Why outsourcing and software can ease your payroll challenges

Payroll is core to many businesses – and certainly one thing that employees rely upon. Put simply, it must be completed without errors each time, or you might end up with several very annoyed people with very real problems that need addressing. And any payroll challenges that occur need to be tackled swiftly and efficiently to maintain a happy group within your workplace.

For the owner of a business who’s new to employing staff, running a payroll can therefore induce a cold sweat. To learn more about the issues for those with a growing business that finds itself considering the best way to handle payroll, we spoke to Donna Obstfeld (FCIPD), who has more than 20 years’ experience in human resources (HR) and management.

She owns and runs DOHR, an agency that helps businesses with their human resources needs. We also spoke with one of Sage’s payroll experts, Todd Black, who has more than 20 years of Human Capital Management and payroll experience.

Need a basic knowledge

There are a number of solutions for handling payroll, says Donna, but regardless of which is chosen, there’s no getting away from having a basic knowledge of what’s required – especially when it comes to regulations.

“You need to know what questions to ask,” she says. “And you need to know enough to challenge when things don’t look right. Some of our clients Google it and get half the story, or they’ll get the whole story but then they’ll decide they don’t want to do it as they should.”

So, here we have the first piece of advice:

“Googling isn’t enough – and might prove to be a disastrous false economy”

“People tend to consult us for the first time when they’re in crisis,” says Donna. “And that crisis is usually formed because they’ve done something wrong. And nine times out of ten it’s because they didn’t even realise they were doing it wrong. They didn’t know how much they didn’t know.”

Organisations such as the Chartered Institute of Payroll Professionals offer training courses, she explains, and a good idea is to sign up to things such as email lists from such organisations so you can keep an eye on industry updates and legislation.

There’s more to outsourcing than you think

Outsourcing is one route for a small business to manage payroll but Todd suggests a note of caution. He says: “Sometimes you forget that you need to add this person in to the payroll, or you forget that you need to update another person’s record. So you then need to have them stop and restart the actual payroll process.

“I’ve seen this frequently. You could have two or three processing fees for any given payroll run, so you’re paying two or three times. And that’s before you get to running special payroll runs like for bonuses that again could bring unexpected costs.”

And this brings us to the second piece of advice:

“Don’t expect to hand off your payroll to somebody and forget about it”

Make sure you think carefully about the outsourcing process and what it will mean for your business. It doesn’t mean you can wash your hands of the activity – you still need to manage it. However, if you’ve worked through the processes and know what’s required, outsourcing can certainly benefit you and your business.

Try using software to make life easier

Using software is a very popular avenue for managing payroll – and this has been a growth area in recent years with cloud software providing many benefits. Often the payroll software will be built from the ground up to take into account regulatory requirements, making it more difficult to make a mistake.

“You have total control of the process from end to end,” says Todd. “Now with that total control of process you have a flexibility to be able to change things and amend things on the fly, as you want. And you also know exactly what your costs are going to be at any moment in time, because you’re doing it in-house.”

However, Donna adds a note of caution. She says: “You’re putting in a set of numbers and it crunches them, then comes out with something at the end. You’ve got to be able to say, ‘Right, I trust this totally and completely.’ It’s about knowing what to ask.”

And here we encounter our third and final piece of advice:

“Software requires you to use it intelligently and diligently – and never more so than when it comes to payroll”

In summary, Donna says: “If you’re going to run a business then you never stop learning. And as a business person you are your own operations person, you are your own finance person, you are your own administration person.

“And even when you outsource that stuff or use software, you still need to make sure that you’re getting the results you expect and the return on investment you expect.”

Have you tried outsourcing or payroll software to ease your business admin burden? And what payroll challenges have you faced and overcome? Let us know about your stories in the comments below.