Manual vs Managed Payroll Differences

Is doing payroll yourself truly the best option or does a managed payroll service offer more pros than cons? Learn how each payroll method impacts efficiency, accuracy and compliance.

Payroll is one of the most critical elements of running a business. Ensuring that your employees are paid on time and accurately whilst also keeping your business legally compliant with HMRC. It is one business process that requires a lot of your attention.

For small business owners or start-ups, it can be a daunting task to approach, especially if you do not have the resources or time to give it your full attention.

This is why choosing the right approach to payroll can make all the difference. Should you handle it manually? Or would it be beneficial to outsource it to a third party?

As a business owner, you have a multitude of options when it comes to handling your payroll. Which, of course, come with different costs and considerations.

Read on to compare manual and outsourced payroll options exploring the key benefits to each method and key considerations to help you make an informed decision.

The challenges of manual payroll

While you may save yourself the cost of paying an external provider, having to handle payroll manually can be a challenge. As mentioned above, for small businesses and start-ups these challenges can cause all sorts of problems.

From making simple errors to mis-understanding your legal requirements, to mishaps with payslips, payroll is a complex yet vital process.

Some of the challenges handling your payroll in-house include:

• Risk of human error

• Failure to comply with legal requirements

• Issues with time management

• Lack of resources or knowledge

• Poorly designed manual systems

Reasons to outsource payroll to a managed service provider

To overcome these challenges and more, there are several reasons why you might consider a managed payroll service. Especially, when it comes to calculating wages, employee timesheets and overtime.

Firstly, outsourcing payroll can save your business time and money. Managing your own payroll manually can be extremely time-consuming and outsourcing eliminates the need to hire or train anyone internally to take care of it. It also frees up your time and resources to be allocated to more important duties.

Then there’s the issue of HMRC compliance. A common worry when doing payroll internally is managing the complex calculations involved, which can be challenging to navigate on your own. Especially if don’t have experience in this area. Manual data entry, tax withholdings and compliance tasks can be prone to errors if handled by the wrong person or team.

Outsourcing payroll processes to a third party provides access to experienced payroll management experts, ensuring compliance and delivering peace of mind. Knowing that you aren’t at risk of payroll errors is one of the most popular reasons to partner with a reputable payroll provider.

Lastly, a managed payroll service is scalable and can adjust to the fast-changing landscape of your business. whether that’s handling an influx of new starters or expanding the service to cater for the growth of your business overtime. By having the support of a third party, you won’t have to worry about your payroll becoming too much to handle, the experts will have this covered.

What does a managed payroll service cost?

One of the reasons business owners hesitate to outsource their payroll processes is the costs associated with payroll services. And yes, while there are costs, these can certainly be outweighed by the time wasted and potential risks a payroll service can save you from.

So, while doing your payroll internally may seem cost-effective on the surface, you should consider the labour costs, training costs and compliance-related penalties before ruling out a third party due to outsourced payroll costs.

What are the pros and cons of using a payroll service?

Of course, every method comes with its own set of pros and cons. Let’s take a look at the various advantages and disadvantages of outsourcing payroll.

Pros of payroll services include:

Saving time and money

Managing payroll involves hours of data entry, calculations, tax filings and compliance tasks. By outsourcing your payroll process, you eliminate your need to dedicate internal resources to take on these time-consuming admin tasks. This saves you time and frees up valuable resources within your business so you can focus on other core initiatives and growth opportunities.

Accurate payroll data

It’s essential that your payroll data is accurate. Using a payroll service can help you to minimise errors and penalties. When you handle your payroll manually, you are at risk of incorrect tax calculations, compliance violations and late payments all of which can lead to costly penalties and damage your business reputation. When you outsource your payroll, you can leverage specialised knowledge and reduce risks.

Cost effective

If you are managing your payroll manually, you will have to employ resources to maintain an effective payroll system. A payroll service helps you to reduce labour costs associated with payroll processing and training resulting in huge cost savings for your company. It can also save you money on software costs and compliance-related expenses.

Enhanced security

Third-party payroll services prioritise safety and security and when you outsource your payroll process, you can leverage advanced technology, compliance expertise, secure data handling practices and disaster recovery measures that you wouldn’t usually have access to. This helps you mitigate the risk of a data breach and ensures compliance.

Increased flexibility

Manual payroll becomes increasingly challenging as your business grows, making it difficult to adjust to changes in staff levels and business needs. An outsourced payroll service is adaptable and can adjust its service level to meet your ever-changing needs.

Cons of payroll services include:

Additional cost

A potential downside to using a payroll service is the additional costs you will incur as a result. So, what do payroll services cost? The cost will of course depend on the size of your business and the complexity of your payroll requirements. While it may seem that outsourcing your payroll will add to your overall expenses, the value gained by working with a third party will outweigh any financial expense.

Loss of control

When you outsource your payroll needs you will have to relinquish some level of control over your payroll process. This is something that you will adapt to over time and while you won’t have sole control of your payroll needs, you will still have visibility and oversight of payroll operations regardless of them being handled by a third party.

Outsourcing payroll comes with its own set of pros and cons but any drawbacks can be mitigated by choosing a trusted partner and establishing clear expectations and communication protocols.

How does an outsourced payroll service provide value?

An outsourced payroll service can provide value in several ways. First of all, it can add an extra layer of security to your payroll process. A third-party provider gives you access to advanced technology with the latest and most powerful security features. This safeguards your payroll data and gives you access to secure login protocols, data backup procedures and firewalls that you wouldn’t usually be able to use with an in-house solution.

You also can take advantage of in-depth knowledge of payroll laws and be sure that you are up to date on the latest compliance standards. An outsourced payroll service grows and expands with you. BrightHR's payroll service is backed by a team of CIPP qualified payroll specialists, so you can rest assured knowing you're getting the very best service, from a team with years of industry knowledge and experience.

Easy employee onboarding and automation of important documents such as P45 are just a few of the additional benefits an outsourced payroll service can provide.

Discover the smart way to handle pay with BrightHR payroll

Are you looking to experience the many benefits of outsourcing your payroll needs? As a small business, it is natural to want to keep costs low. However, it is also crucial to streamline your payroll management process as an efficient and effective payroll process is the key to success.

Outsourced payroll can ensure accurate employee payments and help you avoid hefty fines and penalties related to payroll errors. BrightHR payroll service can minimise administrative costs, help you avoid unnecessary expenses and boost efficiency by reallocating resources in-house.

BrightHR's payroll service can:

• Manage and distribute your employee payslips

• Complete your HMRC filing

• Input the employee data of new starters into our payroll software

• Accurately calculate national insurance contributions

And more, so you don't have to.

Want to know how much the payroll services cost? Get in touch with the team to find out how we can save you time and money. Not ready for a managed service? Our payroll software is available for those businesses who wish to streamline their workplace payroll management. For peace of mind we have a team of payroll experts just a phone call away offering professional support services to address your queries.

Book your free demo today to discover payroll solutions that will save your business time with one easy-to-use digital solution.