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Should I Outsource Payroll?

Advice on whether to keep payroll in house or outsource this.

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Hi All,

I'm wondering if anyone has experience of outsourcing payroll please? I'm tempted to look into this as it is taking one of the team an increasing amount of time and I wonder if this could be better spent doing (for example) management accounts, cashflow forecasts etc.

If you have done this yourself (or if you'd like to take on this work!) then I'd love to hear from you.

Many thanks in advance for your comments.

Replies (21)

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By Paul Crowley
19th Nov 2020 19:12

Tried to dump it three times in the last four years.
Nobody wanted it.
Former employee, IRIS and a local small firm that just did payroll, not accounts.

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Replying to Paul Crowley:
Red Leader
By Red Leader
20th Nov 2020 11:06

Sorry, but can you say that again but using more words please?

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By memyself-eye
19th Nov 2020 19:37

we did, just before furlough. Best thing we ever did!
two large pubs too.......

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By Calculatorboy
19th Nov 2020 21:42

payroll is not worth the trouble ,

I'm so glad i dumped mine on the clients a few years ago , thanks moneysoft ..I owe you...

same with vat now ,only got a handful left to gradually dispose of.

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RLI
By lionofludesch
19th Nov 2020 23:14

Never found it a problem and always thought it was easy money.

Mind you, I don't take on anything difficult. Nearly everyone is on the same wage each month/week and I then just need to deal with the odd sickness or code change.

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Replying to lionofludesch:
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By mbee1
20th Nov 2020 11:39

lionofludesch wrote:

Never found it a problem and always thought it was easy money.

Mind you, I don't take on anything difficult. Nearly everyone is on the same wage each month/week and I then just need to deal with the odd sickness or code change.

Same here. Most of mine are small payrolls - biggest about 10 employees and rarely cause me problems especially if the employees are salaried. I've a few with variable hours or overtime but, again they're not a problem.
I use Brightpay which is a doddle to use - I also think it's easy money.

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By paul.benny
20th Nov 2020 07:48

I've outsourced payroll (c250 employees, around 150 were hourly paid with overtime and a production bonus). This was part of a group-wide consolidation into shared services.

Gross to net is what the software does and what an outsource provider will do. If it's decent software, it will also spit out all your RTI submissions, year end forms, and reports for paying HMRC, pension, other deductions.

You can't sensibly outsource the build-up to gross. Mutations such as variable pay, employee turnover, absence, are where the workload lies.

If you're finding payroll time-consuming, take a hard look at your processes. Break the down into individual steps. Look at where there is rework or inefficiency - for example do you receive overtime claims and then send them out for approval? That's an unnecessary step - they should come to you already approved. Do you have a clear timetable that is well known? And do you stick to it?

There are opportunities for time-saving by providing employee login for personal details, bank, payslips. Not necessarily suitable for everyone, though, and you need the right infrastructure.

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Replying to paul.benny:
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By tom123
20th Nov 2020 08:34

You can't sensibly outsource the build-up to gross. Mutations such as variable pay, employee turnover, absence, are where the workload lies.

--
I agree with the above. Used to work for a manufacturer with 200 weekly paid staff. We had a full time payroll person.
New MD thought the whole thing could be outsourced for next to nothing.
Explained the gross to net was not the hard bit, = all the legacy overtime, shift, allowance stuff was where the work was!

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By Samantha20
20th Nov 2020 08:29

What is it that is time consuming? It might depend on the bureau, but the bureau we used asked us for all the information and just transferred it to their software, so we took it in-house as we were doing all the work anyway.

Which payroll software do you use and how many employees do you have?

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Replying to Samantha20:
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By tom123
20th Nov 2020 08:35

What information would you have expected them to do without though? They are not psychic.

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Replying to tom123:
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By Samantha20
20th Nov 2020 08:47

tom123 wrote:

What information would you have expected them to do without though? They are not psychic.


Well, if I could calculate the figures, why couldn't they? I got my information re starters, leavers, overtime etc from the other managers. I could send them the same information and they could do the calculations just like I did.

There was no point in me doing all the work and then paying them much more than Moneysoft costs per month for them to transfer it to their systems. Especially now that it is possible to email paylips etc directly from Moneysoft.

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Replying to Samantha20:
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By tom123
20th Nov 2020 11:52

I see that, but I am fairly sure no bureau would canvas around various bits of your company for the information they needed.

Mind you, I have always done my own payroll and never seen the 'benefit' of outsourcing for much the same reason.

Bureau work probably works well for steady staff on fixed salaries. In other more complex cases probably better to bring in house.

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Caroline
By accountantccole
20th Nov 2020 12:01

I used to use AFH payroll Eastbourne to run all our client payrolls before I closed my firm and moved to France. They dealt directly with the clients. I know they also worked for another firm (not local) and offered a white label experience so their emails etc looked like they were coming from that firm rather than an outsourced payroll firm.

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By adam.arca
20th Nov 2020 13:06

Like the OP, this thought has been in my mind for years now.

I used to think payroll was a decent little earner but, personally, I think that side of things went away when RTI and AE came in. And coronavirus this year has just made it so much worse in terms of distraction and time commitment (and, unlike some of you, I've been charging for our CV work so at least I've been getting some payback from the hassle).

What has always made me stop from making the jump is the concern of how clients will view this. Every bureau I've ever come across want the info in a very structured format whereas clients generally feel happier dumping some random s.h.1.t. on their accountants and expecting us to employ our powers of interpretation (and, before anyone leaps on me, I do have standardised processes and I do manage to make at least half my payroll clients stick to them :) ).

So, what would be very interesting both for me and, I suspect, the OP is hearing how those who've done this have sold it to their clients and what teething issues there have been.

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By Mr_awol
20th Nov 2020 13:46

I'm surprised to see so many wanting to ditch it. If you get someone good in and they spread the workload by processing the director only ones early, it's a real money spinner

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Replying to Mr_awol:
RLI
By lionofludesch
20th Nov 2020 13:53

The ones who want to ditch it are the ones who have taken on difficult cases at a price which is too low.

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Replying to lionofludesch:
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By Whatisname
20th Nov 2020 14:57

lionofludesch wrote:

The ones who want to ditch it are the ones who have taken on difficult cases at a price which is too low.

And that’s the nub of it - too low price - when in practice we had a very profitable payroll section because we priced it properly. I started in payroll at 18 years old and ended up 50 years later running our payroll section! Glad to be retired now though.

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Replying to lionofludesch:
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By adam.arca
21st Nov 2020 09:17

lionofludesch wrote:

The ones who want to ditch it are the ones who have taken on difficult cases at a price which is too low.

That’s a surprisingly sweeping and ill-considered comment from you there, Lion.

To take my case, I know I’m not cheap based on what previous acco7ntants charged when I get new clients in; I also charge way more than any bureaux. But clients get a much better service than with a bureau and that’s what they pay the extra for; however, I do tend to let them impose and, even though I am making an OK profit, it’s less than it used to be (for reasons I mentioned in my previous post) and it comes with grief I could do without.

So, the trade-off is between keeping clients happy by offering a more complete service and between keeping me happy because I would rather we were doing accounts which will keep us busy for hours or days and are a more profitable use of our limited time in the round. Pricing has absolutely nothing to do with it (in my case and, therefore, probably in lots of other cases too).

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By paul.benny
20th Nov 2020 15:59

We have two categories of response here
- firms who provide payroll to clients
- employers dealing with payroll for their own staff
Clearly for those who provide payroll as a service to clients, the question is whether it's commercially worthwhile. But the question suggests that the OP is in the second of those categories.

Perhaps when/if the OP comes back the thread, we will get some clarity.

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Replying to paul.benny:
RLI
By lionofludesch
20th Nov 2020 16:05

Samantha hit the nail on the head.

If you're the employer and you still have to collate a lot of detail to send to the payroll bureau, you may not be saving yourself much work by outsourcing.

It'll be a judgment call. We've no information on which to base a view.

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Replying to lionofludesch:
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By paul.benny
21st Nov 2020 12:27

Indeed.

The OP must be far too busy running payrolls for the end of the month that s/he hasn't been able to acknowledge or engage with the contributions.

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