Need to know

Q There are only six of us working in my organisation and we have always run the payroll ourselves, but it is quite complicated and time consuming. Our administrator is leaving, so should we consider using an external payroll service rather than train her replacement to do this job?
 

A My initial response would be to find out why running the existing payroll is “complicated and time consuming”. Is it because of the nature and circumstances of your employees, (for example variable hour contracts or statutory deductions)? Or because of in-house systems, support and expertise, for example the payroll is done manually? It may be possible to make the in-house payroll more efficient, by, say, having adequate systems for collecting information and free/low-cost payroll software, (for example via Her Majesty’s Revenues and Customs [HRMC]), and by effectively training the new administrator. The most significant cost to organisations of doing their own payroll is the time taken up; the true cost for a small to medium-sized arts organisation for time spent on a task ranges between £15 and £30 per hour. The time (and associated cost) of training a new individual, and the time involved in managing this aspect and the time spent on its operation, all need to be considered. You should look at the resource and related risk issues with running a payroll. The same tax rules and regulations are applicable and enforceable on all arts organisations and/or the voluntary sector – ignorance is no excuse in the eyes of HMRC.
Organisations benefit in a number of ways from using an experienced payroll provider. Tasks can be performed efficiently; your company’s time and resources are freed up; organisations can access additional support and advice in respect of their ongoing employer obligations; and changes in rules and regulations are monitored by the payroll provider. Ultimately, businesses need to consider the relative costs and benefits of doing the payroll themselves versus using an external provider. Some of these benefits will be quantifiable, for the others you need to consider the importance they have for you. Whatever decision is made, it needs to be remembered that you cannot outsource your obligations; the employer (the organisation) is legally responsible for all aspects of the correct operation of PAYE.