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Some Of The Many Reasons Businesses Choose To Outsource Their Payroll

More and more businesses in the UK are choosing to outsource their payroll than ever before. In fact, a recent survey has found that nearly a half of all organisations in the UK, Europe, and the Middle East are now outsourcing their payroll because it is becoming more and more of a chore doing it in-house.

In fact, in the UK the number of businesses that began to use outsourcing rose significantly after the legislation was changed in 2012. This was when HMRC introduced RTI – Real Time Information – to the PAYE system and it meant that employers how have to create tax deductions and reports every time an employee is paid, rather than just at the end of the tax year. For most businesses that meant that these returns increased elevenfold if they paid their employees on a monthly basis which is what the majority do. If you pay weekly, then it is even worse.

The problem is that the legislation and all the rules surrounding pay and tax are so complicated that it is very easy to make mistakes. If you make mistakes in tax returns then you are liable for fines from HMRC, so many businesses now prefer to use payroll bureau services in the UK because they can be confident that the people who provide them keep right up to date with all of the changes in legislation. In other words, they know exactly what they are doing. If you are doing payroll in-house, it is very likely that your payroll operatives will not be fully conversant with the latest regulations, and this is why errors can creep in.

Auto-Enrolment Pension Schemes

Apart from anything else, consider your auto enrolment pension scheme. Just running that is complicated. You have employees who are eligible and therefore must be auto-enrolled, but you may also have employees who are not eligible by reason of age or income or both.

Now it may be that some of your employees who are eligible to join may not wish to do so, and in this case, they can opt out. However, they can only opt out after you have auto-enrolled them. They can do this at any time and if they do so within the first month, they have to have their contribution refunded. If they opt out after that, the money stays in their pension pot.

If an employee opts out, you have to re-enrol them after three years. They can then opt out again if they wish, or they can remain in. If they have opted out, they can opt in again at any time as well. You may also have employees who are not eligible to join the pension scheme, but they may choose to opt in, and if they do so you have to enrol them. In fact, you may not have an eligible employee, so do not have a pension scheme, but if a non-eligible employee asks to join your pension scheme you have to set one up.

There are minimum contributions that both you and the employee must make, but either or both of you can make more than the minimum contribution if you choose to do so.

The pension scheme that you select for your business has to meet certain minimum requirements. Schemes can be UK-based or a non-UK scheme, they must be tax registered, and they need to meet minimum requirements that vary according to the type of pension scheme.

As you can see, just the auto enrolment pension scheme can be difficult enough to administer, and when you add up all the other complications of running payroll, it is easy to see why so many businesses today prefer to use payroll bureau services in the UKrather than doing it the old-fashioned way in-house.


This article was written by
The Pay Check Team
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