What’s Best for You: In-house Payroll Software or Outsourced Services?

smiling SBL doing the payroll

Explore the evolving landscape of payroll management with IRIS, as we highlight the complexities introduced by global changes and the critical need for expert knowledge in navigating modern payroll challenges

In an age of interconnected systems, it’s easy to think that all we need is top-notch payroll software, and we’re good to go. But these new cloud-based computing and interconnected payroll systems were invented for a reason: the world is getting more complex.

As we’ll see, the next-generation software solutions that are rising to this challenge are still best used by substantial teams of professionals that are completely confident with payroll.

In-house Payroll vs Outsourcing – What’s Changed?

As the world has become more complicated, the goalposts for effective payroll management have moved closer together. Consequently, old decisions about resource allocation haven’t disappeared; they are just different.

In the past, there were always three options when it came to paying your staff. Managers mulled over sticking with tried-and-tested systems, moving to new tech, or payroll outsourcing. Now, that same decision has narrowed; “tried and tested” is no longer an option.

A new, more focused decision must be made between buying new tech or using payroll outsourcing services. The world has changed, and we have to move with it.

How Did Payroll Become More Complex?

The short answer is the pandemic pushed in-house payroll capacity to the brink, forcing innovation. Payroll teams found themselves firefighting new legislation and thinning staff numbers as job relief schemes were introduced to shift people away from offices.

The question, during the toughest time for payroll in living memory, was how to make systems more agile and, where possible, cater for teams working remotely. This led some business leaders to consider the pros and cons of keeping things in-house while leveraging modern software that could be used remotely.

Now, a recent report states that 62% of organisations are using cloud-based software to process their payroll (vs on-premises), up from 34.8% in 2019. This shift towards cloud-based solutions has helped save time and streamline payroll processes. Others, however, have seen the benefits of outsourcing and believe managed payroll services are a better fit for either some or all their needs. Overall, 61% of respondents to the Global Payroll Complexity Index Report have chosen this route.

The reason? You still need to know a lot about payroll before you can use the software.

Why New Complexities Need Payroll Expertise 

Software alone will not keep you on top of modern payroll challenges, and unfortunately, you can’t blame them for any gaps in your knowledge. If you have comprehensive, in-house payroll expertise, you’ll be fine. If not, then tapping the know-how of an external payroll company becomes crucial.

Only an in-depth understanding will help you navigate an ever-changing payroll landscape. In your own business, wages change. New legislation means tax bands shift, as do employer obligations for pensions and staff benefits. If you miss, for example, the ongoing changes to benefit-in-kind rates on company electric cars, then good luck explaining to HMRC why you relied on software to keep on top of the law. They will fine you for any mistakes. Likewise, an annoyed staff member will not be placated when you tell them your computer program messed up their tax. We must be on the ball even more now there’s a cost-of-living crisis.

Helping staff get through this difficult time isn’t about software; it’s about getting creative with benefits and pay. You will need a mix of business savvy, good payroll practice and tax smarts. Without it, you won’t be able to offer your staff resources that cost very little to your business but will make all the difference to them.

This is a sponsored article, brought to you by IRIS Education.

To read the full article or find out more about IRIS Education’s payroll solutions, head to their website: www.iris.co.uk

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