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Outsourcing client payroll services – why and how?

25 Apr 2024

Businesses commonly outsource tasks to external organisations that operate within specific fields. There are several advantages of doing so, not least of which include saving time, increasing internal efficiency and improving quality of the tasks in question. When it comes to payroll, many organisations – regardless of size, industry or structure – benefit from outsourcing to those considered experts in the area. There are several aspects to consider when deciding whether this could be right for your clients.

What is payroll outsourcing and how does it work?

Put simply, outsourcing payroll means subcontracting another organisation to manage the process of calculating and paying your clients’ employees. It means that you needn’t look after this aspect in-house and can leave it to individuals with expertise specifically in this area. They are also known as a ‘managed payroll provider’ or ‘payroll bureau’.

It’s been estimated that around 60% of businesses in the UK already outsource their payroll. [i] And this is a growing trend for accountants.

A good payroll provider will make setting up easy. You or your client will need to provide the necessary staff salary and bank information, but the payroll provider will do the rest.

From here, the payroll provider is responsible for ensuring your clients’ employees are paid correctly, processing payroll according to all relevant legislation. They will also calculate and deliver statutory sick or maternity pay, as well as creating and sharing employee payslips and end of year processing like P45s and P60s. If the payroll involves additional tasks or processes, the provider you outsource to will be capable of performing all of these on your behalf as well – the service is tailored specifically to your and client’s needs. They can also help communicate changes or options to your clients when applicable.

What are the benefits of outsourcing payroll?

As may already be apparent, there are many benefits to outsourcing your clients’ payroll. According to a 2019 YouGov survey,[ii] the biggest reason companies outsourced payroll was for better results (almost 50%). More specifically, the benefits of outsourcing payroll include:

  • Saving you time and money – the cost of processing payroll internally is often much higher than a managed payroll provider’s fees. That’s because the process takes considerable time, especially when being performed by someone who is not specifically trained and experience in the field. Outsourcing also frees up internal staff to complete other work for greater organisational efficiency.
  • Increased accuracy – with specialist automated technology, more time and greater experience in the field, a payroll provider will ensure fewer errors and increased accuracy of payroll for maximum peace of mind. The last thing you want is to pay a client’s employees the wrong amount, or worse, miss a payment altogether. Outsourcing to a dedicated provider prevents these errors from happening and ensures a robust and positive employee experience.
  • Compliance with the latest regulations – there are literally hundreds of pieces of legislation regulating payroll in the UK. Keeping up with them all and complying is a full-time job in itself. When outsourcing, this becomes their responsibility, saving you even more time and hassle, while minimising the chance of you – or your client – falling foul to any financial, reputational or legal consequences of getting payroll wrong.
  • Optimise reliability – most small businesses have a single person managing payroll, but what happens when that person is off sick, or they leave the company? By outsourcing the entire payroll process, you avoid the enormous disruption that can be caused with internal staff changes.
  • Support business growth – off-the-shelf payroll solutions are great for small businesses, but they become significantly more complex, time-consuming and expensive as the company grows. The risk of errors also increases. By collaborating with a payroll expert, they will adapt their services to you and your clients more effectively and cost-efficiently, supporting your business development.

How do you choose the right payroll provider?

As is true with all your business partners, choosing the right payroll provider is integral to making this work as effectively as possible. This will require some research as you need to know all your options and what each provider may offer your organisation. A good payroll provider can bring added value and increase customer retention for your accountancy firm.

It can be useful to arrange a meeting with potential candidates or a demonstration of their services/software to see how easy they would be to work with. In particular, explore how easy it would be to communicate with the team and how fast you could expect a response, as well as the type of software and security they utilise.

Any client feedback available via online reviews will also help guide your decisions. Other than this, it’s essential to make sure they’re GDPR compliant and have all the necessary accreditations or certifications.

Are you ready?

If you’re looking for a more reliable, efficient and hassle-free way to manage your clients’ payroll, get started today. Should you have any questions, the team at Wagemate would be very happy to share how we work and how easy we make outsourcing the entire payroll process.

For more details about Wagemate, please visit wagemate.com

[i] Cybercrew. Genius Outsourcing Statistics UK [2024]. February 2024. https://cybercrew.uk/blog/outsourcing-statistics-uk/ [Accessed April 2024]

[ii] YouGov. Supplier demand? Over three-fifths of small businesses outsource key services. October 2019. https://yougov.co.uk/economy/articles/25811-supplier-demand-over-three-fifths-small-businesses [Accessed April 2024]