, if the employer retains control over how and when payroll is run, internal process changes can be actioned much more rapidly than they would be if the function were outsourced. This includes the ability to reverse any errors and gather all relevant data together in one place.

The cons

However, in-house payroll does have its fallibilities.

We have already discussed how payroll can be extremely time-consuming and eat significantly into other tasks. While this is undoubtedly true, the larger issue relates to whether or not payroll is being run correctly.

As with outsourcing, its success is very much dependent on who is in charge of administering it each month and, perhaps more crucially, how they are doing it.

Unless the person is an expert who can keep on top of the regular legislative changes, it is quite likely that errors will occur, with the implications potentially extremely serious.

Did you know?

At PayFit, we offer far more than just brilliant payroll software. We consider ourselves to be an in-house software, but with all of the perks that you would receive from outsourcing.

In-house payroll with the benefits of outsourcing

For some people, payroll can be tedious and laborious. For others, i.e. us at PayFit, it is the best thing in the world!

Okay, we may be exaggerating a bit, but the point we're trying to make is that payroll is what we do best!

At PayFit, we offer far more than just payroll software. Our goal is to support clients when administering their payroll while ensuring that the whole process is fully compliant. We like to think of ourselves as an in-house solution but with all the perks you would normally associate with outsourcing.

Thanks to our dedicated payroll experts who operate under the guidance of the customer success team, we are always on hand to answer any payroll-specific questions that you may have.

On top of helping our clients with individual queries, the customer success team ensures that the PayFit app remains compliant at all times through analysing the latest legislative changes affecting payroll.

Did you know?

Because our app is cloud-based and built using our own coding language, it only ever takes a couple of hours for the latest changes to be updated within the app.

Finally, the app automates calculations and identifies and then highlights any errors made or potential areas of non-compliance. Importantly, this means that people with no prior experience or expertise with either payroll or payroll compliance can use it confidently.

If you or your colleagues are currently experiencing challenges with payroll administration, you may be keen to discover a smarter and more modern way of running payroll. Book a demo with one of our product specialists today to see how we make in-house payroll hassle-free.

PayFit blog author

PayFit blog author


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