Outsourced Payroll Case Study
The study below is genuine. The name of our client has been hidden to protect their privacy.

Our client is a marketing company based in Lancashire.

Our client has one office and directly employs 30 full time staff members. These employees are paid weekly in arrears. The company indirectly employs the services of approximately 150 self-employed sales staff. These people are not processed on the payroll - they submit invoices on a monthly basis that are paid through the purchase ledger system. There are two members of staff in the Finance Department - they are mainly involved in issuing invoices, chasing payments and allocating cash received. A firm of accountants completes all other bookwork with the exception of payroll.

The Company started with five employees, because of this the Managing Director decided to process the payroll himself using an off-the-shelf payroll package. Although having no payroll knowledge himself he nevertheless decided to take on the task himself to save costs. No thought had been given to sickness or holiday cover and he had no BACS facility and so couldn't process payments directly into employee's bank accounts. Instead, each Friday, he gave every employee a hand written cheque made payable to cash, and allowed them time to go to the bank to collect their wages.

Over the next 7 months the company expanded rapidly and it's payroll grew in size to 30 employees, increasing the payroll workload six-fold. All too quickly April 5th arrived and the Managing Director arrived face to face with his first problem - payroll year-end. He had no idea what to do, so he did nothing. At the same time he received notification from the software company that he needed to upgrade the payroll sotware to take into account the budget changes. He didn't understand the implications of not upgrading, and because of the cost, decided not to bother.

The company's payroll continued in this way for a further 8 months. Each pay period became more problematic; there were always adjustments to make, such as bonus payments and overtime hours. What seemed like an easy job was becoming a nightmare. Each week, the payroll was taking longer and longer and was increasingly filled with complexities - Inputting hours worked, Checking, Running the calculation, Printing payslips, Hand-writing and distributing cheques, and balancing figures he didn't fully understand for monthly pay-over to the Inland Revenue, Producing journal reports for the accountant - The process was taking nearly a whole day. At his hourly rate of £40 per hour, this was costing him £300, and 7.5 hours when he wasn't concentrating on his business. Hand-written cheques were costing 60p each through his bank account - a further £24 each week.

Very soon, reminders from the Inland Revenue began to arrive, then £100 fines because the tax year-end had not been submitted.

Christmas was approaching and the staff needed holiday pay for the time off. He needed a holiday too so had booked a two-week break to go skiing, but who would process the payroll in his absence?

It was at this point that he decided he needed professional help. He approached PayPartners through this website.

The PayPartners payroll team visited to discuss his requirements.

He wanted a service whereby:

• He could e-mail any non-standard hours each week, along with any other bonus or holiday-pay payments. E-mail was important to him as it meant he didn't need to leave his desk, and it was more confidential to him than sending faxes.
• We would e-mail a payroll report back to him so he could still check and sign-off his payroll before it was run.
• His employees were paid directly into their bank accounts.
• We would take care of the forthcoming holiday pay for the Christmas period.
• We would take over the calculation of his monthly payments to the Inland Revenue so that all he need do is write them a cheque.
• We would produce all the reports needed by his accountants.
• We would process a basic payroll for his staff in his absence - i.e. he no longer had to worry about sickness or holiday cover.
• We would deal with the fact that he had not upgraded his payroll after the budget changes.
• We would take away the burden of the forthcoming payroll legislation - Tax Credits, Paternity Pay, Adoption Pay etc.
• We would prepare and submit a year-end return to the Inland Revenue for the previous tax year.
• And he wanted it 'Yesterday'

Arrangements were made to collect each employee's:

• Payroll static data (employee personnel records)
• Standard hours and pay rates
• Pay and Tax to date figures

This information was transferred to PayPartners' payroll system. Upgraded tax codes were input for each employee. A parallel run was not required as the MD knew the Tax and National Insurance (NI) deductions had been incorrect. Two weeks before Christmas the payroll went live. The relief on the MD's face was plain to see. All his employees received a tax and NI refund in time for Christmas, plus their holiday pay in advance, all correctly taxed, as we were able to advance the tax weeks on the payroll. They were delighted!

Soon after, we completed his tax year-end, and based on our pricing policy the cost to him was only £75 (- by the time he contacted us the fines were running at a total of £500!)

The payroll now runs as follows:

• The MD prepares a simple spreadsheet for additional hours worked in the previous week and e-mails it to PayPartners each Monday morning.
• These changes are input and the payroll is processed.
• The payroll report is e-mailed back to the MD by 5pm the same day. He now has until 12 noon on Wednesday to check the detail and sign the payroll off.
• We take care of the other payroll processes - calculating tax and NI, producing payslips, sending BACS payments, printing payslips and reports.
• Payslips are posted back to him for Thursday. They are now left in a central place within the office for employees to collect for themselves.
• BACS payments credit employee's bank accounts on Friday. Employees are now happier, as there is no longer a temptation to spend a handful of cash! Subs on wages are a thing of the past.
• An invoice is sent to the MD for his payroll processing costs, which he passes on to the purchase ledger.

PayPartners keeps a tally of the money due to the Inland Revenue, and forwards a remittance advice at the end of each month for him to send with his cheque.

For this service, PayPartners charges him: 30 x £2.50 = £75 per week. To him this represents:

Plus he is secure in the knowledge that his payroll is accurate, and his employees are paid on time.

He hadn't realised that payroll would become such a headache, nor how much money he could save by outsourcing.

Our Payroll Team

To contact the PayPartners team for an informal chat about your payroll situation click on the Contact Us link below.