Outsourcing Payroll: A Huge Opportunity To Boost Cost Savings, Productivity, And Employer Brand

January 23, 2023

Categorised in: News

Transitioning to an outsourced payroll provider saves costs, boosts productivity, improves employer brand, and supports recruitment and retention. 

The commercial landscape is full of challenges, including:

  • 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
  • Changing working patterns

All of these challenges can drain 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. 

Traditionally, outsourcing payroll models involve only the processing, but new and progressive models build in risk and responsibility-sharing that focus on commercial impacts, which address the increasing pressure on costs, and factors in a richer and more beneficial employee experience.

PAYE payroll vs umbrella

Essentials Of Outsourcing Payroll

An outsourced payroll provider should guarantee delivery of accurate, on-time, and compliant worker pay.

Look for a provider that:

  • Is HMRC and GLAA compliant. 
  • Provides and demonstrates transparent PAYE payroll support. 
  • 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.

Outsourced Payroll Providers To Avoid

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. 

New 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 outsourced payroll providers.  


Outsourcing Payroll For Recruitment

Full outsourcing of payroll has been commonplace in the recruitment sector for many years, with the reduction in downtime and streamlining of business processes frequently cited as benefits. 

Unscrupulous outsourced payroll providers are not uncommon. Known as Mini Umbrella Companies (MUC), these providers put a business at risk, but there are red flags a company is a MUC and one to avoid, including:

  • A MUC model of payroll payments is via randomly named companies – that frequently change – with no transparency of pay deductions provided. There are few or no employers’ NI paid on workers’ pay, which HMRC classifies as tax fraud. 
  • Workers paid through multiple limited companies with unusual names because the MUC model needs payroll companies to have limited payroll payments that allow the use of employers’ NI allowance and very little else. 
  • Operating from serviced offices, bulk mailboxes, or offshore locations. The individual business type registered with Companies House frequently doesn’t match the Trading Group name. 
  • Directors/Shareholders are non-UK nationals, non-resident in the UK, and non-tax resident. 
  • Utilise flat rate VAT accounting, which gains them additional income without the need for accounting records. 
  • MUC are structured to achieve multiple employment allowance opportunities because they use multiple Limited companies. 

Shared Experience

Premiere Recruitment specialises in GLAA-regulated sectors including food processing and agriculture, with an average of 250 workers on its weekly payroll.

It has been outsourcing payroll since it launched in November last year.

“Payroll has to be run on time, accurately and compliantly, or it’s catastrophic,” says the company’s Director, Leon Vickers. “Handing payroll over to another organisation is terrifying, but ideal for busy businesses. For us, working with a legitimate, reputable outsourced payroll provider has improved efficiency, saves money, gives peace of mind, and frees-up time and headspace to focus on the business. 

“There are loads of payroll providers out there, and investing in comprehensive due diligence up front is vital to get the right one. Ask for references, evidence of HMRC compliance, and the 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.” 

Patricia Hay founded Gloucestershire based First Base Employment in 1997, and has been outsourcing payroll over the last 20 years.

“It’s reassuring knowing we have payroll professionals on board,” she says. “If payroll is run in-house, there’s always the nagging doubt that something could be missed, or a mistake made.

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

“It’s a competitive market, so take time to find out about how each provider can add value. Employee support is now so important, and if this is part of the outsourced payroll provider’s solution, it’s one to embrace – it’s rewarding to give our whole team the tools to help with the cost of living, and access to counsellors and GPs.”

A picture of David McCormack

About the author:

David McCormack is CEO of HIVE360, which HIVE360 provides expert, compliant and reliable PAYE payroll support and comprehensive employment administration, and provides its customisable Engage Employee Benefits app as standard.  He has over 20 years experience as a director within the recruitment sector and over 15 years running payroll businesses. 

More information: https://www.hive360.com