Five tips for finding a good payroll service

Outsourcing your payroll can free you up from knowing all the rules and regulations around paying your employees but the service you receive can vary.

A potential new payroll client with less than 10 employees told us of their shock at being asked to pay several hundred pounds to terminate their contract with their current outsourced payroll provider.  They hadn't been happy with the service, hence the decision to move, so as a longstanding bookkeeping client of ours it made sense for them to ask about our payroll services.

If any clients choose to leave us, for bookkeeping or payroll, we happily hand over the information the new provider needs and answer any questions they have.  We don't charge because it really doesn't take very long and it is important to us that we maintain the friendly and supportive service we always provide even if a client has chosen to leave.

What was shocking to us was that the company refused to provide any payroll information without charging more on top of the exit fee.  In addition they advised that as soon as the final payroll was run all payroll information would be deleted.

We have never, in twenty years of being in business, come across an organisation which treats their customers in this way.  And, of course, it sets alarm bells ringing.  Why would they delete payroll records?  The software used for payroll processing shows the tax codes used each month, so it is easy to see changes that have been applied, as well as the percentage of pension contributions and whether they are applied to whole earnings, qualifying earnings and whether there is tax relief.  None of that information is found on reports provided to the employer so there is no way of finding where errors have occurred.

We take responsibility for the processing of payroll information for our clients and if there is ever any query we will follow it up.  Very occasionally we need to review previous payroll information so we always retain records for the period of time we are  allowed to, even for clients who no longer have a payroll or have moved to someone else.

One of the main errors we have found when we take on new clients is that pensions have not been deducted correctly.  Either the wrong percentages have been used or the tax relief has not been applied where it should have been.  For one new client we re-calculated the payroll for 4 years because the pension deductions had been done incorrectly and the employees had lost out on their tax relief.  And it is not just one payroll that we have taken on that had pension auto enrolment errors.

Our Five tips to finding a good payroll service

When you decide to outsource your payroll, if you haven't received a recommendation, it would be worth considering these five things when contacting a potential provider:

1. Do they seem friendly and approachable?  You want to be able to ask questions when you need to without feeling that you can't.

2. Do they sound as though they know about payroll?  You will be able to tell by the questions they ask when you make the initial enquiry.

3. How long have they been processing payroll for?  The longer the period of time the more payroll situations they are likely to have come across.

4. How many employees do they process payroll for?  The higher the number the more experienced they are likely to be.

5. Does the person processing your payroll have payroll qualifications?  Possibly not vital but anyone who has taken the time to study for the job they are doing has shown their commitment.

When you have received a quote for outsourcing your payroll (and really you should get more than one especially if you haven't been recommended anyone in particular) and accepted it, your potential new payroll provider will have to carry out verification of your identity under Anti-Money Laundering Regulations.  All bookkeepers, payroll providers and accountants are required to do this by the organisation which monitors them.  In our case that is HMRC and we have to show that we have followed the regulations and prove we have carried out the checks required.  If your potential payroll provider doesn't do this then they are not regulated by any official body and shouldn't be providing payroll (or bookkeeping) services.

Outsourcing your payroll should give you peace of mind but if you are not comfortable with the service you are receiving then it is time to look elsewhere.  Don't get stuck thinking you can't move - you don't have to wait until the end of a tax year.  We are used to taking on companies mid-year and so should any decent payroll company.  And no company should charge you a significant amount to leave them because they have a ridiculously long notice period written into the contract.  We only ask for one month! 

Carefully check any Service Agreement you are required to sign before signing on the dotted line.  There is always more than one option.