If you are responsible for managing a large payroll in Ireland and wondering whether outsourcing to a payroll bureau is a good strategic decision, you’re not alone. Data from Statista suggests that 38% of organisations worldwide outsource their payroll function in some way. As many as 70% of Fortune 500 companies outsource their payroll. It says a lot that these large, successful organisations trust external partners to manage such a vital area of the business.
Managing a large payroll is no small feat. The complexities involved in ensuring accurate and timely payments, adhering to evolving tax and regulatory requirements, and maintaining data security can place a significant burden on an organisation’s resources and time. In the pursuit of operational efficiency and strategic growth, many businesses are turning to outsourcing as a solution. We have already looked at the general benefits of outsourcing payroll and what a good payroll service looks like in previous blogs. In this blog, we explore how outsourcing a sizable payroll function – 1,500 to 5,000 employees – can lead to better business performance, reduced costs, and improved employee satisfaction.
Outsourcing the payroll of your large workforce is sound strategic practice
Managing the payroll of a few staff is one thing. You may have successfully done this in-house for 50 or even 100 employees. But if the business scales, growing that internal function is not easy. You’ll have to undertake the recruitment and training of payroll staff, and factor in the time, management, and oversight new staff entail. Let’s explore the four main reasons that outsourcing your large-scale Irish payroll make business sense.
1) Large payroll outsourcing de-risks the business
Navigating the intricacies of payroll regulations, tax laws, and compliance requirements is a daunting task for any organisation, but especially when managing payroll for a large workforce. In-house payroll staff may not have the most up-to-date knowledge, or it can be based solely on an understanding of the companies they have previously worked in. Even payroll staff with strong technical ability can be lacking in their knowledge of other pay-related issues or latest best practice.
Outsourcing to a specialised payroll service provider means that only people who are well-versed in complex payroll management will be handling your payroll. These experts keep up with the latest regulatory changes and ensure that payroll processes adhere to legal and tax requirements. They are trained on an ongoing basis – typically they will receive Irish Payroll Association training, tax training, and compliance training across the year.
A report by MHR, published in 2022, suggest that over 90% of British and Irish businesses make payroll calculation mistakes every single month. This has serious implications for the company and for employees! By outsourcing, larger businesses mitigate the risk of costly errors, WRC penalties, unhappy employees, legal disputes, and the lasting reputational damage that could arise from faulty payroll.
2) Large payroll outsourcing gives you time and focus
Outsourcing your large payroll means less management all round. You don’t have to recruit, onboard, train, or manage your payroll staff. This means less drain on the resources of the HR team and/or finance team (depending on where payroll responsibility lies in your organisation). Payroll is a very time-consuming and as a function there is absolutely no need for it to sit within the business.
Instead of the headache of payroll, HR and finance teams can concentrate on more business-critical missions and strategic initiatives. This shift in focus enhances productivity but also contributes to improved employee satisfaction, as HR teams can dedicate more time to employee development and engagement.
Another concern for an in-house team is what happens when a key member of the payroll team leaves or is absent for a long time. Such an event leads to continuity issues, especially if the remaining colleagues don’t have the required skills to ensure interim management in a way that doesn’t impact employee salaries. Covering gaps like this isn’t always easy, and you will require additional time and resources to make it happen, sometimes at a moment’s notice.
Outsourced teams will have more than one person available at any time, with strict procedures and systems in place to guarantee absolute continuity across the payroll function, from calculating wages and deductions to addressing employee queries to resolving discrepancies.
3) Large payroll outsourcing is more cost-effective
Cost isn’t always the main motivator when it comes to outsourcing a large payroll. That said, outsourcing is generally more cost-effective than running the function in-house. Let’s look at a representative example of an in-house payroll professional managing 1,500 monthly employees:
• Salary (one full-time payroll specialist): €45,000
• Employer’s PRSI at 11%: €5,000
• Professional development and training: €500
• Software: €850
• Leave cover: €3,500
• Typical office overheads for an employee:€1,500
Total in-house cost: €56,350
Cost of a typical outsourced payroll package to manage 1,500 employees paid on a monthly basis: €33,152
Saving achieved by outsourcing: €23,198
As you can see, switching to an outsourced service in this scenario represents a saving of 40% (this cost is only representative, as packages are always tailored to your needs). Having payroll employees will require substantial investment in software, hardware, and skills. This investment may even divert resources from other critical areas of operation. A lot of the cost is up-front, whereas an outsourced payroll package will be a fixed and predictable monthly cost.
4) Large payroll outsourcing gives you total flexibility
An outsourced payroll service adjusts to meet your company’s needs. Outsourcing provides the scalability and flexibility required to adapt to changes in workforce size, structure, and payroll complexity – whether that comes from seasonal workforce adjustments or expansion into new markets, outsourced payroll partners can accommodate these changes seamlessly. This scalability goes both up and down, eliminating the need for organisations to invest in additional resources during periods of growth or to downsize during leaner times.
This kind of operational agility is vital in today’s competitive landscape. You have one less function to worry about, but there is absolutely no risk of your employees not being paid. Outsourced payroll providers also understand what finance teams need and have experience dealing with all kinds of business in every kind of sector. They’ll be able to produce bespoke reports for the finance team that cater for any complexities, such as reporting by department or cost centre.
Security-conscious payroll outsourcing companies also embrace technology to bolster your defence against potential data breaches and cyber threats. Importantly, they know all the payroll systems and platforms and how they work and interact with each other. Their experienced and trained staff can help with integrating other business systems such as time and attendance tools, providing stability where you need it most.
Outsource the payroll of your larger organisation
As you can see, outsourcing payroll is a tactic that can benefit the company through cost efficiency, compliance expertise, time savings, scalability, data security, and technological advancements. Outsourcing is a strategic choice that not only optimises payroll management but also results in enhanced performance, reduced costs, and increased employee satisfaction.
At Clear Group, we specialise in larger payrolls for companies in sectors such as retail, pharma, hospitality, and manufacturing. The cost of an outsourced package varies according to the size of the workforce, the complexity of the payroll, and how often people are paid. If you would like to discuss your company’s needs and see if we would be a good fit for you, please get in touch.