Small business payroll services

Small business payroll services can provide a huge number of options, with flexibility to match any operation. Find out more today and compare quotes

Any business, no matter how many employees they have on their books, should operate a formal payroll. It may be tempting to keep things top-line for small business owners that can count their staff on one hand, issuing payment on an almost cash-in-hand basis by writing cheques or issuing bank transfers for salaries at the end of the each week or month, but this leaves both business and employee at risk of falling foul of HMRC regulations at the end of the financial year.

Unless an individual is officially registered as self-employed with the government and has appropriate policies in place, they will almost certainly prefer to pay their taxes on a PAYE basis.

The legal introduction of auto-enrolment into a workplace pension policy – and the deductions that must come from a regular salary to accommodate this saving for their future – also have to be taken into account (more information at the bottom of our page on auto-enrolment pension providers). Your employee may also have Student Loan subtractions to take into consideration, or their wage could be variable on each payment date depending on the salary model that you employ.

Small business owners will already have more than enough to think about with the day-to-day necessities of keeping their company profitable, so an investment in a payroll service will take a great deal of this strain away.

Find out more about the range of options on this page, with information about the various service types available.

What are small business payroll solutions?

A payroll solution is a piece of software, managed in-house by a business or outsourced to an external specialist, that tracks and records the data of all employee salaries and payments.

Utilising a payroll service ensures that tax and NI deductions are automatically applied to an employee’s gross salary, ensuring that their take-home pay is accurate, as well as filing your salary-based paperwork online with HMRC.

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Investing in a payroll service ensures that your staff will be paid in a timely fashion, and any reports that must be generated are done so by the relevant software. Small business owners may balk at the idea of paying for a payroll service, but the investment pays for itself multiple times over in terms of time and reassurance.

Many payroll solutions may also incorporate some degree of Human Resources management, such as holiday and sickness day tracking –helpful to some businesses, for whom these matters are intrinsically linked to an employee’s eligible wage. The most important element of any payroll service, however, is the expertise provided.

The tax landscape changes constantly, as do other elements of finance that pertain to an individual’s take-home pay, and correcting mistakes after the event can prove to be costly for a small business. Bringing in a payroll service will eradicate – or, at the very worst, minimise – this risk. Best of all, payroll services will also complete your online filing at the end of the financial year – no more fines for a delay in registering your paperwork.

Many employees will also appreciate a breakdown of their gross and net salaries on each payday, which can be provided by a payroll service in the form of a payslip – either printed as hard copies, or sharable electronically as a PDF or similar format, while a payroll service will also be able to produce essential documentation such as P60s.

The question remains however – are small businesses better served handling their payroll in-house, or outsourcing to a professional provider?

The main small business payroll options are listed below – continue on down the page for more information about each choice.

Outsourced payroll services

Outsourcing the payroll of a small business involves handing the control – and responsibilities – associated with this to an external source. Some business owners may not be entirely comfortable with this idea on paper, as they prefer to keep a close eye on what expenses they are incurring, but outsourced payrolls for small business come in many formats; a business can have as little or as much involvement in the process as they feel comfortable with.

The biggest advantage of outsourcing your payroll, especially if you operate a small business, is that the burden of responsibility falls on the company handling the tasks. This means that any inconsistencies caused by human error, problems with a BACS run that leaves an employee unpaid when they may be expecting a deposit, or incorrect tax returns are handled by the payroll service provider – that’s a huge relief for any small business owner, especially one who may not have direct experience in accounting.

What elements of a payroll are outsourced is a matter of personal choice. The remainder of this guide will talk you through the many and varied choices that small business owners have when it comes to engaging the services of a payroll service provider.

Fully-managed small business payroll

As the name suggests, a fully managed payroll solution will involve taking all elements of administration involved with the process and hand them over to an external provider.

Given that payroll can be a demanding and taxing task – as well being hugely laborious if you employ a sizable number of employees – fully managed payroll solutions are hugely popular with larger companies and multinational corporations.

Given that such a wide-ranging service also comes with a price tag to match however, is this service necessarily a good idea for a small business?

The answer to this depends largely on who already exists on a staff team, and how much responsibility a business owner wishes to take for any payroll legalities and foibles.

A business that does not employ a bookkeeper, for example, may be well advised to look into a fully managed payroll service; the management of such a project is not simple, and may well be intimidating to an unskilled staff member as such as an administrator or office manager – not least because a working knowledge of the ever-changing tax laws is required, as well as the ability to keep on top of them.

A fully managed payroll service will take the details of employees from the business and apply all necessary deductions from their gross salary (from such basics as tax and NI to Student Loan reductions and pension contributions), ensuring that any changes are dealt with in a timely fashion.

Obtaining the services of a fully managed payroll service will also see an external body handle all BACS runs and the printing of payslips and other essential documentation, a dedicated account manager that will be at the businesses service for any queries, and complete transparency on all costs – clients will be invited to run or request full reports on their business payroll at any time.

Most of all though, paying a fee to a fully-managed payroll service provider will offer the twin gifts of time and peace of mind, leaving any business owner to focus on the day-to-day maintenance of their company.

Part-managed small business payroll

A part-managed payroll solution is a popular choice for many small businesses – especially those that already have financial professionals among their staff.

Cheaper than outsourcing payroll duties in their entirety to an outside provider, but still offering a degree of protection in the form of professional assistance, a part-managed payroll services involve dividing up the tasks between in-house and external companies to a point that the business owner feels comfortable with.

Part-managed solutions may be particularly effective for a small business that wishes to manage their own data entry when it comes to running a payroll.

If, for example, a company needs to make regular additions to a regular salary because the employee has achieved a contracted target, or overtime or holiday in lieu is required, some businesses may find it easier to deal with this themselves before passing the information over to an outsourced supplier to handle the necessary amendments ahead of a BACS run.

You can often pick and choose what services you actually require from a provider (printing of payslips and documentation, regular checks of changes to tax law, a dedicated account manager to assist with any complications that may arise from payroll software) and obtain a bespoke quote accordingly.

Many part-managed service providers will offer to take care of a company’s year-end payroll filing, which is a weight off the mind of any business owner. At the same time, an experienced financial officer may appreciate simply having the security of an account manager at the end of the telephone to help with any technical issues or complex queries.

Selecting a part managed payroll service as a small business is simply a matter of giving your company choice and flexibility. It’s not advisable if you nobody within the company has the time or experience to conduct payroll duties, but it can be a very useful middle ground to work alongside an accounts team.

Bureau service small business payroll

Bureau service small business payroll

Bureau payroll services are typically utilised by small business that do not have – or, in many cases, need – a dedicated payroll department.

Often linked with basic HR services, a bureau service payroll provider will typically save a small business a great deal of money, which is never a bad thing.

A payroll provider of this ilk is most beneficial and cost-effective to a small business when combined with the aforementioned HR responsibilities. While many small business owners may spend their time drawing up employment contracts themselves, or deferring the task to their administrative staff, it’s rare that such an individual will have a full working knowledge of the complexities of employment law.

Engaging the services of a bureau service will ensure that both business and employee are legally protected and compliant, and will take the pressure of arranging the running of BACS payments away from the business itself.

The services of a payroll bureau may not be quite as extensive as those offered by a fully managed provider, but many small businesses will find that these companies make the ideal budget-friendly partner.

As with the larger-scale operations, a payroll bureau will absorb the responsibility of accurate payments and reporting, filing reports, arranging the necessary deductions from an employee’s gross salary and releasing the funds on designated dates.

Smaller businesses, with a low number of requirements and a handful of paid staff that enjoy steady and consistent earnings but no financial clerk among their number, would be well advised to investigate such a partnership, as it’s a fine potential alternative to signing up to a costly fully managed payroll service.

Hosted service small business payroll

If a small business is adamant that they can – and should – deal with their own payroll service in-house, hosted software is the way to do so.

Often referred to as cloud software, meaning that there is no need to install a running program on company equipment as everything is held and hosted online, this is the solution for a business that has a payroll expert on tap. This will obviously grant complete control over the data entry and report running of a business payroll, and typically most software purveyors will offer technical support in the event of an emergency.

Using software connected to the internet certainly means that it will be fact up to date at all times, and a business should be able to file their own accounts with HMRC using the program.

The only concern is that the onus is on the business to do so accurately and on time, as hosting payroll software and taking a DIY approach offers no safety net in the form of an outsourced supplier to offer reminders and take urgent action where necessary.

Hosting services are useful for any business that knows their way around a payroll, and has the time to perform such duties themselves. Typically, the hosted software will include the opportunity to perform anything that an outsourced service provider would offer, and it’s certainly cheaper on paper than paying a monthly or annual fee to an external body.

If a small business owner is confident that these rewards outweigh the risks of taking care of their own payroll, it is hard to find an issue with the use of hosted services.

Pay-as-you-go small business payroll

As every small business owner will know, sometimes the goalposts can move at short notice. If a company manages their payroll in-house by employing the services of a bookkeeper or accountant, a prolonged leave of absence for that individual could plunge the company into disarray.

Pay-as-you-go payroll services can be an invaluable resource for any small business that needs the abilities of an external service on a short- to medium-term basis, such as to cover staff leave or process a particular influx of new employees.

Employing the services of a pay-as-you-go payroll solution will bring all the benefits of a fully managed service, but without the need to sign up to an ongoing contract that may be a daunting expense to a small business.

These services can be opened and dissolved without the need to give notice, although the price point may be a little higher to compensate for the lack of guaranteed income for the provider.

This solution could be ideal for small business that temporarily expands their workforce. For example, if a company needed twenty new heads to work on three-month contracts before moving on, that would lead to a lot of paperwork and administration to manage.

A pay-as-you-go service would see the salaries of these temporary employees paid promptly and accurately, before cancelling the service as business returns to its previous payroll status quo.

Alternatively, consider the employee cover solution that was discussed earlier. If a company’s finance clerk was taken suddenly and unexpectedly unwell and could not work for several weeks or months, would anybody else in the business know how to process the payroll?

Calling on a temporary pay-as-you-go service will prevent any of the troubles that could arise from employees not receiving their salaries when expected or erroneous filing with HMRC, and will allow the business to terminate the relationship upon once the natural order of payroll processing is restored.

Small businesses will always be understandable cautious of where and how they spent their funds, but some kind of payroll service is always advisable – mistakes that lead to government fines can be considerably costlier than a monthly or annual fee paid to a specialist in this field.

Fortunately, there are a plethora of options available to any business, regardless of the size or level of resource, and anybody seeking such a solution will find what they need.

Compare small business payroll services

The information on this page should help you to understand what sort of services your small business might require. For even clearer, more tailored information though, you should speak to experts today – we can help here. Fill in the form at the top of the page now to be put in touch with top UK payroll specialists.

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