The Hidden Risks of DIY Payroll Processing

Many businesses are taking advantage of technology, from AI to automation, allowing them to improve efficiency and cut costs.

Many businesses are tempted to bring their payroll operations in-house, using payroll software which offers admin modules, lured by the promise of streamlined processes and cost savings. However, hidden beneath the cloak of convenience lies a maze of payroll complexities and legal risks that can trip up even the most experienced business owner.

In this blog we’ll delve into the dangers of moving payroll in-house and onto software that beckons with the promise to do it all. Highlighting the crucial areas where expertise and experience are irreplaceable. Saving you pain later down the line.
Plus we’ll share how you can get the best of both worlds.

Why are people moving to DIY Payroll options?

There has been an explosion of payroll software options in the market and these tools are really handy, with software from Xero to Modulr being gamechangers for growing businesses. Many payroll software packages now have additional payroll functionality built-in , so businesses are reviewing their budgets and considering whether this option allows for a shrewd cost-cutting exercise.

However, this often leaves the overseeing of the payroll to people who have other specialisms other than payroll, such as business owners, HR teams or admin staff. Whilst these people are skilled in their areas they rarely have the experience, or time, to deal with the more complex payroll scenarios that can arise. Not to mention the added complications of keeping up with the ever-changing payroll legislation.

Let’s explore the other hidden dangers of using Do It Yourself payroll options.

1. The Payroll Legislation Labyrinth

Ever-changing payroll legislation makes managing payroll in-house without full expertise particularly perilous. From the frequent changes announced in the Autumn & Spring Budget to laws governing payroll taxes, compliance standards are a painful way to incur fines. What’s worse these fines can go straight to your employees in some cases (such as the wrong tax being paid) which can break their trust or even increase employee turnover.

DIY payroll processing and software may offer basic compliance features, but it often falls short in keeping pace with the nuanced intricacies of local, UK-wide and international payroll regulations.

2. Complex Payroll Scenarios

In a one-size-fits-all world, DIY payroll might be a smart move but that’s rarely the case. From shift patterns to employee benefits & P11D right through to maternity leave, the web of complexity in payroll spins wide. Therefore, DIY payroll software, often marketed as a comprehensive solution, is often insufficient when it comes to handling the diverse needs of your staff. Depending on your industry, company size and employee structure this can add extra layers to the payroll process too.

Whilst the DIY payroll software package claims to do the heavy lifting, during busy payroll times this extra strain can buckle under added pressure, leading to inaccuracies and delays. Without the expertise to address these issues promptly and accurately, businesses risk damaging employee trust, tarnishing their reputation, and incurring financial liabilities.

3. Statutory Pay Perils

Statutory pay, including Statutory Sick Pay (SSP), Statutory Maternity Pay (SMP), and Statutory Paternity Pay (SPP), presents another minefield for businesses managing payroll internally. These payments are governed by specific eligibility criteria, which is subject to change.

Calculating holiday pay also has different formulas for irregular hours and part-year employees. Getting these wrong can lead to underpayment or overpayment, both of which cause frustration at best and at worst distress to the employee and losses for your business.

Navigating Safely Through the Payroll Perils

In summary, whilst the pull of DIY payroll processing may be alluring, you need to proceed with caution and consider all the hidden risks lurking under the surface. Here’s how to get the best of both worlds.

1. Outsourced payroll services and consultation – Consult with payroll professionals or enlist outsourced payroll services. You can often strike up a flexible contract which allows you to get the help you need. If you are already in a contract you can list what you’re missing from your current arrangement and explore options that avoid the pain of switching payroll providers through efficient onboarding. Here’s how to choose the right payroll provider.
2. Upskill through people development – You can develop your people with comprehensive payroll training but bear in mind this can’t replicate the experience of long-term payroll professionals.
3. Hire and payroll professionals – You can hire in-house expertise but employing a new team comes with extra costs and if your payroll is only busy at certain times of the month then outsourced payroll is often more cost-effective and productive.
4. Stay Updated – Regularly monitor changes in payroll legislation and seek professional advice to adapt payroll processes accordingly. Sign up to newsletters – such as Moorepay and our Talk Staff newsletter to stay up-to-date.
5. Use Automation Wisely –While automation can enhance efficiency, businesses should supplement DIY payroll software with professional human oversight to catch errors and address exceptions effectively.

Think before you act

If you’re being seduced by the thought of DIY Payroll processing with its promising of simplicity and cost-saving properties, pause for thought. Speak to an outsourced payroll professional and explore your options.

💙 Talk Staff Payroll Services 💙

Talk Staff’s Payroll Services are UK-based and help you get to grips with a whole host of payroll challenges. We’ll take on your payroll admin whilst you focus on growing your business and developing your people. We have a whole range of payroll bureau services to choose from!

Payroll can be a difficult thing to stay on top of. So whether you’re a small business, a growing business or a well-established one our responsive outsourced payroll team are here to help.