Today’s challenging economic environment has led organisations to look at ways they can streamline processes, improve efficiencies and reduce overheads. With Business Process Outsourcing contract counts at an all-time high and multi-process and industry-specific functions leading the way, outsourcing is fast proving itself as a compelling option for firms looking to unlock new levels of operational efficiency. For payroll specifically the raft of changes to the UK PAYE regime has led many small and mid market businesses to outsource their payroll function, in a bid to free them up to focus on their core competencies, which differentiates their business and will ultimately drive profitability.

Outsourcing minimises the administration burden within a personnel team by removing time-intensive processes and enabling employees to focus their resources on those business activities that will directly impact the firm’s bottom line. Having a dedicated outsource provider can also increase the skills set of an organisation by giving them access to experts that not only have an intimate understanding of the process, but who can also help the business navigate any legislative changes to the payroll system. With tens of legislative changes to UK payroll system every year, and with automatic enrolment into pension schemes on the horizon, it’s more important than ever that SME’s have the peace of mind that their payroll function is in a safe pair of hands and that they are fully compliant with HMRC legislation.

Yet businesses that use payroll outsourcing to simply produce payslips each month are missing out on significant benefits. Decision makers need to identify business needs and what level of support they require to get the best possible return on investment, whether it be through a fully managed outsourced service, part managed or bureau service. It’s this relationship between a service provider and the customer that is paramount to the success of the service, ultimately dictating whether outsourcing payroll is the right option for supporting a firm’s business.

At Sage, we work closely with prospective customers to really understand their payroll needs, whether they be software or an outsourced service. One of our customers, Roundhouse, needed an outsource service to manage their permanent staff, casual workers and volunteers. By taking the time to really understand their business needs and pressure points and through adopting a close partnership approach, we were able to develop a bespoke service that minimised the administrative burden on the Roundhouse personnel team by removing time-intensive processes associated with running payroll. But that solution may not necessarily translate to all of our customers, so it’s critical that we understand their pain points and how a payroll solution can alleviate them.

While the current economic situation will continue to force businesses to focus on driving efficiencies, the importance of developing a relationship built on understanding and trust with your outsource partner cannot be underestimated. It is only by finding a true partner that organisations will be able to realise the 30% cost savings on payroll that are possible compared to running payroll in-house. However, it is this significant level of savings that means payroll outsourcing is a trend that is set to increase.