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How to: Choose a Payroll Provider

June 25, 2024

Categorised in: News, Recruitment

In the first in our series of ‘How to’ blogs for recruitment businesses considering outsourcing payroll or reviewing its existing payroll provider, we share HIVE360’s insights and advice to help navigate selecting a compliant outsourcing payroll provider that’s right for your business.

Outsourced payroll

Payroll outsourcing ensures payroll processing and HMRC submissions are managed efficiently by a business that specialises in payroll and its associated legislation and best practice, without the need to hire and manage an in-house team.

Managing payroll is critical for every business, and it becomes even more complex for recruitment agencies because of the unique nature of agency workers’ pay and compliance requirements.

As a recruitment agency grows, using payroll services designed specifically for recruitment businesses provides scalability. These companies are specialist, niche businesses with the infrastructure and systems in place to accommodate your business growth without disruptions. The right payroll service provider can easily adapt to changes in your workforce size, and handle fluctuations in payroll requirements, making them a sound business choice for now and the future.

Finding the right outsourced payroll provider for your business

The commercial landscape is full of challenges around people, cost pressures, digitisation, compliance and risk, auto-enrolment, changing tax and employment legislation, the admin burden, cost of living, employee engagement, health and wellbeing, and changing working patterns. Together, all of this can drain workers’ productivity, and be onerous for businesses.

Payroll is a priority for good employment experience and operational efficiency. Accuracy, compliance, agility, and flexibility are key, because the costs of getting it wrong are huge – it can damage an employee relationship, and a business’ reputation.

Adding payroll to an outsourcing strategy saves costs, boosts productivity, improves employer brand, and supports recruitment and retention.

By outsourcing payroll, you can get on with running your business, knowing that your company’s payroll is accurate and compliant. This approach also saves time, increases payroll accuracy, and reduces administrative costs.

What are the benefits of outsourcing payroll?

The turbulent national and global economic conditions are having an impact on the UK job market, talent war, and worker pay rates. One way to manage staffing expenses is by outsourcing key business processes to a third-party expert, and payroll is a powerful place to start.

Due to the nature of recruitment, whether for part-time, temporary, seasonal, agency or contract workers, changes quickly and often, and actioning payroll and ensuring compliance and accuracy can be time-consuming. For recruiters providing workers from overseas, the payroll needs, and management of tax and national insurance arrangements, are complex and often tricky to navigate.

For these reasons, along with the rise in the volume of businesses turning to agencies to fulfill their short/medium-term talent and skills requirements, means that recruitment businesses have felt the burden of effective payroll management and thus continue the long tradition of outsourcing their payroll to a specialist payroll provider.

First and foremost, an outsourced payroll provider should guarantee delivery of accurate, on time, and compliant worker pay. While handing over responsibility to another company may seem daunting, outsourced payroll really is highly efficient and delivers many advantages.

The advantages of outsourcing payroll:

  • Cost-effectiveness: outsourced payroll companies enable process efficiencies and overhead savings, with payroll expertise and resources in place so you don’t need them.
  • Expert status: as experts within the payroll industry, the outsourced payroll business is reliable and guarantees your business is compliant with all regulations. Hiring a professional payroll team will ensure your business doesn’t run the risk of payroll data inconsistency, missing data, late payments, or non compliance.
  • Specialised technology: payroll technology can be costly, so using an outsourced payroll company means benefiting from their investment in payroll software.
  • Sensitive information: outsourced payroll businesses are experienced in working with sensitive information, and must have secure systems for storing data and comply with associated legislation such as GDPR.
  • Contact whenever required: an outsourced payroll provider has people assigned to your payroll, who are always available to answer questions or make changes.
  • Bespoke: outsourced payroll companies understand no two businesses are the same, so develop a tailored payroll service that matches client’s individual needs.
  • Value-added benefits and better employee experience: providers like HIVE360 go further, with its Engage employee mobile app provides 24/7 access to digital payslips, pensions performance, inclusive health and money savings benefits and its data-led Employee Engagement Hub that harnesses unique employee management technology to deliver a 360-degree, real-time online platform to maximise worker engagement rates.

Where to begin the outsource payroll journey?

Outsourcing payroll services rather than hiring internally can be a cost-effective solution. After all,  you’re only paying for the services you require, which keeps costs down.

There are plenty of payroll providers to choose from, and investing in comprehensive due diligence up front is vital to ensure you identify the right one – and importantly one that is compliant when it comes to how they manage your payroll and payslips.

So always ask for references, evidence of HMRC compliance, and their latest audit. Talk to other businesses about who they use for payroll, check-out online reviews, and ask for proof the provider understands your sector and relevant legislation. Meet their team to establish the business is reliable, has robust systems and processes, the knowledge and resource to act and respond, and that payroll is in the right format for you.

Trust comes over time, but before selecting a payroll provider, get evidence they have excellent communication tools, secure technology, satisfied customers, and value openness and transparency.

There have been several tax avoidance and unscrupulous models of payroll that have left temporary workers financially penalised, and open to illegal activity that threatens the business and workers’ financial wellbeing. Recently introduced guidelines evidence the government’s drive to encourage businesses to examine the supply chain with comprehensive, regular due diligence to ensure they work with only fully compliant and ethical payroll providers.

Essentials checklist: look for a provider that:

  • Is HMRC and GLAA compliant.
  • Provides and demonstrates transparent PAYE payroll support.
  • Can demonstrate full compliance with payslips.
  • Shows no evidence of ‘skimming’ workers’ pay, with NMW as a minimum.
  • Has a future-proof solution that meets IR35 and the Good Work Plan.
  • Includes auto enrolment pension administration and a high performing workplace pension provider.
  • Delivers significant cost savings and operational efficiency gains.
  • Offers HR legal advisory support to enable continued compliance and protection.
  • Has a demonstrable, proven track record in the specialist outsourced payroll field.

Transitioning to a new outsourced payroll provider:

Once you’ve identified the right outsourced payroll solution and provider for your business, transitioning to the new service typically involves an assessment of current payroll processes, data migration, coordination with the provider for setup, testing, and a structured changeover to minimize disruption.

Why choose HIVE360's outsourced payroll solution

HIVE360 is a specialist employment solutions organisation, which provides expert outsourced PAYE HMRC compliant payroll and benefits services.

With a focus on adding value to its client’s businesses, and looking after their people and workers, HIVE360 strives to support tackling the challenge of attracting, engaging and retaining the best talent, by enabling its clients to become employers and recruiters of choice by giving them a strong employment offering in the market.

By working with HIVE360, clients gain access to an extensive network of experts and professional partners – including businesses with GLAA licenses - which combine to provide a robust and seamless solution for fully compliant pay and payroll, and efficient employment administration support.

By bringing together these expert partners, HIVE360 acts as a unique facilitator to deliver an integrated solution of cost effective outsourced payroll, employee benefits, support and employee engagement to each of its clients that includes recruitment businesses, owner-managed, privately-owned and medium-sized (150-plus employees/workers) businesses.

HIVE360 and its partner providers are not mini umbrella companies, hybrid or any other contrived employment structure. All HIVE360 payrolls are processed under HMRC payroll standards; the company operates full standard rate VAT and has no connection with any business or individual promoting flat rate VAT schemes.

HIVE360’s solution integrates outsourced payroll solutions with integrated benefits and support that deliver typical savings of £65 per employee/worker per annum, with an inclusive benefits package worth in the region of £200 per employee per year, dependent on individual company situation and factors.

As an outsourced employment services and administration expert, HIVE360 delivers not only effective outsourced employment administration and payroll, but also employee engagement and employee benefits solutions powered by its sophisticated mobile employee engagement app Engage, provided as standard and at no extra charge for all clients and their workforce.

If you’d like to talk about using the agency payroll services offered at HIVE360, please get in touch here.

Coming up

The next in our How to series, will look at how to choose an Umbrella Company and the red flags to look out for in order to avoid unscrupulous payroll providers – known as Mini Umbrella Companies (MUC) - that put a business at risk.