Case Studies

Option B The People Products Solution

Case Study

Company B, is a small publishing company, based in Liverpool.

The Company started with five employees, and the Managing Director decided to process the payroll himself using an 'off the shelf' payroll package. His payroll knowledge was non-existent and he had not given a thought to sickness or holiday cover. He had no BACS facility so couldn't process payments directly into employee's bank accounts. Instead, each Friday, he gave every employee a hand written cheque made payable to cash - and allowed them time to go to the bank to collect the money.

Over the next 7 months he expanded rapidly and his payroll grew in size to 30 employees - increasing his workload six fold. Payroll year-end presented his first big problem. He had no idea what to do, so he did nothing. At the same time he received notification from the software company that he needed to upgrade the payroll to take into account the budget changes. He did not understand the implications of not upgrading, and because of the cost, decided not to bother.

Payroll continued for a futher 8 months. Each pay period became more problematical. What seemed like an easy job was becoming a nightmare. Each week, the payroll was taking longer & longer and soon the process was taking nearly a whole day. At his hourly rate of £40 per hour, this was costing him £300, and 7.5 hours when he wasn't concentrating on his business. Hand written cheques were costing 60p each through his bank account - a futher £24 each week.

Soon reminders from the Inland Revenue started arriving with £100 fines because the tax year-end had not been submitted.

Christmas was approaching and the staff needed holiday pay for the time off. He needed a holiday too so had booked a two-week break to go skiing, but who would process the payroll in his absence?

It was at this point that he decided he needed professional help & approached Exact HR through their website.

The payroll team went along to discuss his requirements. He wanted a service whereby:

1. He could e-mail any non-standard hours each week, along with any other bonus or holiday-pay payments. E-mail was important to him as it meant he didn't need to leave his desk, and it was more secure than sending faxes.
2. We would e-mail a payroll report back to him so he could still check & sign off his payroll before it was run.
   
3. His employees were paid directly into their bank accounts.
   
4. We would take care of the forthcoming holiday pay for the Christmas period.
   
5. We would take over the calculation of his monthly payments to the Inland Revenue - all he wanted to do was write them a cheque.
   
6. We would produce all the reports needed by his accountants.
   
7. We would process a basic payroll for his staff in his absence - i.e. he no longer had to worry about sickness or holiday cover.
   
8. We would deal with the fact that he had not upgraded his payroll after the budget changes.
   
9. We would take away the burden of the forthcoming payroll legislation - Tax Credits, Paternity Pay, Adoption Pay etc.
   
10. We would prepare & submit a year-end return to the Inland Revenue for the previous tax year.
    He wanted all this 'yesterday'!

Arrangements were made to collect each employee's:

• Payroll static data (employee personnel records)
• Standard hours & pay rates
  
• Pay & tax to date figures

This information was input onto Exact HRs payroll system. Upgraded tax codes were input for each employee. A parallel run was not required as the MD knew the tax & NI deductions had been incorrect. Two weeks before Christmas the payroll went live. All the employees received a tax and NI refund in time for Christmas, plus their holiday pay in advance, all correctly taxed, as we were able to advance the tax weeks on the payroll. They were delighted!

Soon after, we completed his tax year-end, and based on our pricing policy the cost to him was only £75 (- by the time he contacted Exact HR the fines were running at a total of £500!)

The payroll now runs as follows:

1. The MD prepares a simple spreadsheet for additional hours worked in the previous week and e-mails it to Exact HR on Monday morning.
   
2. These changes are input & the payroll is processed.
   
3. The payroll report is e-mailed back to the MD by 5 p.m. the same day. He now has until 12 noon on Wednesday to check the detail & sign the payroll off.
   
4. Exact HR takes care of the other payroll processes - calculating tax & NI, producing payslips, sending BACS payments, printing payslips & reports etc.
   
5. Payslips are posted back to him for Thursday. They are now left in a central place within the office for employees to collect for themselves.
   
6. BACS payments credit employee's bank accounts on Friday.
   
7. An invoice is sent to the MD for his payroll processing costs, which he passes on to the purchase ledger.

Exact HR keeps a tally of the money due to the Inland Revenue, and forwards a remittance advice at the end of each month for him to send with his cheque.

For this service, Exact HR charges him: 30 & £2.50 = £75 per week. To him this represents:

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