There are a number of problems and challenges that small companies face when performing payroll in-house, and for each payroll solution – such as outsourcing or using UK payroll software – there are advantages and disadvantages. This guide explores the advantages and disadvantages of payroll solutions and the problems that each payroll solution can present, to help you make the right decision for your small business.

Payroll management software

For small companies with few employees, software is often a good choice.

Advantages

Clarifies and streamlines the payroll process:

• Handles deductions such as income tax and national insurance contributions automatically
• Updates according to global tax code updates and P6 updates.
• Provides BACS and payslip sending and printing
• Provides an automated process for leavers and joiners.
• Many solutions are free for companies with small numbers of employees.
• RTI payroll software will make the upcoming RTI update easy to manage.
• Customer support services can help you address problems and learn about payroll as you go.

Takes less time than the manual process, giving a potential saving on employment costs.

 

Disadvantages

Automatic systems help you to reduce and correct mistakes, but there is no guarantee that your payroll will be perfectly accurate or on-time. Even with software you may require a payroll or HR expert, and for small companies with only one expert, there can be a lot of responsibility resting on only one set of shoulders.

Buy UK payroll software to manage all aspects of company payroll with an easy to use interface.

Outsourcing payroll

There are many payroll outsourcing options to suit different requirements. The two major options are the fully managed service or the part managed-service. The first option is best for small companies with little or no payroll management knowledge, as all aspects of the payroll are managed by the service provider, including reporting, pay frequencies, tax provisioning and payslips. If you have some knowledge of payroll you can reduce your service costs with a part-managed service.

Advantages

Fully managed services have a duty to perform payroll accurately and according to HMRC standards, so you can be sure your payroll is managed properly with every aspect taken care of. You still have control over your payroll data, and nothing is finalised without your approval. You submit your data to the outsourcer, who will then make all the necessary payroll calculations and send them to you for your approval – you have the advantage of control without all the work.

Disadvantages

While any good outsourcing service will operate on the highest standards of data safety, the fact is that the moment you let your data go outside of your business it is vulnerable to theft. Make sure you check with each service for the level of security they provide. It is always more expensive to outsource than to go with manual or software-assisted in-house management. It is always good practice as a business manager to learn payroll, but when you use an outsourced service there is less reason to learn.