The introduction of real time information has led more small businesses to outsource payroll, says Feargal McCormack.
Every business that employs staff has to make sure its employees are paid correctly and on time. Managing your payroll involves calculating the hours individual staff members have worked, deducting tax and pension payments, adding any statutory payments or overtime that the employee may be entitled to, processing bonuses, pay increases and benefits-in-kind, and maintaining the necessary documentation such as P45s and so on. This administrative burden is one reason why more companies now outsource their payroll.
Real time information
Outsourcing payroll became more attractive following the introduction in 2013 by HMRC of a change in the way employers report PAYE information. The new system requires employers to report in real time, on or before every payday.
A similar change will take effect in the Republic of Ireland from 1 January 2019 as a result of Revenue’s PAYE Modernisation project.
For HMRC and Revenue, the advantage of real time information is that it means the right tax is deducted at the right time, reducing the need to correct errors.
Employees also benefit as it is easier for them to check what information an employer has provided about them.
For employers, however, particularly those in smaller businesses who may not have a payroll system or who have not outsourced payroll to a third party service provider, real time information increases their administrative burden.
An additional concern is that payroll information is impacted by the General Data Protection Regulation. Consequently, businesses need to review their payroll procedures and make any necessary changes to comply with GDPR.
FPM clients complain that payroll requires in-depth knowledge and takes up too much time. As a result, we are seeing more companies opting to outsource their payroll function. For these businesses, outsourcing makes sense because it is generally cost-effective and it frees up time allowing owners and managers to concentrate on running the business.
Other advantages of outsourcing payroll include:
• Confidence that your payroll function will be carried out by qualified and experienced staff
• Access to accurate and timely payroll information for your management and annual accounts
• Eliminating the need for specialised payroll software
• Disaster recover for your payroll information
• Reduced risk of exposing confidential payroll to unauthorised personnel
To meet client demand for payroll services, FPM’s real time accounting solution incorporates payroll services. If you would like to find out more about this service, please contact a member of our team.
Feargal McCormack l Managing Director