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Choosing
Outsourcing Payroll Compared With
Payroll Software |
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Income tax and national insurance contributions must be calculated and
deducted from the employee each pay period, payslips produced for each
employee and the tax liability accounted for and paid over to the
inland revenue office. Calculating the deductions can be achieved using
the HMRC CD-Rom while payslips represent an area which may well sway
the decision.
Many medium and large companies employ a specialist wages department to
perform these functions. Some medium sized companies may still choose
to outsource the payroll function leaving many of the technical issues
that might be encountered to a specialist payroll service.
Small businesses may choose to outsource the payroll function because
they are not familiar with the intricacies of payroll although HMRC run
regular paye seminars to assist employers. The payroll system adopted
should calculates income tax and national insurance deductions and deal
with tax code changes, new employees and changes to existing employees
plus taxable benefits and allowances such as statutory payments for
sickness and maternity leave, contracting out of the state pension
scheme and student loan repayments.
The main benefit of manually producing the employee payroll in house is
the low cost although the time spent might be better spent running the
business which payroll administration can detract from. The cost may
not be the cheapest option if a wages clerk is required to produce the
payroll.
Purchasing payroll software can save significant time compared with
manual calculations while outsourcing payroll may be more expensive but
in some cases where there is a lack of knowledge the safer option.
Although time is usually more important as the payroll production cost
is not usually a big factor.
Outsourcing payroll adds a small additional cost to running the
business but would normally carry worthwhile benefits in reducing the
time spent on the function and reduces the payroll administrative
burden.
Main benefits outsourcing payroll to a service provider
1. Time saving when calculating the payroll deductions and dealing with
different and sometimes complex employee circumstances.
2. Using a professional outsourcing service to advise on potential
payroll problems and difficulties.
3. The cost of outsourcing payroll should be compared against the cost
of employing specialist in house payroll staff. Even when the payroll
is outsourced some wages staff may be required.
4. Payroll service providers almost invariably use a payroll software
package and normally produce accurate income tax and national insurance
deductions and pay records reducing the prospect of problems with the
tax authorities.
5. Payroll administration such as preparing the tax deductions
schedules, dealing with starters and leavers, year end certificates for
employees and the employer annual returns are normally all automated as
part of the payroll service
6. The outsourced payroll company should also be responsible for
producing employee payslips, advising tax and deductions liability and
in larger businesses also provide a payroll analysis for accounting
purposes.
Where to find outsourced payroll providers.
Finding a suitable outsourced payroll service is not difficult. Local
telephone directories or searching the internet would produce many
potential payroll service providers.
Many accountancy firms offer payroll services to their clients and
although the prices may struggle to be competitive price is always
negotiable. Using the business accountant for the payroll has
advantages since a substantial cost area for most businesses is already
known to the accountant since they prepare the numbers.
Choosing a payroll software package
The major alternative to outsourcing the payroll is for the business to
acquire and use payroll software.
Larger companies require payroll software that has incorporated within
it all the potential pay scenarios and also be capable of dealing with
high numbers of employees. Large comprehensive packages can be complex
to operate and require specialist wages staff. Small business may
choose simpler less complex payroll software packages that meet the
basic needs of the business.
It is important the person running the payroll within the wages
function understands the payroll essentials and legal payroll
administration requirements.
Choosing payroll software should save the business money against
outsourcing the payroll and also retain control over the payroll in
house. An ideal payroll package should take no more time that supplying
employee details and gross wages to the payroll service and minimise
the payroll knowledge required by the business staff responsible for
wages...
If the business chooses to adopt a payroll software package then the
complexity of the package should be considered and also the attributes
and capabilities of the chosen software to produce all the payroll
requirements in relation to pay and wage deductions, payroll
administration and employee payslips.
Article Source: http://www.articlesbase.com/finance-articles/
choosing-outsourcing-payroll-compared-with-payroll-software-
498317.html About the Author
Terry Cartwright of DIY Accounting produce Accounting Software
and Payroll
Software packages for self employed and small limited
companies. The simple payroll spreadsheets calculate income tax and
insurance deductions, automate payslips and provide the employer with a
full automated paye administration system. |
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