Payroll for Small Business

Payroll for Small Business

Payroll for small business is the perfect demonstration that every silver lining has a cloud. Setting up and running a small business is one of the most exhilarating things a person can ever do. Creating jobs and taking on responsibility for providing others with a livelihood, bringing new products or services to market, establishing premises and creating relationships with customers are all monumental achievements and provide immense satisfaction. Satisfaction that is just dessert for taking all the necessary risks to start a new venture from scratch.

Unfortunately, there are a number of frustrations and trivialities that can greatly detract from these satisfactions, as well as divert your attention from the all important task of running and growing the business. Payroll can be one such frustration.

Administering an efficient and legally compliant payroll process not only means getting to grips with all the necessary tax forms, bank account details and calculations but also means staying on top of changes to legislation, employee tax codes and pension requirements. Statutory sick pay, redundancy packages, maternity and paternity pay, performance related bonuses and student loans can throw extra spanners into an already spanner laden mechanism. Payroll can get to be a migraine inducing process that comes around once a month, sapping your time and energy for dealing with the more important aspects of the business.

Many small businesses therefore offload payroll responsibilities onto their accountants, relieving themselves of the need to learn the intricate details of payroll or employ someone to take responsibility for it. But is this the best solution?

Accountants, while highly qualified and guaranteed to keep you on the right side of the law also operate opaque pricing structures and are generally overqualified for the repetitive number crunching nature of payroll for small business processing. Taking on a dedicated payroll company could therefore save you money without compromising on efficiency and peace of mind.

Companies which offer to outsource payroll for small business operate in an incredibly competitive market which means that bargains are there to be found by the diligent business owner. Before you start looking for a company that can take over your payroll processing you’ll need to be familiar with the different options available:

• Managed service: Managed payroll processing provides you with a web based interface through which you update employee hours and changes to their circumstances. The payroll provider then takes care of the rest: processing payments to employees, HMRC, pensions and unions; providing payslips and reports for year-end filing. Online or offline support will answer your queries and allow error correction.
• Hosted service: You’ll be provided with software that makes calculating payments and deductions a doddle so you’ll know exactly how much to pay your employees, HMRC etc. The payroll company will also print and distribute payslips on your behalf and provide end of year filing. Software is updated frequently to take into account changes to legislation, tax rates etc.
• Software only: A software only solution provides all the tools you need for making calculations but leaves the actual payments, delivery of payslips and filing with tax authorities up to you.

So in short, a managed service requires less input from you but will inevitably cost more. A hosted solution removes most of the burden but ultimate responsibility for payroll remains in-house whereas the software only solution provides up to date calculation tools and payslip templates only.

Choosing which of these payroll options to go for will obviously depend chiefly on cost but there are a number of other factors to consider. By using the following checklist you’ll know what to look for in each provider and how to compare different services.

• Number of employees: Some payroll packages have minimum and maximum numbers of employees that they can deal with. Think carefully about whether your business is likely to expand over the term of the contract.
• Contract length: A typical contract will run over a 12 month period. You may be offered a better rate for a longer term but will this provide the flexibility your company needs?
• Termination clause: The current business environment can be hostile to small and large firms. If the unexpected happens you don’t want to be stuck paying out large sums for a payroll service you don’t need.
• Extra charges: Will you be charged for software updates, tax code changes, P45s or P60s, end of year filing? Make sure all charges are included in quotes.
• HMRC accredited?: A payroll provider should provide software endorsed by HM Revenue and Customs’ ‘Payroll Standard’, ensuring compliance with UK law and freeing you up to worry about the bottom line instead.

When you start looking for a specialist company to take over your payroll you’ll be struck by the wealth of options. By dedicating enough time to exploring these options it’s possible to find a service that matches your requirements exactly. The time you invest will be worth it: payroll isn’t going away anytime soon and the time and cost savings you’ll make from employing the right payroll provider can be reinvested in your business. When it comes to payroll for small business, finding the right partner can therefore be a key element in the formula for taking your company to the next level.