Payroll is an essential part of every company’s operations and a foundational part of employee engagement. It’s a numbers and admin-heavy task, so, understandably, some business owners might believe it’s easier to outsource it. You might think it’s only an option for big businesses, but completing PAYE yourself is not nearly as difficult or as time consuming as you may think. The British Government says that you must use payroll software to accurately report Real Time Information (RTI) to HM Revenue and Customs (HMRC). Thankfully, in-house payroll software has never been easier to navigate or more helpful in connecting various parts of your business. But, if you’re still unsure about if in-house payroll software is the right option for your business, we’ve got you covered. 

The factsheet will cover:

• A step-by-step guide to bringing payroll in-house
• The major benefits of bringing payroll in-house

What is Payroll?

Payroll at its basic form is the act of the employer paying their employee wages earned. It is the act of providing a monetary salary. Over the years, the function has advanced and now includes an employer’s responsibility to collect and keep records of your employee’s details such as net and gross salary, hours they work, sick days, tax code and more. There are also certain records that you have to keep and in most cases, employers operate PAYE as part of this too. The size and structure of your business will determine who owns the function. But in most cases it is either a HR professional,  business owner, or an outsourced company. 

Outsourced Vs in-house payroll

There are two different ways of approaching your payroll function; outsourced or in-house. The main difference between the two is who handles the process. 

Outsourced

For some businesses, it makes sense to hire an external provider to handle your processes. It’s up to the business to decide how much of the process is handed over, it can range from basic processing to handling the entire function.  The benefit of outsourcing is that it can save you time, ensure you are compliant and reduce the risk of errors. However, outsourcing can get expensive, and it means the business has less control over the function. 

In-house

In-house means that you handle the process internally. This is often owned by either the business owner, or HR professional. Although this sounds more complicated, you don’t have to do everything manually, and there are in-house payroll softwares to help you.  The benefit of dealing with the process internally is that you can easily make changes, and you have greater control over your cash flow. 

Which is best for your business?

There is no right or wrong when it comes to deciding to outsource, or keep functions internal. But some important things to consider when making your decision include: 

• Control: Keeping processes in house allows you to have greater control over how things are done, including how and when payroll is run. It also makes it easier to make changes.
• Cost: Costs are always a factor for businesses, and oftentimes choosing the most cost effective option is the priority. So consider how much outsourcing costs in comparison to  an in-house payroll software. 
• Time: Time is also an important factor. If you opt to run processes internally, how much time and resource will be required?

• Compliance: Being non-compliant is not an option, so think about how you can remain compliant with whatever option you decide on.
• HR team: The decision will primarily impact your HR team, so consider their skillset, and how much time they have to conduct extra responsibilities. However, an in-house payroll software can be a huge time and money saver for your HR team.

How do you bring payroll in-house?

So you’ve decided that owning the function internally is the best option for your business, but how do you actually go about making that happen? Don’t worry, we have a few helpful tips! 

1. Get leadership approval

The first thing you need to do is get approval from leadership, this is a key step when it comes to making big changes.  Our advice is to outline the benefits and explain the ROI of dealing with the process internally and utilising an in-house payroll software.  Here are some ways to prove the returns on using a platform:

• Compare the costs of outsourced methods with a new platform. Calculate this per employee and include any growth projections
• Next, pull out some examples of how outsourcing has created more work for your team. When were there mistakes that took time to rectify? When were there instances of human error that took time to resolve because of information changing hands?
• Talk to your team about times when they’ve been frustrated with the external system. Explore how keeping operations internal and within their control would improve their trust in company administration

2. Choose an in-house payroll software system

Once approval from leadership has been given, the next step is to find an internal solution that works for your business. Many businesses opt to utilise tools to simplify their processes.  Regardless of the industry your business operates in, we recommend choosing an intelligent and integrated tool. In-house payroll software doesn’t have to just manage one function; in fact it can help your business with a variety of functions including finding and hiring top talent using SmartMatch, seamlessly onboarding new hires, and driving employee engagement. 

3. Don’t forget about your historical data archive

When switching to your new shiny tech, there are some important records that you’ll need to access in order to store them on your new system. It’s a crucial step that can often be overlooked – but records must be kept for 3 years from the end of the tax year they relate to. After all, HMRC may check your records to make sure you’ve paid the right amount of tax. If you do not keep full records HMRC may estimate what you have to pay and charge you up to £3,000. As for what records you must keep, these include:

• What you pay your employees and the deductions you make
• Reports you make to HM Revenue and Customs (HMRC)
• Payments you make to HMRC
• Employee leave and sickness absences
• Tax code notices
• Taxable expenses or benefits
• Payroll Giving Scheme documents, including the agency contract and employee authorisation forms.

4. Let your teams know they’ll now be able to update their details on-the-go

Woo hoo! You’ve made it to this exciting final step. Congratulations! Transparency is always key when making any big business changes. Don’t forget to share the good news through company-wide communications to let your team know that payroll will now be done internally – and – that they now have the power to view and update their own details on-the-go.

What makes a good in-house payroll software?

In-house payroll software is an excellent option for any business looking to manage their processes internally. But with so many tools on the market, how do you know which is the best one to invest in? Here are a few things you should look out for that should make it worthy of your time and money.

1. HMRC recognised

The first thing you need to consider is if the platform you are purchasing is recognised by the HMRC. In our opinion, this is non-negotiable.  Millions of pounds are lost each year to errors. When you use software like Employment Hero, we help you have peace of mind knowing that your money is going to the right place. This helps remove frustrations and improve compliance with real time information (RTI) reporting – as you submit all required information with just a few clicks. Our integrated software is tested and recognised by HMRC, so you know when you’re using it you’re accurately paying tax and providing Real Time Information. This is an important one to note because if you want to run the process internally – you must use payroll software to report to HMRC.

2. Connected timesheets and rostering

Having everything living on the same platform can make a huge difference. Frustration can build over time if you have to keep jumping from one platform to another as you collate the data you need. Employment Hero happens to allow you to have everything from approved timesheets which automatically feed through to payroll and  rostering – including snazzy templates, dynamic rostering and budgeting tools all under one roof.

3. Empowers employees

Does your team dread changing bank accounts because everyone has to spend administrative time updating your bank details to make sure you get paid correctly? Or perhaps they find clocking in to their shift a nuisance? Well – we’ve got good news! When you use an internal system like Employment Hero, your team can enter their own details to the self-service platform. They can make changes easily at any time, and easily view and manage their personal details so you no longer have to keep chasing people if someone needs something changed on the system. You can also easily clock in and out for a shift. Phew! By the way, having everything internally means that if they spot a mistake (because they do happen, we’re human after all) they can flag it easily and make the necessary changes.

4. Cost effective

A common misconception about internal processing is that you have to add additional headcount to manage the task. This isn’t the case when you enlist the help of an in-house payroll software. Although accurate budgeting is always important, an effective tool will help you to automate and streamline data handling and reduce the risk of errors. This means that you will never lose track of a timesheet or annual leave request again. Saving you both time and money. When using a platform, you can set up custom rule sets and automate your pay runs. All the usual manual steps required to process and finalise a pay run such as creating it, importing timesheets and applying leave requests as well as publishing payslips. 

Give power back to your team – save time and money by bringing payroll in-house

Gone are the days of admin headaches and all that time wasted following up with HR tasks that have gone amiss. Simplify your processes by bringing managing HR internally with an in-house payroll software. Employment Hero is the world’s first Employment OS (operating system) designed to make employment easy.  Offering everything your business needs, from finding and hiring top talent using SmartMatch, seamlessly onboarding new hires, automating complex payroll, and driving employee engagement and morale, all backed by UK-based expert support.   Eager to get started? Talk to one of our friendly team members today. Download your factsheet now.