What happens if you don’t use a payroll service?
What are the risks of not using a payroll service?
On paper, it is possible to regularly roll out payments to your employee’s wages without using payroll services. Many small businesses with no other alternative options don’t use payrolls. However, it’s not uncommon for admin errors to occur, and although the damage is usually minimal, being unable to properly implement a payroll system can lead to:
Legal Compliance Issues
One of the common drawbacks of disregarding a payroll system is that employers often miss out on updating tax coding notices issued by the HMRC. As a result, the incorrect amount of tax gets deducted from an employee’s paycheck.
A slightly more uncommon occurrence is when employers don’t operate PAYE as a regular part of their payroll. Missing PAYE tax payments result in interests and penalties which stack up with every missed payment. The amount you pay gets levied and the percentage of interest goes up as follows:
- For the first time in a tax year, you won’t be given a penalty
- 2 missed payments, you will be fined 1%
- 4 missed payments, you’ll be fined 2%
- 7 then brings the total to 3%
Lower Employee Engagement, Higher Turnover, and Lower Recruitment Rates
Aside from the obvious point that nobody wants to receive a late paycheck, multiple missed payroll payments have a knock-on effect on your entire staffing situation.
With the majority of job boards actively surveying active employers, reviews in all aspects of the work environment are being sourced from past and current employees. Ranging from management style through to fair pay. Within these reviews, payroll is one of the most commonly reviewed topics. Without even knowing, you could be losing out on high-quality employees.
The Impact On Your Business Valuation
Compliance issues leave a paper trail for future investors, buyers, and business partners to look into. We understand that you’re more than likely equipped with an exit strategy which often involves either selling the business or committing to a merger. Recorded non-compliance and malpractice, including payroll, harm the valuation of the business and as a result, potentially damage your exit strategy.
What are the benefits of using a payroll service?
Aside from avoiding all the previously aforementioned consequences, the benefits dramatically boost the ease of management in more than one way:
How Can Payroll Services Save Time & Money?
Training staff to conduct payroll duties not only takes up your time but also theirs. As obvious as it may seem, payroll is a time-consuming task that could be time better spent elsewhere. Not only are you paying for the time your employees take to conduct this task, but your overall business output is slowed down by this process.
How can payroll services reduce security risks?
An outsourced payroll means that you don’t have to invest as heavily in cybersecurity, as an outsourced payroll service is likely to have invested even more than you have and they can process your payroll for you.
In addition, you mitigate the risk of data breaches by internal intention. For example, a dissatisfied employee could leak confidential information. Alternatively, a phishing email could be just convincing enough to deceive a new employee, creating a leak in private payroll information.
Looking For A Payroll Service Of Your Own?
If you’re on the lookout for a payroll service of your own, we have a questionnaire that allows you to find a service that’s best suited to your business needs. Visit our site to learn more, or contact us to speak directly to an industry professional.