Payroll software comes in many forms and it is often included as part of a wider financial management system along with bookkeeping software. However, this is not the same as having a fully managed payroll provider operate your payroll functions for you. Numerous British businesses now opt for fully managed payroll, typically by making use of a cloud-based software system to keep their costs down. Human resources directors, CEOs, payroll managers and CFOs should all consider the many benefits that a managed payroll service could bring. Retailers, manufacturers, e-commerce businesses and insurance providers, among other market sectors, can all enjoy greater accuracy with their payroll for less expenditure by switching to a payroll management system. What stops some companies from doing so is that they have little understanding of what making such a change would entail. Read on to find out how easy it can be to adopt a payroll management software solution that can start offering benefits sooner than you might think.
What is managed payroll?
Before proceeding with what adopting a managed payroll system entail, it will be useful to define what this service is exactly. Simply put, companies that utilise managed payroll solutions rely on a third-party specialist to run all of their payroll functions. This means weekly pay packets and monthly salaries are handled in one place with all the necessary tax deductions and overtime payments being calculated by an expert in payroll. The service is fully managed, allowing for greater accuracy while no longer needing to recruit or train payroll clerks in-house. Online managed payroll services use a secure web-based portal that keeps a company’s private financial information exactly that – private.
What is included with payroll management software?
This differs depending on which payroll management software you are talking about. For example, some can only deal with the basic elements of payroll, such as NICs calculations, pension deductions, PAYE income tax and so on. These should not be considered as fully managed payroll solutions, however. Those that offer a complete solution will be able to handle overtime payments at various rates, offer greater employee accountability, improved compliance with potentially changing financial regulations and more besides. Some are not scalable either, so it is best to look for a solution that is, especially if your company is growing. Most systems will have an online portal for employees to log on to where they can see their past payslips and so on.
Managed vs in-house payroll – what’s the difference?
In-house payroll requires the knowledge and skills associated with running a payroll function to be maintained in-house. This means that there is necessarily a recruitment and retention cost for any business that manages its own payroll. Employees may need to be trained and can often leave for work opportunities elsewhere when they have gained the necessary skills to be more employable. As such, business leaders constantly have to spend time and resources on keeping those skills in-house. Emphatically, this is not the case with a managed payroll solution which effectively outsources all the work.
In addition, in-house payroll software needs to house sensitive information. The last thing you will want is for a data breach to reveal your employees’ personal records and for your competitors to be able to see how much you are paying your staff. Therefore, IT professionals must be given the resources they need to keep your payroll information secure on your own servers. This is not the case with a cloud-based managed payroll solution, however, because all of these costs are borne by the software provider. Given that they will deal with other companies as well as your own, there is a significant economy of scale to be enjoyed while benefiting from often superior security standards.
Can you integrate your existing HCM system with a managed payroll solution?
Yes, you can. An HCM system will probably already deal with most employee matters from a human resources point of view. If so, adopting a fully managed payroll service can seem counter-intuitive at first. However, running an HCM system while outsourcing payroll to a managed service is perfectly possible and the two systems can run very effectively side by side. Indeed, the best-managed payroll solutions will integrate very well with an HCM system, thereby helping businesses to get the best of both worlds.
What should you look for when selecting a managed payroll solution provider?
Firstly, it should be underlined that fully managed payroll service providers are not all the same. Although some will offer a fully bespoke solution to meet particular commercial requirements, others will simply alter their usual system offering for different needs. That said, when selecting a payroll solution provider, one of the most important factors to take note of is the scalability – or otherwise – of the system. This is crucial for both fast-growing businesses as well as ones that have lots of seasonal workers, such as retailers that might employ more staff over Christmas, for example. Moreover, the regulatory compliance aspects of the managed payroll solution should be investigated carefully. The last thing you will want is to fall foul of the rules HMRC has in place, for instance, when it comes to providing accurate tax information.
Finance directors and HR professionals alike should also consider what the service provider they are considering opting for would do in the event of a disaster. Do they have a disaster recovery plan and how would this be rolled out are two key questions to ask. You should also take a close look at the way different fully managed payroll services are charged for. There again, you will also want to look closely into the charging structure. Some solution providers charge by the number of employees there are on the payroll while others don’t. Equally, some demand monthly payments while others have different invoicing systems. Look for suitable accreditation, such as an ISO 27001 certificate, too, as a sign of excellence.
How long would it take to shift over to managed payroll?
If you see the benefits of turning fully managed payroll services but wonder how long it will take to adopt a payroll management software system, then the answer is that it varies greatly. Depending on the size of your organisation and how much data will need to be transferred from your legacy system, it can take weeks. However, with good initial planning, it won’t be too long before you can move on to the implementation phase. It is important not to rush headlong into a shift to a managed payroll service or there could be interruptions with employee payments, something all businesses need to avoid.
Owners of SMEs and smaller businesses with just a few employees on their books can switch to payroll management software within a few weeks and they can even work it so that one payroll is conducted on the old system with everything in place on the new one the following month. That said, when it comes to larger organisations with several hundred workers to take into consideration, a schedule of 14 to 16 weeks would be typical. This would involve the full data migration of historical payrolls and the necessary inter-departmental liaison that would be required with finance, HR and the various divisions a large company is likely to have.
The next step with improving your payroll management…
If you would like to find out more about our Quantum managed payroll service and how to go about outsourcing payroll management to experts in their field, then do not hesitate to get in contact with us.