So, what is a payroll service provider?
A payroll service provider, or payroll provider, is an individual or organisation that provides payroll processing services. Payroll providers typically partner with businesses that lack the necessary knowledge, expertise, and software to process payrolls internally.
In this context, you may also hear terms like payroll vendor, payroll service, and payroll company.
Top 5 Payroll Service Providers In The UK
The list below shows the top 5 payroll services providers in the UK:
What Does A Payroll Service Include?
Other than basic payroll calculations, payroll providers offer many payroll services. The level of the service they’ll provide usually depends on the package a client has selected. Here are some common services that most payroll companies provide:
Automatic payroll processing
If you have an automated payroll process, the time you spend calculating wages and paying employees is reduced significantly. Often, a payroll provider may even have various payment processing options like direct deposit or paycheck.
Tax filing services
Whether you’ve filed a tax return before or not, you probably know how much of a headache tax can be. Full-service payroll providers can handle payroll taxes on behalf of their clients. They can also help with annual reports.
Payroll providers with an automated payroll system can easily handle the necessary payroll taxes or tax withholding. Apart from payroll tax payments, they can also take care of garnishments and similar deductions.
These are detailed reports that outline all areas of payroll operations. This can be very useful for financial forecasting.
A reputable payroll provider may have experts available around the clock. This is to ensure timely issue resolution so that your business can run smoothly.
To function effectively and within the law, payroll providers have to stay on top of regulatory changes and tax laws. Compliance expertise payroll providers often notify clients of changes or have cloud systems that are synced with changes.
With self-service portals, employees are able to complete basic actions like viewing statements or changing personal details. This can contribute to substantial time savings, as they won’t require management to access payroll data.
The Different Types Of Payroll Service Providers
Business owners can choose from the following types of providers for payroll processing:
Full-service payroll provider
As the name suggests, a full-service payroll provider handles all aspects of the payroll process. This option can save lots of time and give a business owner much-needed peace of mind.
Payroll software provider
Unlike a full-service payroll provider, payroll software providers only provide the software for payroll processing. They provide online software which automates the payroll. This simplifies calculations and improves accuracy. The issue with this is that businesses may still need to handle tax or compliance, depending on what their package includes.
Professional Employer Organisation
With co-employment, comprehensive payroll services are usually included. They also come with advantages like HR support, compliance monitoring, and enticing benefits packages.
What Are The Benefits Of Outsourcing Payroll?
Payroll outsourcing can benefit businesses of different scales in many ways. Here are some of the main benefits:
Outsourcing means you free up time within your business. That time can then be used to focus on objectives like scaling.
If you outsource payroll to a payroll provider, you may save money. The in-house management of payroll can be very costly because of having to train staff or buy expensive software. Outsourcing can easily eliminate these costs.
Payroll providers have the knowledge and expertise to ensure employees are paid accurately. They can also reduce the frequency of errors in recording transactions and generate accurate payroll reports.
Because they know the latest industry trends, a payroll provider can handle complex tasks with relative ease. They can also offer HR support and resolve employee queries.
A provider’s payroll system will often be paired with strong security measures. This can prove to be useful in protecting sensitive information and preventing data theft.
Some providers offer technology that can simplify your operations in many areas. For example, certain companies have tracking software within their platform that allows users to easily review and confirm information at the end of the pay period. Others may also offer options such as employee direct deposit and tax withholding.
How To Choose A Payroll Service Provider
Before settling on a payroll provider, ensure they offer services that will complement your payroll processes. Here are a few points to guide your decision-making:
Identify your challenges
Start by seeing what the main pain points around your payroll system are. Very often businesses struggle with factors like time constraints, tax compliance, and calculating wages.
If your business uses accounting programs, find out if there are any integration possibilities. This can help make the data transfer smooth and keep operations running continuously.
See if you can get a quote based on the number of employees you have and how often your payroll happens.
Research their reputation
Online reviews can paint a very vivid image of how good a service provider is. Find trusted review sites to see what the general public thinks about a company.
Payroll services provide many benefits in terms of simplifying payroll management. While you might want to rush to hire a payroll service provider, remember that payroll services still require companies to have adequate financial systems. This is where having an accountant can be highly beneficial.
Accountants have a deep understanding of financial systems and regulations. Companies can lean on their expertise to ensure accurate financial reporting, drive strategic planning, and ease payroll processing. Save yourself the time and energy – let an accountant do the number-crunching for you.
Should I outsource payroll services?
Outsourcing payroll can offer a company many advantages. But, whether this is an ideal move for your business depends on its needs and resources.
Outsourcing payroll may result in valuable time being freed up and fewer errors. But, it’s important to consider the cost of doing so.
You may also want to consider factors like the confidentiality of employee data.
Ultimately, just ensure the decision aligns with your risk tolerance and business priorities.
Are payroll service providers expensive?
Full-service payroll providers can be relatively expensive. But the price of payroll services varies according to several factors.
This includes the size of a business, the specific services required, and the complexity of your payroll needs.
For example, with a medium to small business, owners could find outsourcing payroll to be more cost-effective. This is because doing so eliminates the need to hire and train in-house payroll staff.
Payroll software can also be incredibly expensive. The cost of outsourcing can often be offset by the time and resources saved by doing so.
Can I handle payroll myself?
Many business owners opt to handle payroll themselves, so it’s possible for you to do the same.
But, whether you want to do so depends on your capacity and financial knowledge. Managing payroll requires you to have sufficient time on your hands, as it’s a detail-oriented process. You also need to be able to stay on top of tax laws and compliance regulations.
If you feel these factors won’t be an issue, then you can always do the payroll processing yourself. Do bear in mind that it’s still recommended to do so with the help of an accountant.
What payroll software programs can I use for payroll management?
Most payroll programs are similar to or integrated with accounting software. Here are a few examples of the programs for payroll processing:
There are many more programs out there, so look out for one that is best aligned with your needs or one that offers tailored solutions.
When is the best time to switch payroll service providers?
Switching payroll services depends on factors like contract terms and the availability of suitable providers. Here are a few factors that could tell you it’s time to find a new payroll company:
Contract renewal – If your contract is about to end with your current payroll service provider, then it may be the ideal time to make the switch. Be sure to evaluate their performance, pricing, and service levels.
Business growth – As your business grows, you may need to seek out a payroll company that can accommodate your new needs.
Cost considerations – If a provider’s costs are increasing but their value is staying the same, a switch may be in order. Look for a provider that offers competitive pricing and sufficient value.
Service dissatisfaction – Experiencing constant errors, delays, and poor customer service can be more than enough reasons to explore alternative service providers.