Should I run my own payroll or outsource it to a specialist?

Managing payroll can be a stressful and time consuming task at the best of times so it is not surprising that many businesses are asking the question; "Should I outsource payroll", says Sarah Daly.

Following the introduction of PAYE Modernisation last year, payroll administrators could be forgiven if they were hoping for an easier time in 2020. However, the outbreak of the Covid-19 pandemic dashed those hopes in March. Disrupted working patterns and the impact on payroll of reduced hours, temporary layoffs, and the various Government supports introduced to help businesses and individuals through the current difficulties have created a multitude of new challenges for payroll teams.

While supports like the Temporary Wage Subsidy Scheme and the recently announced Employment Wage Support Subsidy provide welcome assistance for eligible businesses and individuals, processing these payments is creating additional work for payroll administrators.

Here at GroForth, our team is working hard to keep our payroll clients up to speed with the latest developments through our regular client communications and via the FAQs section of our Payroll Services Page.

New to payroll?

If you are a first-time employer, getting to grips with your payroll obligations can be daunting. It’s not just a matter of calculating weekly wages or monthly pay checks, there are also tax and employment law requirements to comply with. It is important that you set up and operate your payroll correctly from the outset so it is a good idea to seek advice from an experienced payroll service provider.

Ways to run payroll

The three main ways to run payroll are manually, using payroll software, or outsourcing your payroll to a specialist service provider. Here is a brief description of the pros and cons of each of these options:

Manually: This can look attractive as it means you don’t incur the cost of paying a payroll service provider. However, operating payroll manually can be risky as it is error prone especially if you are not experienced in payroll. Also, payroll legislation can be complicated and it is not easy for any one individual to keep up to date tax and employment law changes that can affect employee pay and deductions.

Payroll software: Depending on your business structure and how many employees you have, payroll software can be cost-effective. There are various cloud-based solutions available — e.g. Thesaurus, BrightPay and Sage Payroll to name just a few. It is important to choose the right solution, checking carefully that it integrates with your accounting software and is compatible will Revenue’s systems. You also need to understand how to operate the software correctly. Training is usually required especially if you do not have previous payroll knowledge and experience.

Outsourced payroll: This is where you use a specialist like GroForth to manage your payroll on your behalf. While outsourcing can save you time and is often more cost effective than trying to manage payroll in-house, you need to choose your payroll service provider carefully making sure that they have the resources and skills to deliver the services you need. Similar to choosing payroll software, don’t forget to check that the service provider’s systems and processes integrate reliably with your accounting software and Revenue’s systems.

Payroll and Revenue

Each time that you make a payment to an employee, you have to report certain information to Revenue. This includes the payment amount, payment date and the Income Tax, Universal Social Charge and Local Property Tax deducted. For an overview of these requirements, see the Revenue website.

Should I outsource payroll?

Keeping up to date with the various legislation and tax changes that impact payroll can be stressful and time consuming. Often, the changes require certain knowledge before you can fully understand them and they can be complicated to implement, particularly if you have employees working non-standard hours or with different pay, benefits and conditions. Because of this, businesses often find it is easier to outsource payroll. It can also save time and be more cost-effective than hiring a payroll specialist and investing in training to keep their skills up to date. However, before you outsource your payroll, it is vital to check that the provider you choose has the necessary skills and knowledge to comply with tax and employment law requirements. You also need to check that they are set up to provide an efficient service and confidential service so that your employees will be paid correctly, securely and on time.

It’s important to be aware that, as an employer, you are responsible for ensuring that your payroll system complies with tax law regardless of whether you are using payroll software to manage your payroll yourself or relying on your accountant, a payroll service provider or another agency to manage your payroll for you.

What payroll services should I look for from an outsourced payroll service provider?

Provided you keep your payroll service provider informed of relevant changes such as salary changes and details of new or departing employees, they should be able to:

Provide a confidential, secure service

Use industry-standard, compliant payroll software

Calculate employee payments including overtime, holiday pay, sick pay

Generate employee payslips

Process PRSI, USC and tax deductions

Process pension payments, health insurance, trade union membership subscriptions and other relevant deductions

Report payroll information to Revenue including details of new employees and employees leaving your service

Track annual leave

Generate payroll reports

Calculate employee share payments

Calculate Benefit in Kind (BIK) on non-salary benefits

Provide payroll support and training where required

GroForth provides all of this, and more, for our payroll clients. For more information about our services along with some frequently asked payroll questions, please see our payroll services page or contact me here and I will be happy to answer any questions you may have.