Overview of Managed Payroll

Overview of Managed Payroll

Although many companies have their own payroll management software, sometimes as a module included in the bookkeeping system, it is often preferable to switch to a fully managed payroll provider instead. This is because CFOs and payroll managers will often find their payroll function is streamlined with this approach. All sorts of businesses, from retailers to e-commerce firms and from manufacturing companies to professional service providers, can benefit from fully managed payroll services. Find out what would be involved in making the switch from an in-house approach to payroll and what advantages you can expect from managed payroll.

What is managed payroll?

Firms that make use of managed payroll solutions utilise an external specialist to run their business payroll functions. CEOs and finance directors tend to choose these approaches with monthly payroll functions because it is more cost-effective than doing so in-house. What’s more, it saves time so finance teams can concentrate on core tasks while ensuring that greater payroll accuracy is maintained and that PAYE legislation is complied with.

What is included with fully managed payroll services?

Some payroll management software can cope with the basic elements of payroll, including calculating national insurance contributions, overtime, pension deductions, and income tax but they are not a full solution. With managed payroll solutions, matters including employee accountability, legislative compliance, scalability, and changing pay scale structures can all be met without any additional investment. What’s more, the time-consuming administration that’s needed to manage payroll and produce payslips is handled within one, centralised system. If future changes to payroll need to be managed – such as alterations in the way student loan deductions are made, for example – then these will be included within a fully managed payrolls service.

Managed vs in-house payroll

Payroll management software needs to be secure because it will hold potentially sensitive financial and personal records of individual employees. With online payroll management, your security issues will be handled by the firm you are outsourcing to. In addition to their expertise with running payroll, this means you will enjoy a cost-benefit. In short, managed payroll solutions providers offer an economy of scale because they focus solely on the secure management of payrolls for multiple firms. As such, there is a cost-saving but also less business risk from potential data breaches and lack of regulatory compliance by adopting a managed payroll system.

Another key benefit of a fully managed payroll service is that business decision-makers do not have to concern themselves with in-house payroll staff. Recruitment and retention – as well as upskilling employees – is no longer required. As such, holiday and sickness cover does not need to be arranged either, allowing CFOs and directors to concentrate on their core business functions. Because managed payroll also leaves an audit trail, there is also the benefit of being open and transparent should your business be subject to an audited inspection of its accounts. Like other forms of outsourcing, managed payroll means being able to deal with varying levels of demand so it tends to suit businesses that have seasonal employees or those which are large enough to have a constant level of staff turnover.

Can you integrate a human capital management (HCM) system with payroll management software?

If your firm’s HCM system already handles employee matters from a human resources perspective, then switching to a fully managed payroll can seem like a big step. In some cases, it can even appear to be the reverse of why you might have adopted a centralised HCM system in the first place. That said, the two systems – HCM and fully managed payroll services – do not need to be distinct entities. In short, high-quality managed payroll solutions will integrate within an HCM environment and complement one another.

What to look for when choosing a managed payroll solutions provider

Not all providers of fully managed payroll services are the same. Some provide a fully bespoke solution to meet businesses requirements while others merely adapt their systems for certain commercial needs. One of the key things to look out for when choosing a solution provider includes the scalability of the system being proposed. This is important not just for growing businesses but ones that can have large numbers of employees on their books at certain times of the year but not at others. Furthermore, the regulatory compliance part of the solution should be a high priority. This will help to avoid any potential fines from HMRC but also matters like GDPR data compliance and financial probity. Always confirm the solution provider you might be considering has a strong disaster recovery model, too.

Finance and Human Resources directors should also take a close look at the way different fully managed payroll services are charged for. For example, some will bill extra for when statutory forms, such as P60s and P11Ds, need to be produced while others include this within their service provision remit. Some charge according to the number of employees and the frequency of payroll while others will bill based on an average yearly or quarterly level of work and a proportion of the total amount being paid to employees. The correct accreditation, such as ISO 27001 certification, is another key thing to look out for when it comes to payroll management, too.

How long does it take to implement managed payroll?

This question really depends on the size of your organisation and how much work will be needed to move from the planning to the implementation phase. It is, of course, better to ensure the move to a managed system of payroll is properly planned to prevent any unnecessary and avoidable interruptions to employee pay. Nevertheless, for SMEs and smaller organisations, the shift to payroll management software should be a matter of weeks. For larger businesses with several hundred employees, a programme of 14 to 16 weeks is usually enough time to ensure that the transition is handled fully.

Typically, two weeks are needed to engage with those teams – heads of departments, finance, HR, and so on – who will implement the changes to project plan the process. Those organisations wanting to run implementation workshops so that all interested parties can find out more about the changes will usually need to set aside a further two-week period. This will include data capturing and data preparation, too. A further couple of weeks will be needed for training, system setup, and data migration. This period should also include test runs so that the service can be checked for any errors before the go-live date. Once live data has been migrated to the system, it is advisable to run the service in parallel with your current payroll system. For most businesses, this will mean a period of five to eight weeks, so that two monthly payroll runs can be captured. After that, it is time to go live. Nevertheless, the service transition should still be managed – usually by a dedicated project manager – for at least the first live payroll run to ensure that it is being handled correctly at every stage.

Find out more

If you’d like to find out more about outsourcing online payroll management, then do not hesitate to get in contact.

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