Payroll is a major cost centre in almost every organisation. Not only is there the cost of the wage bill, but the actual costs of running an in-house payroll team – with office and stationary costs, the cost of setting up and running payroll systems, and the cost of employing a dedicated team – are higher than you might think. It can also be especially daunting for small, in-house teams to accurately process the payrolls of more complex, large workforces.
What’s more, the COVID-19 pandemic has put many organisations under huge financial strain and increased pressure on already stretched payroll and HR teams. In fact, our research found that almost a third (30%) of organisations reported a loss of payroll capacity in the early months of the pandemic.
And with new, rapidly-changing legislative measures – such as the Coronavirus Job Retention Scheme (CJRS) – having to be digested and applied in such a short amount of time, the risk of potential payroll errors and delays has increased. This, in turn, can have a further financial impact on businesses.
This year’s economic shock has highlighted exactly how mission-critical the payroll function truly is. With this in mind, it’s essential that business leaders look to future-proof their payroll. One of the most fundamental ways to do this is by improving cost control, and this can be achieved by partnering with a Managed Payroll Service provider.
We’ve taken a closer look at seven reasons why working with an outsourced provider can make this possible:
1. Economies of scale
Economies of scale are achieved by increasing production while lowering costs. Larger companies can do this much easier than smaller ones, because their costs are spread over a much larger number of goods.
A Managed Payroll Service provider can achieve economies of scale in much the same way. For example, when running a large number of payrolls for various client organisations, management overheads are significantly reduced, more efficient processes are developed and utilised.
Plus, as a customer you benefit from the expertise of a dedicated, highly knowledgeable workforce, which typically covers a large range of different industry requirements. This allows Managed Service providers like Zellis to provide a high quality, non-compromising service that is highly tailored to your business needs, but at a lower cost than you would be able to provide yourself in-house.
2. Reduction of errors
Not only do expert payroll providers hold much greater payroll knowledge compared to many in-house teams, they can also utilise the very best in payroll technology, including an increased level of automation, to significantly decrease errors. Some Managed Service providers also work to strict Service Level Agreements (SLAs) to ensure pre-agreed levels of accuracy are maintained throughout the partnership. Furthermore, the very best providers will go above and beyond to exceed their SLAs.
Setting out these clear accuracy standards, along with utilising automated payroll technology, helps to significantly reduce costly errors such as overpayments. In addition, further costs are saved due to the reduced time, money, and resources being spent on correcting considerable payroll errors caused by manual calculations.
3. Stricter compliance
Due to their experience across multiple industries and complex workforces, Managed Service teams are typically much more up-to-speed with ever-changing payroll legislation and regulations compared to in-house teams. Many providers must complete regular compliance training courses, plus, with outsourced payroll teams handling personal data and dealing with compliance day in and day out, it almost comes as second nature to them.
This greater level of assurance around compliance significantly reduces the risks of your organisation falling foul of crucial regulations. As a result, you will steer clear of costly penalties such as hefty fines and reputational damage which can have a costly impact on the future of your business.
4. Removal of indirect costs
Running a payroll brings many extra indirect costs – those that are incurred in addition to more obvious costs such as salaries. Indirect costs can include office rent, utilities, printing costs and stationery, software hosting, and system maintenance. These extra costs can add up quickly and as such, processing payroll in-house actually becomes much more costly than people first think.
When outsourcing your payroll, you no longer have to worry about these extra, indirect costs. The Managed Service provider will take all this on instead, meaning that your costs are much more predictable and easier to manage.
5. Superior process efficiency
Managed Service providers can provide increased process efficiency compared to in-house payroll teams. This is achieved by not only utilising automation and highly sophisticated payroll software at a much higher level, but also by developing best practice processes from working across a broad range of industries and workforces.
Streamlined and superior processes can help optimise costs in a big way. For example, many organisations are still reliant on long-winded, manual workarounds and paper processes for key payroll tasks, such as company sick pay or maternity pay. Altering this outdated way of working to adopt digital and automated processes will reduce the cost of the payroll operation and in turn, the overall cost for the customer.
6. Labour arbitrage
Some Managed Service providers operate internationally, which can bring two main benefits. The first being that they can gain access to top talent from across the globe. This additional expert knowledge ensures the highest quality payroll output for your business.
The second is a labour arbitrage benefit. This is due to the cost of offshore labour generally being much lower compared to that in the UK, allowing the provider to offer you a lower price to outsource your payroll.
Together, this means you can reap the benefits of lower outsourcing costs while still feeling confident that the quality of service is not being compromised.
7. Strategic insights
An effective way to optimise costs is to make smarter strategic decisions, which lead to more profitable outcomes. However, many organisations are unable to access the information needed to make these decisions; they either do not have the right systems and processes in place, or they simply do not know where to look to unlock these crucial insights.
Payroll is a prime example of a business function with an extensive amount of untapped data potential that can really make a difference to your strategic decisions, and ultimately, your cost control.
Managed Service Providers like Zellis have both the technology and expertise to help you harness your payroll data and convert it into cost-driving insights. For example, if a certain department in the organisation is looking to create a significant number of new roles, existing payroll data for that department – such as average salary and overtime worked – can be used to forecast the potential cost of this expanded workforce. Sharing these insights in the boardroom empowers business leaders with the right knowledge to make the most cost-effective decisions.
Time to get your payroll costs under control?
If you’re looking to improve your organisation’s cost control, especially after the impact of COVID-19, using a Managed Service provider may just be the answer. Our expert, dedicated payroll teams can relieve you of the stresses of achieving accuracy, compliance, and efficiency, as well as provide you with strategic insights to help you make the best business decisions, all while optimising your overall payroll costs.
If you’d like to find out more about our Managed Services and how we can help reduce your costs, get in touch today.