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Payroll Outsourcing: Why You Should Consider Using It

When you are an employer, one of the biggest headaches that you have is one that earns you nothing at all and yet is an essential part of your business. We are talking about payroll here, and it is a headache because it is so very complicated. Furthermore, the bigger your business grows - which is what you want to achieve – the more employees that you have, and the more difficult your payroll becomes.

This is because there are so many possible variations which means that two employees with exactly the same wage are actually paid differently because one may be in receipt of benefits and the other is not.

Not only that, but while you have employees you may also have workers. The difference can be quite subtle, but employees have rights that workers do not, such as statutory sick pay, maternity leave, maternity pay, the right to request flexible working hours, protection against unfair dismissal, and more. In general, an employee will have a written contract of employment which a worker will not.

HMRC provides several online guides regarding employees, one of which is an Employment Status Manual which can help an employer to understand the legal requirements when it comes to employing people and payroll. It helps you to understand issues relating to the employment status of individuals and working out whether an employee is actually employed or could be self-employed, and also things such as apprenticeships and training.

You have to supply a Full Payment Submission using Real Time Information every time one or more employees is paid, showing payments and deductions. FPS can only be sent using payroll software and must be supplied on or before the employee’s pay day. All of this allows HMRC to keep up to date with your payroll and your employees tax and National Insurance.


Most employees pay NICs (National Insurance Contributions) and these are deducted from their pay in the same way as tax. All employees earning more than £166 per week must pay NICs, but there are different classes which can vary if you supply things such as company cars or health insurance. As the employer, you also have to make a contribution to their National Insurance, and this is calculated as a percentage of the employee’s salary.

There are also several categories of employee, and this can determine whether or not they pay NICs at the standard rate or a lower rate. For instance, married women and widows may be entitled to pay a lower rate. There are separate categories for employees under 21, apprentices under 25, employees over the state pension age, and so on.

All of this is why many employers today choose to use payroll outsourcing services in the UK. If you are a very small business and only have a handful of employees, you may be able to handle payroll in house, but as your business expands, payroll can become a serious problem. It also costs money to run because you need payroll software, a payroll manager, and maybe additional staff – all to operate your payroll. Using payroll outsourcing services in the UK can actually reduce the costs of operating your payroll while at the same time freeing you up to do what you should be doing which is sourcing new customers and providing the goods or services that you offer.

Not only that, but one of the big benefits of using payroll outsourcing services is that the companies that provide them are fully conversant with all of the complex laws that cover payroll, so you can relax in the knowledge that your returns to HMRC will be correct.


This article was written by
The Pay Check Team
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