Starting a outsourcing payroll company 2019.

[Simba No More 9-5]

Hi my name is Simba. I’m thinking of starting an outsourcing payroll company in the UK. My potential clients would be recruitment agency’s that pay employees weekly and monthly within the healthcare sectors private and local council. I have had 5 years experience in payroll and pension and I feel I could use my skills to provide a specialised service.

My question main questions would be;

- is this a good idea
- should I use payroll software
- what are my cost likely to be
- I plan to use the commercial finance model (paying all employees on clients behalf and invoicing them after) will that work?

Many thanks if you respond.

 

[WaveJumper]

No more 9-5 running your own business could be more like 24/7

 

[Scalloway]

should I use payroll software

If you are running payrolls for customers then you must use software that can do RTI returns for PAYE.

 

[Mr D]

You would be paying out then invoicing the customer?

And you'd be happy lending them that money? What if the business is late paying or simply does not pay?

 

[Newchodge]

You will have t register with the ICO and for money laundering.

Why would you want to pay someone else's employees before receiving the money from your client? Your finance costs will be huge.

 

[Newchodge]

What alternative to payroll software were you thinking about?

 

[Mr D]

You will have t register with the ICO and for money laundering.

Why would you want to pay someone else's employees before receiving the money from your client? Your finance costs will be huge.

I suppose its one way to get clients. Just not a very good way and the moment the process is changed to be better for the business the clients would no longer have the good financial reason to stay.

I can think of several companies who would jump at being lent their wages bill. Any council would be fools not to do so.

 

[WaveJumper]

You can do my payroll .............. I promise to pay all invoices within 60 days, maybe

 

[mattk]

What alternative to payroll software were you thinking about?

Fingers

 

[mattk]

- is this a good idea

Yes. Everyone wants to be paid and payroll isn't going away any time soon.

- should I use payroll software

Definitely.

- what are my cost likely to be

Given that you will have to licence payroll software, you are looking up to £1m per year depending on how many payrolls and payment you are making. Then you will need people to run the software, a call centre to answer payroll related queries, a team for regulatory compliance and so on.

- I plan to use the commercial finance model (paying all employees on clients behalf and invoicing them after) will that work?

No. Typically the client will pay directly from their bank accounts via a BACS gateway in the payroll software you are running. You will simply invoice a per payroll/payslip amount.

 

[Ian J]

I’m thinking of starting an outsourcing payroll company in the UK. My potential clients would be recruitment agency’s that pay employees weekly and monthly within the healthcare sectors private and local council.

I plan to use the commercial finance model (paying all employees on clients behalf and invoicing them after) will that work?

Competition is huge. You are effectively competing against factoring companies and specialist recruitment back office concerns too

 

[Simba No More 9-5]

I’m don’t have any other alternatives but it’s either deciding to use the HMRC tool or a basic payroll package.

I’m trying to make my self competitive and using the factoring method would seem very attractive to potiental client. With that being said, yes the cost will be high for me.

My next plan of action is to register a company, write a business plan.

Meet with clients and sell different packages.

Low premiums for clients who send Bacs weekly & higher premiums for those who pay invoices at a later date

 

[Simba No More 9-5]

I’m don’t have any other alternatives but it’s either deciding to use the HMRC tool or a basic payroll package.

I suppose its one way to get clients. Just not a very good way and the moment the process is changed to be better for the business the clients would no longer have the good financial reason to stay.

I can think of several companies who would jump at being lent their wages bill. Any council would be fools not to do so.

I’m trying to make myself much more competitive.

 

[Newchodge]

I’m don’t have any other alternatives but it’s either deciding to use the HMRC tool or a basic payroll package.

I’m trying to make my self competitive and using the factoring method would seem very attractive to potiental client. With that being said, yes the cost will be high for me.

My next plan of action is to register a company, write a business plan.

Meet with clients and sell different packages.

Low premiums for clients who send Bacs weekly & higher premiums for those who pay invoices at a later date

The HMRC tool is, as it says, basic and will be of no use to you whatsoever. To start with it doesn't produce payslips, which your clients may not appreciate, as it is a legal requirement to give an employee a payslip.

 

[Newchodge]

is this a good idea

To respond to one of your original questions - it doesn't sound like it.

 

[Mr D]

I’m don’t have any other alternatives but it’s either deciding to use the HMRC tool or a basic payroll package.



I’m trying to make myself much more competitive.

Just don't take risks that are too great for you.
There's competitive and there's risky. Knowing the risks and factoring them into your business plan can help.

 

[Mr D]

I’m don’t have any other alternatives but it’s either deciding to use the HMRC tool or a basic payroll package.

I’m trying to make my self competitive and using the factoring method would seem very attractive to potiental client. With that being said, yes the cost will be high for me.

My next plan of action is to register a company, write a business plan.

Meet with clients and sell different packages.

Low premiums for clients who send Bacs weekly & higher premiums for those who pay invoices at a later date

And out of what you are charging you have to pay for whatever marketing you are doing. Plus your other running costs.

 

[Ian J]

I’m trying to make my self competitive and using the factoring method would seem very attractive to potiental client. With that being said, yes the cost will be high for me.

It isn't the cost that will be high but the funding requirements

If you take on a company turning over £500,000 who pay their staff weekly but don't get paid from their customers for six weeks you are going to have to lay out about £50,000 in wages before you get anything back so you'll need pretty deep pockets to look after just one client

 

[justintime]

What a great idea - you'll be unindated! DO NOT under any circumstances, pay the employees out of your own pocket, unless you have received funding from the client first. One non payer and you're screwed. Other than that, for software choose Moneysoft Payroll Manager (around £150 quid + VAT a year) or Brightpay (from £250 - £499 + VAT depending on the amount of clients) You may also need a BACS licence if you're doing the BACS yourself, and last time I looked (some years ago) it was about £4000.

 

[justintime]

You will have t register with the ICO and for money laundering.

Correct me if I'm wrong, but I don't think you need to register for MLR if just doing payroll.

 

[Mark Laurie]

The majority of payroll providers that handle recruitment/temp agencies have been doing it for years and have a self service portal for the "employees" to enter hours etc. and a file is then exported to an integrated payroll system after approval from the temp's employer. HMRC is a pile of poo and will not do what you want and I suspect others mentioned here won't either.

We are a payroll management company and never pay the employees, everything is done by BACS, bankfile or handled by the client.

If you are serious about starting a payroll business you need to make sure that you have another income stream as the money will not just roll in. Life ain't like that.

As previously mentioned this is likely to be 7 days a week 52 weeks a year, forget holidays and what happens if you can't work due to accident or illness, who is going to run the payrolls then?

In my opinion you need to go back to the drawing board and have a good think if this is really what you want to do.

 

[kulture]

Its a really bad idea. Major payroll companies have bespoke software so that they can run tens of thousands of payroll calculations in a very short timescale. As soon as you are dealing with large volumes the normal retail payroll software just becomes too cumbersome. They are simply not designed to run high volumes of employees and multi company payrolls.

 

[Simba No More 9-5]

Thank you all for the response. Very mixed messages but I appreciate. It’s not always a easy decision to make starting a new business. I hope to one day update you with how things are going.

 

[Newchodge]

Correct me if I'm wrong, but I don't think you need to register for MLR if just doing payroll.

I think you are wrong. You don't have to register for MLR if you run payroll service as a sideline to a different kind of non-accounting business.

 

[The Byre]

I do realise that English may not be your first language, but doing payroll is all about attention to detail and you have five grammatical mistakes in your first post and seven in your second. That kind of thing will not inspire confidence in your prospective clientele.

 

[justintime]

I think you are wrong. You don't have to register for MLR if you run payroll service as a sideline to a different kind of non-accounting business.

Hi Cyndy

Perhaps you could show me which part of the leglisation states payroll providers have to be registered who are not engaged in other accountancy services?

http://www.legislation.gov.uk/uksi/2017/692/regulation/11/made

 

[Newchodge]

Hi Cyndy

Perhaps you could show me which part of the leglisation states payroll providers have to be registered who are not engaged in other accountancy services?

http://www.legislation.gov.uk/uksi/2017/692/regulation/11/made

https://www.gov.uk/guidance/money-laundering-regulations-accountancy-service-provider-registration

 

[Financial-Modeller]

@Simba No More 9-5 You suggest that your clients will be local councils.

Your new business will have to go through the procurement process, which is time-consuming, so that you can join the list of providers who are they are approved to contract with. It will be very hard to meet thier criteria as a start-up.

You will effectively have to go through the same process with every council that you want to work with and you will have to do so when they determine that they are ready to receive tenders for the service. You can't just turn-up, pitch and take on the work.

 

[Financial-Modeller]

You may also need a BACS licence if you're doing the BACS yourself, and last time I looked (some years ago) it was about £4000.

This is correct, and getting a approval can take several months, but a start-up company would be better advised to access BACS capability under the umbrella of an approved BACS bureau. This can take a couple of days, and with far lower initial cost.

 

[Ian J]

@Simba No More 9-5 You suggest that your clients will be local councils.

Your new business will have to go through the procurement process, which is time-consuming, so that you can join the list of providers who are they are approved to contract with. It will be very hard to meet thier criteria as a start-up.

No. He said that his clients will be recruitment agencies that supply local councils

 

[Simba No More 9-5]

That’s correct recruitment agency that have gone through the procurement processes already.

No. He said that his clients will be recruitment agencies that supply local councils

 

[Financial-Modeller]

No. He said that his clients will be recruitment agencies that supply local councils

Apologies @Simba No More 9-5 I misread your post.

 

[Caroline_Pegden]

There's lot of competition in this space.

Have you done some competition analysis, looking at what others are doing in the space?
What will you do differently from your competitors?
How will you market your services?

Best of luck!
Caroline