Payroll Services

By Rob Binns | Senior Writer | Updated: 21 June 2019

Employee pay in the UK

Running a successful business in the UK involves more than providing or selling a product or service. If you employ staff, however few, then you will need to consider the best, most efficient and legally acceptable way to pay them. All of this requires time that you may not have when you are organising and running your business on a day to day basis. This is why many companies consider going through a payroll service.

Very large companies may employ in-house payroll staff but many small to medium sized firms (and some large ones with a specific business model) will outsource their payroll duties such as organising PAYE, BACS payments, direct debits and the printing of pay slips.

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UK employee pay also overlaps with human resources which is a huge area for many small to medium sized businesses to handle as there can be dire consequences involved when HR is handled wrongly.

As an employer you will need to be aware of:

  • UK law relating to the national minimum wage
  • Issuing pay statements
  • PAYE and National Insurance deductions
  • Statutory payments
  • Pension and student loan deductions
  • As well as how the HMRC enforces the NMW (National Minimum Wage)

You may be fantastic at running your core business but understanding and handling all employee pay related processes may stretch your abilities and time which could negatively affect the overall performance of your operation.

Dealing with tax and accounting for your business

Understanding UK tax and accounting laws is an area best handled by qualified accountants and tax advisors since not following HMRC guidelines can involve hefty fines and or imprisonment.

Small tax or accounting errors can escalate and be expensive to remedy later on if the appropriate processes are not created and adhered to in the early stages of businesses development. Many small businesses grow much larger and continue to use the expertise of outsourced tax and accounting services.

Is it better to keep payroll within the office and have the advantage of trained staff on hand to deal with issues as they arise, or would it be preferable to outsource and cut the budget by negating the need for expensive payroll hardware and software?

There are basically three different options for businesses to choose from:

Fully Managed

The fully managed option provides the best choice for those businesses who have no in-house payroll knowledge as all aspects of the process will be covered from BACS to the payments to other payroll related services such as pension providers. This option will also allow for the provision of standard and bespoke reporting delivered in hard copy or electronic application.

Part Managed

For the business with a little in-house payroll knowledge and would like to retain access to their payroll software, a part managed outsourced system is a good option. The HR and finance teams within the company will maintain the payroll data while still being able to take advantage of the outsourced software and the advice of an experienced payroll administrator for issues such as changes in legislation and compliance.

Bureau Service

A bureau service demands good working in-house payroll knowledge and allows the business to retain full access of their payroll system. They will deal with data entry and then decide which other elements of the process to outsource. For example the in-house payroll could outsource all payment responsibilities to their employees and HMRC while retaining the input of static data.

Advantages of outsourcing

For an increasing number of businesses, the outsourcing option delivers the optimum management for payroll solutions for their needs. Benefits include; enhanced efficiency and productivity, the ability to cut costs, additional flexibility and reliability and guaranteed confidentiality and security.

There is no need to worry if in-house payroll staff are on holiday or absent through sickness and any changes in legislation will be automatically dealt with.

Budgeting is simplified with a regular monthly payment to the outsourcing service and BACS payments will offer a cheaper solution than online banking transfers. Costs can be reduced with no requirement for the purchase and maintenance of payroll software.

Reporting and services can be customised to suit the requirements of the business and payments are adaptable to weekly, two weekly, four weekly or monthly scheduling.

Confidentiality is ensured as the outsourcing service will allow access of payroll data to only certain authorised personnel.

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Payroll FAQs

What are the benefits of using an outsourced payroll service?

There are a number of benefits to using payroll services, but one of the most vital to businesses is that their payroll activities are managed by professional, experienced providers who are able to handle all aspects of payroll including having a knowledge of relevant legislation, National Insurance details, tax codes, sick pay and so on. No additional staff are required and businesses can focus on their other activities whilst being assured that their payroll will be managed effectively.

What services can a payroll service offer?

Payroll providers will set up and manage your business’ payroll. This will involve ensuring that the correct HRMC tax and National Insurance codes are applied and will also consider deductions such as student loans, payroll benefits and so on. They will take care of handling the payments themselves (usually through BACS) and provide you with all of the necessary data to help your businesses to keep track of its expenditure. Payroll services offer all of this as well as providing help and giving you a point of contact should any problems arise.

In summary:

  • Payroll set up free of charge.
  • Full compliance with all NICs, tax, SSP, SMP, SAP and Student Loan regulations.
  • Payment through the BACS system.
  • Issue of security payslips.
  • Reporting to address NI and Taxation issues.
  • Mid-period calculations for leavers and new starts.
  • The online submission to HMRC of all taxation documents.
  • Help desk support to deal with alterations to salary and legislation advice.
  • Full departmental analysis, personnel records and holiday, sickness and absence reports.

Does a business need a minimum number of employees for payroll services?

Businesses of all sizes can benefit from payroll services, whether they are small companies with just a handful of staff or large organisations managing thousands of staff across a number of locations. In fact, small businesses may find it a huge boost to outsource their payroll activities as it will free up their staff to focus on other areas of the business. There is usually no minimum number of employees, but there may be a minimum service charge from providers.

How much will payroll services cost me?

Payroll service rates depend on a number of factors including the size of your business, the number of employees and other factors such as how often they’re paid. Payroll service outsourcing is much lower than you think it would- with some companies offering services from just £18 a month depending on the level required.

Are payroll services reliable?

Thousands of companies outsource their payroll, giving external companies complete control over these services in order for them to manage payroll effectively. Making sure payments are made on time, using the correct tax codes and using secure systems in order to protect personal details and payments, payroll services have great track records. If your own systems fail, you can feel reassured that your payroll will continue as normal.

How to choose the top payroll service provider in the UK

There are literally thousands of UK companies that claim to be able to offer payroll services but it is very important that you only use reputable firms who are qualified and experienced enough to provide you with the best service possible.

Using an independent payroll service comparison website is probably the most efficient and cost effective way of comparing the best payroll service providers in the UK. These comparison services are usually completely free to use and could save you a lot of time and money so don't waste time responding to flashy ads when you can compare the best for free.

Rob Binns Expert Market
Rob Binns Senior Writer

Rob writes mainly about the payments industry, but also brings to the table industry-specific knowledge of CRM software, business loans, fulfilment, and invoice finance. When not exasperating his editor with bad puns, he can be found relaxing in a sunny (socially-distanced) corner, with a beer and a battered copy of Dostoevsky.

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