Payroll outsourcing: What every accountant should know

Written by

Parth Shah

Managing Partner

It is becoming more common than ever for companies to have a global workforce, especially now that many people work remotely. It is the responsibility of businesses to make sure everyone on their team is paid on time and in a manner fully compliant with local regulations.

As an accountant, you will agree companies of all sizes, types, niches, and locations can benefit from a complete payroll outsourcing service. That is why they have hired you! However, the payroll function is far from simple.

From tax calculation and wage policy implementation to HMRC liaison, there is a lot to do even for accountants. Moreover, your client businesses may not necessarily have their own branch offices in every country.

That means you will have to figure out how to process payments in different locations and currencies seamlessly. Sounds tedious, right? That is where payroll outsourcing for accountants enters the picture.

But what does it mean?

Simply put, payroll outsourcing refers to using a third-party service provider to manage the task of processing payslips, paying employees, including admin work and compliance. It allows workers in domestic and foreign locations to be paid on time and consistently.

It is important to note that a payroll service provider in a different country will not provide local employment records on behalf of the company. The company still has to handle local incorporation in its foreign locations as well as all the non-payroll aspects of hiring foreign-based employees.

Given the complexity of the function, you might end up stalling your accounting firm’s growth if your staff spends more time and energy managing your clients’ payroll than offering advisory services such as forecasting or tax planning. It makes sense to outsource payroll processing to industry specialists such as Stellaripe.

What payroll functions can be outsourced?

Depending on the requirements, an accounting firm can choose which of its clients’ payroll and related functions to outsource to a third party. Typically, a payroll outsourcing firm might handle the following tasks for accountants:

  • Administering employee benefits
  • Filing the necessary government forms
  • Calculating and withholding relevant taxes
  • Withholding pension and social security contributions
  • Managing payroll and calculating employee pay amounts
  • Depositing salaries into employee bank accounts or issuing checks

How does an accountant know when to outsource payroll?

In many cases, the time and cost of setting up an in-house team for handling the clients’ payroll function are not feasible, especially for a small accountancy practice.

There are other factors to consider, too, such as the number of employees on every client’s payroll, whether the company has its local entity in the foreign country, how complex the foreign country’s laws are, and so on.

Large companies can also benefit from payroll outsourcing, especially in cases where their employees are being sent abroad on international assignments. That demands a higher level of expertise, and if you are handling such accounts, you can outsource parts of the job.

Advantages of payroll outsourcing for accountants

There are numerous benefits to outsourcing payroll for accounting firms. It is a simple, cost-effective way to manage a necessary but often cumbersome administrative task, for starters. The advantages of working with a payroll service provider include:

  • The time and energy of the staff reserved for more strategic tasks
  • Reduced administrative burden on your team related to personnel changes, alterations to compensation structure, or government report filing
  • No need to worry about late payments, filing mistakes, or tax compliance penalties
  • Satisfied clients around the world as a result of timely, accurate payments to employees

How to choose a good payroll service provider

Payroll is a critical part of any business, and you do not want to disappoint your clients by handing over their accounts to an outsourced partner that does not do a good job. Here are a few points to consider when choosing a payroll provider:

  • Make sure your provider offers the right level of service. Understand what you are paying for and how you will need to support them to do their job. Stellaripe, for instance, takes care of end-to-end payroll processing, auto-enrolment, CIS, client liaison, HMRC correspondence, and reporting – all under the same roof.
  • Your provider must have proficiency in commonly used payroll software such as FreeAgent, Xero, QuickBooks, and so on. Stellaripe is tech-savvy, and with a little bit of training, we can work with most unique payroll tools.
  • If you want to migrate to a new payroll software, your service provider must have the capability to do so.
  • Ask what processes the service provider has for checking and updating employee information. Do they have a proper reporting system?
  • Data security is a big deal, and ever since GDPR entered the picture, its significance has doubled. Ensure your service provider has all the safeguards to ensure your client data is secure.
  • Find out how adept the outsourced partner is in handling pension portals. Can they help gain real-time financial visibility with tools like Smart Pension and True Potential?

Questions to ask when outsourcing your payroll to a third-party vendor

Payroll outsourcing can provide manifold benefits that outweigh the cons. For it to work, however, your accounting firm needs to do its homework and select the most experienced and reliable payroll outsourcing service provider available. Some of the questions to ask up front when choosing among various options are:

  • Do you help with generating and filing tax forms?
  • Do you calculate tax, pension, and social security withholdings?
  • What are the essential services you offer? What add-ons are available?
  • What measures do you take to secure employee and compensation data?
  • How many payroll clients do you have, and how long have you served them?
  • What are your rates per employee for running payroll? Do you offer discounts for higher volumes?

Over to you

In conclusion, outsourcing payroll tasks offers significant advantages to any accounting firm regarding time saved, laws complied with, and processes accurately handled.

Assess your needs, work out a reasonable budget and explore the various engagement models within which you can outsource. Choose a service provider most aligned with your needs. You will take a breath of relief with the proper support!

If you are looking to change how you do payroll for your clients, the time is now. Ring us at 020 3475 3537 or drop your details here to book a free consultation around how we can keep all your payroll woes at bay.

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