Cloud Payroll Solutions: A Guide for Your Business

Feel like you’ve reached the end of the road with your current payroll process, but not sure what’s next?

Whether you’re doing some last-minute research before switching to cloud payroll software or just want to know what your options are, this article will teach you how cloud software works, what the software landscape looks like, and everything you need to know before making any big decisions .

If you don’t use cloud-based software, the alternative is called native (or native) software. On-premises payroll software is installed on physical computers at your place of business, so it never leaves your company’s building.

Generally speaking, on-premises software is considered slightly more secure than cloud-based software because any data or records are stored at your physical workplace. But there are downsides: On-premises software requires maintenance and frequent updates, all of which need to be handled internally.

Advantages of cloud payroll software

In the UK, the overall trend is Payroll management The market is shifting to cloud-based software. Here are some of the reasons why more and more businesses are moving away from traditional on-premises solutions.

• Auxiliary functions: Cloud payroll software allows businesses to access their payroll systems from any location with an Internet connection. This makes it particularly useful for remote or distributed teams.
• Instant updates and compliance: Cloud software gives you access to real-time analysis and reporting as well as automatic updates to help stay on top of any legislative changes.
• Scalability: Cloud-based solutions make it easier to scale headcount and meet more complex payroll requirements.
• Integration: If you already use accounting, HR, or time and attendance tools, cloud-based solutions will (usually) integrate with these tools so you don’t need to replicate data across platforms.
• support: While support levels vary between vendors, most cloud software comes with some level of expert assistance so you don’t have to deal with issues alone.

Cloud payroll software and traditional outsourcing

Although cloud software is steadily gaining popularity, many businesses still choose to outsource payroll to more traditional organizations.

Here are some considerations you may want to consider when looking for a new solution.

Traditional outsourcing use cases and drawbacks

Traditional outsourcing agencies work best for small teams with limited in-house expertise. If you’re already stretched thin, outsourcing payroll can relieve some of the more complex payroll tasks.

Outsourcing may also be a reasonable option for businesses with strict regulatory requirements or industries with strong compliance requirements.

While payroll agencies have taken away some administrative work, you’re not entirely off the hook. You still need to send stuff out and allow time for manual double-checking, as your payroll is still prone to human error.

You also have to give up some level of control over the process because you can’t see all the inner workings and calculations. You may also have to work within fairly tight deadlines and deadlines.

Cloud Payroll Software Use Cases and Disadvantages

Expanding a business that often requires new employees may require a modern, cloud-based solution to keep up with monthly changes. You’ll also get greater flexibility than on-premises solutions, including instant changes, no artificial deadlines, and automated workflows.

While most cloud solutions are flexible, on-premises systems may be better suited to highly specialized configurations. You may also find that the quality of customer support varies depending on the provider you choose.

cost considerations

Payroll outsourcing costs in the UK range from £20 to £100 per employee per year. A lot depends on the complexity of your payroll. Things like year-end tax filing, pension management and customized reporting cost extra.

Cloud software costs typically range from £10 to £30 per employee per month for medium-sized businesses, and £30 to £100 for larger businesses.

Features of cloud payroll solutions

Although the features vary, read on to learn about some of the most common ones.

Automatic calculation

No matter which solution you choose, almost all providers allow you to automate payroll calculations to save you time and reduce the risk of errors. You should be able to automate things like employee payroll, tax deductions, insurance contributions or pension contributions.

Although less common, some more advanced solutions can handle more complex calculations, such as variable holiday pay.

RTI Submission

As required by UK law, cloud payroll software tools will generate and submit your Real Time Information (RTI) to HMRC. Some providers will also submit P45, P60 and P11D for you.

Automatically updated with new legislation

One of the biggest disadvantages of on-premises software is that it requires manual updates to keep up with any legislative updates from HMRC.

Using a cloud-based solution means these updates are done automatically, so you don’t have to track and implement updates yourself.

Employee and HMRC payments

In addition to calculations, cloud payroll software also pays your employees, generates payslips and makes HMRC payments every payday.

What cloud payroll solutions are available?

There are many types of payroll software on the market today, each with its own advantages and disadvantages.

All-in-one solution

Some HR systems are starting to build payroll software as part of their offerings.

These all-in-one solutions are suitable for small teams with simple needs. However, since Payroll is more of an add-on than a full-fledged standalone solution, it tends to be quite basic.

If you’re a growing team and payroll is a little more complex, you might be better off using a more specialized payroll solution that’s easier to scale.

employer of record

The Employer of Record (EOR) assumes responsibility for becoming your official employer.

EORs are often used by organizations with very dispersed teams as they deal with all the different tax regimes, currency conversions, and country-specific requirements that must be followed when paying employees overseas.

Since different countries have different requirements and EORs impose strict deadlines, it is generally not recommended to do it in person as a team.

Legacy Enterprise Resource Planning

Legacy ERP is a well-known legacy system. They are essentially a combination of software and services and are used by large companies in traditional industries, and are best suited for large teams with fixed workflows.

ERP tends to be quite outdated. You have a dashboard to work with, but there are still people involved in the process. If you need flexibility and scalability, this may not be the ideal solution for your business.

Modern automation solutions

Modern cloud software is typically designed to be scalable for most businesses. They automate workflows and sync with HMRC updates.

If you want to reduce manual tasks, modern Payroll automation Software will be the most time-saving option. Many platforms allow you to instantly see what’s going on and make changes before payday.

If you need reliable support, you may want to double-check what’s on offer before making the switch, as it depends on the provider.

How to start payroll migration

Careful data transfer mapping, testing of each milestone, and collaboration between finance leaders and the chosen platform help minimize risk and disruption during this critical business transformation.

Gather employee details and set transition dates

The first step in migrating to a new payroll provider is to collect all the employee data your new payroll provider requires and make sure it is accurate and in the correct format.

Migrate historical data

To transfer data to a new vendor, you’ll need to work with them to map which data fields are required, test those fields (and calculations), and then validate the data in the new system.

Set up integration

This step depends on whether your new provider offers integration out of the box. In this case, you can decide which data points need to flow between systems. If they don’t offer out-of-the-box integrations, you can work with them to customize them.

Testing by running in parallel

Before completing the cutover, you will need to perform a parallel payroll run to test the new payroll system and the existing payroll system to verify proper functioning.

Signs It Might Be Time to Change Providers

Changing payroll providers can seem like a pretty daunting task. Migrating takes time, which can feel like an irreversible decision.

If you’re on the fence about switching providers, there are some key signs that you may not be able to meet the needs of your current process.

Do I need to wait until April to change?

When setting a transition date, your only goal should be a smooth, pain-free transition.

For many businesses, the easiest time to change suppliers is in April, at the end of the tax year. This makes year-end reporting easier and clearer. However, this doesn’t necessarily mean that April is the best time for all businesses to pivot.

If your current contract is ending mid-year and you don’t want to lose any form of software, it might be logical to make the transition before April.

You may also find that your particular business or industry goes through a quiet period of the year with reduced payroll needs, making the transition less disruptive.

How much migration support your new provider offers may also be an important factor in choosing a date. Businesses typically wait until April to offset some of the manual work required for migration, but this may be necessary if your new solution comes with migration support. Some people will handle most of the legwork for you, while others will leave it mostly to you.

Cloud payroll: Is it right for your business?

Generally speaking, cloud payroll software gives you greater control, flexibility, and scalability than more traditional solutions on the market.

While these modern systems are a good fit for most businesses, some edge cases may work better in simpler or even legacy systems. But for rapidly scaling businesses, modern cloud-based software is often more valuable in the long run.

Learn more about payroll administration, its benefits and best practices.

Edited by Aisha West