The essential element of payroll administration in the UK is to accurately calculate the income tax and national insurance contributions deducted from the employee each pay period, generate pay stubs for each employee and account to the office from payroll deductions.

Running a payroll system is natural for medium and large companies that may employ specialized payroll staff to perform these functions. Many midsize companies may still choose to outsource the payroll function leaving many of the technical issues that can arise to a specialist payroll service.

Small businesses may choose to outsource the payroll function because they are unfamiliar with the payroll system, although HMRC does run seminars to help employers. The payroll system not only calculates national insurance and tax deductions, but also has to deal with tax code changes, new employees and changes in existing employees, plus taxable benefits and allowances, such as statutory payments for sickness and maternity leave, outsourcing of state pension. scheme and student loans.

The main benefit of manually producing employee payroll is the reduced cost, although the owner’s time spent on the payroll function can be put to better use running the business. Cost may not be the cheapest option if an employee is required to produce payroll. Purchasing payroll software can save significant time and cost for the small business that chooses to set up and monitor their own payroll function. Although time is more important as the cost of producing payroll is usually not a big issue.

Payroll outsourcing adds a small additional cost to running the business, but would typically generate valuable benefits by reducing the time spent on the role and reducing the administrative burden of payroll.

Main benefits of outsourcing the payroll function.

1. Frees up time calculating payroll deductions and handling different and sometimes complex employee circumstances.

2. Use a professional outsourcing service to advise on potential payroll issues and difficulties.

3. The cost of outsourcing payroll should be weighed against the cost of employing specialized payroll staff in-house.

4. Payroll services use payroll software and are more likely to produce accurate national insurance and tax deductions and payment records, reducing the chance of problems with tax authorities.

5. Payroll administration, such as preparing tax deduction schedules, handling incumbents and leavers, year-end certificates for employees, and annual employer returns, are typically automated as part of the payroll service.

6. The outsourcing company should also be responsible for producing employee payrolls, advising on taxes and deductions, and in larger companies, should also provide payroll analysis for accounting purposes.

Alternatives to outsourcing payroll functions.

Finding a suitable outsourced payroll service is not difficult. Local phone directories or searching the Internet would turn up many potential payroll service providers.

Many accounting firms offer payroll services to their clients and although prices may struggle to be competitive, the price is always negotiable. There are advantages to using the business accountant for payroll as the accountant already knows a substantial cost area for most businesses as he prepares the numbers.

Choice of payroll software.

The main alternative to outsourcing payroll is for the company to purchase and use payroll software.

Larger companies require payroll software that has built in all possible payment scenarios and is also capable of handling large numbers of employees. Large comprehensive packages can be complex to operate and require specialized salary staff.

Small businesses can choose simpler and less complex payroll software packages that meet basic business needs. It is important that the person who handles payroll within the salary function understands the essentials of payroll and the legal requirements of payroll administration.

The advantages of choosing payroll software are basically cost, it should save the business money against outsourcing payroll, it should maintain control over role and responsibilities, and ideally it should take no more time than providing payroll details. employees and gross wages to the payroll service.

If the company chooses to adopt a payroll software package, the complexity of the package must be considered, as well as the attributes and capabilities of the software chosen to produce all payroll requirements related to wage and salary deductions, pay administration and accounting. employee payroll.