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The big payroll question: in-house vs outsourcing

Should you run payroll in-house, or should you outsource?

Should you run payroll in-house, or should you outsource?

29 Feb 2024, 12:10

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This becomes a more relevant question by the day, as many schools and MATs continue to face changes in how they deliver staff wages.

For MATs, this question comes to mind as they continue to grow. With each new school a MAT brings on board, it adds new levels of complexity. In such a scenario, many leaders wonder if it’s time to bring everything under direct, centralised control using new software – or hand the increasingly large responsibility to a dedicated service.

Maintained schools ask the same question whenever they are told their local authority can no longer look after their payroll. Although this hasn’t happened for every school, this ongoing trend is already giving many pause for thought – not least because they can end up with just six months’ notice, during which they have to find an alternative.

So, the odds are you have asked yourself the same question, or you will in the future: is in-house or outsourced payroll the right choice for you?

Let’s look at what’s needed to make each work for your school or MAT. By seeing what’s involved, you can make a better decision.

What’s required to make in-house payroll work at a school or MAT?

To deliver school payroll in-house, you need the right staff and the right software.

The right staff are essential, and we can always help you in your search.

The next thing is software. For us, as standard, it has to:

  • Let staff manage payroll from anywhere where they have an internet connection.
  • Manage pension tiers and automate calculations (with TPS and LGPS reporting).
  • Integrate with your HR system for seamless data sharing and analysis.
  • Handle pay for staff with more than one role.
  • Track pay spines.
  • Provide automated back-pay calculations.
  • Administrate term-time contracts.
  • Have an HMRC DPS link.

Pensions are one of the trickiest things on that list. You need to be able to report pensions without having to be an expert – and stay accurate and compliant in the process.

But just as important is a way to integrate payroll with your HR system. Ideally, your HR system should be a hub that lets you see everything from one place, including payroll data.

That said, all the points listed above matter; they’re the difference between a good day and an administrative headache, at the very least.

Once you get software that meets that criteria and a payroll manager to use it, the payoff is worth it.

But what does that payoff look like?

The main things you get are control and the ability to strengthen your school or MAT using data. If you have the right software for the job, you can link payroll to your HR solution, see everything in one place, spot trends and drive efficiencies. And if you’re in a MAT, this can work across the trust while ensuring your schools can also run their own reports.

How do you make payroll outsourcing a success?

Outsourcing, on the other hand, is helpful if you don’t have payroll staff already and don’t plan to recruit anyone for the role.

The payoff here is that using an experienced education sector service can make payroll practically worry-free.

But, as you might imagine, outsourcing is a bit less hands-on than if you process everything in-house.

To get the best out of outsourcing, you do need to find ways to work closely with the team and get oversight of the payroll.

Some bureaus might be able to help you with this. Perhaps your payroll provider will have a user portal where you can log in and interact with the process – and the expertise to enable last-minute changes.

Just like with your in-house solution, being able to use data to plan and make decisions is crucial. A good payroll provider should let you access detailed reports.

If you remember one thing, it’s that the biggest pitfall with outsourcing is not dissimilar to software: the service must be created for schools or MATs and delivered by people with experience in this area. Otherwise, the worry-free benefits of outsourcing are just an illusion, and you might not see something’s wrong until it’s too late.

Decision time – how IRIS can help

If you need more information, don’t hesitate to get our full guide to in-house vs outsourcing payroll.

But if you feel you are closer to a decision, it’s well worth taking a look at two of our solutions for education payroll.

Every Payroll By IRIS – a great new in-house payroll software solution

In the past, running payroll effectively in-house using many disjointed systems has proven a challenge.

That has changed with the arrival of Every Payroll By IRIS. Every Payroll is a modern, cloud-powered solution that lets you work from anywhere with an internet-enabled device.

Whether you have staff with multiple roles, pay rises that need to be backdated, or pension schemes that require reporting, Every Payroll helps your school or MAT.

And because it’s part of the Every family of products, you can integrate Every Payroll with Every HR By IRIS. This means your HR system becomes a central point of information – and can generate in-system reports that help you monitor and improve life in your schools.

And when the UK Government adds new legislation, even at the last minute, you don’t have to worry: Every Payroll will keep you up to date, ensuring you stay compliant thanks to seamless, cloud-powered updates.

Outsourcing and the Dataplan difference

Sometimes, it might feel more helpful to outsource. Dataplan Education By IRIS is the solution many schools across the UK have turned to since it began helping the sector in 2007.

Our experienced team has repeatedly helped schools stay compliant with often complex payroll arrangements. Furthermore, if you want to stay involved in your pay run, you can – Dataplan has a dedicated portal where you can make last-minute changes if you need to, and our team of experts can always double-check the data to ensure you’re still on track.

To learn more, download our free guide. Download

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  1. Also a major issue in going in-house is how actually the payments will be made. Outsourced providers will typically be Bacs Bureaus that can make payments on schools behalf.
    If the school is not set up properly with their bank, making payments can be extremely complicated. Eg if your daily banking limit is 100k and your payroll is close to that, you can easily become a cropper.
    Terrible memories of the 31st of August one year when all pre-setup payroll payments failed as the bank had frozen our account due to a posted statement being returned… because we were closed for the holidays! Nightmare.