THE old Glasgow dismissal of strong women - ''I wouldn't like to take an opened wage packet home to her'' - illustrates a simple truth for most employees. Pay packets are important.

Few workers now receive the traditional brown envelope with the notes neatly folded in beside the payslip, but even with sophisticated methods of payment, nothing is guaranteed to outrage the workforce more than mistakes or delays.

With the risk of upsetting employees combined these days with the threat of tough penalties for failing to comply with a growing regulatory burden, it is no wonder many small and medium-sized enterprises are using outsourcing to pay others to take the strain.

Alison Smith's Activpayroll processing business is not focused exclusively on SMEs but increased demand for its services from smaller fry is one of the main drivers putting the firm on course to treble turnover to (pounds) 3m this year.

And Smith, who is managing director of Aberdeen-based Activpayroll, is evangelical about getting it right. The company handles outsourced payroll for employees across the UK and continental Europe, producing in excess of 350,000 payslips per annum for more than 300 clients.

''It is only professional for a company to ensure accurate and reliable compensation for their employees,'' she said in between meetings which were about to produce a lucrative contract from a North Sea oil incomer.

Smith, who joined the relatively small but fast-growing family operation as an office junior, is steeped in the mysteries not only of payroll, but dealing with the Inland Revenue. She is now on a five-strong UK committee enabling employers to communicate electronically with the Revenue, as required by recent legislation.

''We invested heavily in this field four years ago,'' she said. ''We were the first to do so, and it has gained us a lot of recognition.''

Activpayroll emerged out of an accounting business operated by Smith's parents in Aberdeen for the past 25 years.

As oil companies and contractors sought increasingly to outsource administrative functions, payroll became more important, until the function was branded as a separate entity three years ago.

Last October, Activpayroll became a standalone company and Smith's parents sold the original business. Her father is finance director, her mother HR director and her brother is business development director of the firm on which they decided to focus.

It had a turnover of just over (pounds) 1m to March this year on which it posted a pre-tax profit of (pounds) 200,000. This year Smith is predicting 200% growth in sales on the back of a number of new contracts, including one for (pounds) 1m alone.

Smith is building the company infrastructure into specialist areas, dealing with

sectors such as construction, oil, and retail. However, she is also focusing closely on the SME sector, which is famously overburdened with administrative tasks.

''With small firms, the managers get all involved if there is a payroll issue,'' she said, ''whereas larger firms have bigger administrative departments. In either case, to get it right is very important.''

Activpayroll can either improve an existing internal process or remove the function completely, she said. ''We deal with all the employee tax questions, and if an employee has a query, the employer can point him towards us. Every employee gets a pin number and a card and can contact us directly through the web.''

Smith said many employers are not looking to outsource primarily as a cost reduction measure, but for management information. Activpayroll offers management reporting, workforce accounting, tracking of people, and overseas payroll.

''In retail, for instance, staff is the biggest overhead, and an employer has to be able to rely on information about them,'' she said. ''Some 80% of payroll processing is in how you collect the data, and 15% of errors occur in that process.''

The biggest change in payroll systems, said Smith, was in the way the onus is now on the employer to comply with ever more stringent regulations backed by ever more swingeing penalties and fines.

Electronic legislation will force more revenue inspectors out into the field to check compliance.

Oil is still an important sector for Activpayroll, although Smith acknowledges she is some distance from winning the 35,000-man payroll contacts for major players such as BP. Business is more likely to come from small teams which previously worked for giants such as Halliburton but have now set up their own businesses. She is winning construction business in Glasgow and investment company business in London.

Consultancy is also becoming more important and Smith wants to become more involved in due diligence, to advise companies involved in takeovers about their potential liabilities.

PAYROLL PITFALLS

The main areas where employers can slip up include:

l Filing late returns with the Inland Revenue.

l Not keeping up to date with the many changes in payroll

taxation.

l Over-paying employees when processing payroll.

l Not having proper processes in place to calculate hours worked.

l Incorrect reporting for employees who have been

made redundant.

l Failing to implement changes made in 2003 to maternity and paternity pay.

l Inadequate arrangements for coping with sickness in the payroll department.

l No payroll confidentiality.