Malcolm Trotter, the Chief Executive of the International Association of Book-keepers (IAB) delves into the world of business and looks into the frequently asked question; ‘Is payroll better managed in-house, or outsourced?’
Bookkeeping is fundamental to running a business smoothly; the potential risk of getting things wrong is high and can lead to fines for non-compliance with HMRC requirements. However the cost of outsourcing can often cause hesitation in businesses pursuing a self-employed bookkeeper simply because of the additional overhead costs.
In Teach Secondary magazine, Malcolm Trotter looks into the potential pitfalls and common mistakes that businesses often make in a financial advice column titled ‘On a roll.’
‘Not making adjustments correctly – such as where a pay rise, overtime or a bonus is to be applied. Getting the details wrong – for example, sick pay, pension payments, expenses and other elements in a particular pay period may each need to be treated differently for Income Tax and National Insurance purposes.
Missing the pay-day deadlines is a cardinal sin and with very significant potential detrimental implications for staff members.’
The article claims that the potential risks that can go wrong can demotivate staff members and alternative staff members simply do not have the spare time to support and maintain the professional competence of internal staff managing the books.
A more regular mistake that can be made by staff members is using an incorrect or out of date Tax Code, which affects the tax deduction.
‘This has become even more important to get right since HMRC introduced Real Time Information (RTI) into the PAYE process. This requires that for each pay period, a fully accurate extract of the payroll data is required to be submitted online and must correspond to the actual PAYE payment made by the employer for that day period.’
It is due to the introduction of RTI that a high number of employers have recently outsourced their payroll to a bookkeeper, payroll provider or accountant.
Malcolm states that if you have ‘competent staff to process the payroll, back up in place when they may be absent due to holiday or ill health and committed to the cost of supporting their ongoing professional development to ensure that they keep up to date with both annual tax and legislative changes, then you may decide to continue in-house.’
He goes on to say ‘however if you are unsure then I would encourage you to think further about outsourcing.’
Some of the potential benefits that an outsourcer can provide are:
- Provision of pay slips
- Accurate RTI reporting
- Reporting tailored to your specific needs
- Administrative support to meet Pensions Auto Enrolment requirements including the processing of pensions deductions, reporting and sending data to relevant scheme providers.
The article goes on to say that generally those who outsource help with payroll sense a ‘peace of mind’ knowing that the payroll is being managed effectively and will be compliant.
The International Association of Book-keepers is an award-winning organisation for bookkeepers around the world and is a statutory supervisory body. The IAB website offers small businesses the opportunity to find a fully qualified and regulated book-keeper to manage their payroll. Alternatively if businesses wish to train members of staff in-house, the International Association of Book-keepers offers a range of qualifications which can be studied face-to-face or through online learning allowing students to study in their own time and at their own pace. For more information on the courses available visit the IAB website.
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