Payroll is a crucial function, and a major cost centre in almost every organisation. If you’re looking to optimise your payroll costs, a managed payroll service might be the best solution.

Quite apart from the wage bill itself, running an in-house payroll team can be expensive. From employing a dedicated team, to setting up and operating payroll systems, it all adds up. It can be especially daunting for small, in-house teams to accurately process payroll for complex, large workforces.

Increasing pressure on in-house payroll teams

Recent years have increased the pressure on already stretched payroll and HR teams. A whole raft of fiscal and legislative changes have been introduced (and sometimes revised or rescinded). The UK has seen National Insurance adjustments, IR35 reviews, changes to minimum wage and directors’ dividend allowances. Ireland has introduced gender pay gap reporting and statutory sick pay, with pension auto-enrolment on the way for 2024.

That all came after the pandemic, when almost a third (30%) of organisations lost payroll capacity in the early months. With a depleted workforce and ongoing hiring challenges, the risk of potential payroll errors and delays has increased. This can have a further financial and reputational impact on organisations.

The current economic downturn underlines just 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. You can achieve this by partnering with a managed payroll service provider.

Here are 7 key ways payroll outsourcing can help you optimise costs

1. Economies of scale

A managed payroll service provider can achieve economies of scale in much the same way that companies with large production reduce unit costs. Running a large number of payrolls for various client organisations means more efficient processes, and significantly optimised management overheads.

Plus, as a customer you benefit from the expertise of a dedicated, highly knowledgeable payroll team, typically covering a range of different industry requirements. This allows managed service providers like Zellis to provide a high-quality managed payroll service. 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 use the very best in payroll technology. This includes a greater level of automation, to significantly decrease errors. Some managed service providers also work to strict service level agreements (SLAs). These ensure pre-agreed levels of accuracy 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 errors which lead to over- or underpayments. Companies are currently spending too much time, money, and resources on correcting considerable payroll errors caused by manual calculations.

3. Stricter compliance

Due to their experience across multiple industries and complex workforces, managed payroll teams are typically much more up-to-speed with ever-changing payroll legislation compared to in-house teams. Many providers must complete regular compliance training courses, plus outsourced payroll teams handle personal data and deal with compliance day in, day out.

This greater level of assurance significantly cuts the risk of your organisation falling foul of crucial regulations. As a result, you will steer clear of costly penalties, hefty fines, and reputational damage.

4. Removal of indirect payroll costs

managed payroll costs

Indirect costs of running a payroll can include office rent, utilities, printing costs and stationery, software hosting, and system maintenance. This extra expenditure can add up quickly, and 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, making your costs much more predictable and easier to manage.

5. Superior process efficiency

Managed payroll providers can provide increased process efficiency compared to in-house payroll teams. They do this by harnessing automation and highly sophisticated payroll software at a much higher level. Working across a broad range of industries and workforces helps them develop best practice processes.

Streamlining can 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. Automating and digitalising reduces the cost of the payroll operation and in turn, the overall cost for the customer.

6. Labour arbitrage

Some managed payroll service providers operate internationally, which can bring two main benefits. The first is 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 the UK and Ireland, 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 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 lack the right systems and processes, or simply don’t 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. The insights can really make a difference to your strategic decisions, and ultimately, your cost control.

Managed service providers like Zellis have both the technology and the expertise to help you harness your payroll data and convert it into cost-driving insights. For example, a department in the organisation might be looking to create a significant number of new roles. You could use its existing payroll data – such as average salary and overtime worked – 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, working with a managed payroll service provider may just be the answer. Our expert, dedicated payroll teams can relieve you of the stress, achieving accuracy, compliance, and efficiency. What’s more, they can provide you with strategic insights to help you make the best business decisions, all while optimising your overall payroll costs.

Learn more about our managed payroll services here.