Payroll outsourcing: What every accountant should know

Written by

Parth Shah

It is becoming more common than ever for companies to outsource functions that are essential to running their business but peripheral to their core business and expertise. In-house accounts and payroll teams are a luxury that many businesses feel are a stretch too far for their bottom line. But, however they resource it, it is their responsibility to make sure everyone on their team is paid on time and in a manner fully compliant with the regulations.

As an accountant, you no doubt have clients that approached you about taking on their payroll.  However, the payroll function is far from simple and if you have not got the people in place in your own team, then it is likely you have shied away from taking this part of their business.  Perhaps now is the time to reconsider.

How? From tax calculation and wage policy implementation to HMRC liaison, there is a lot to do even for accountants. The sensible way to take this forward is to assess the practicalities of payroll outsourcing for accountants. Adding a new service without taking on the overheads is a quick and straightforward way to increase your turnover.

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 to be paid on time and consistently.

Choosing a specialist outsourced payroll provider means you will be working with a team with all the expertise of UK payroll, who will deliver the service on your behalf.

What payroll functions can be outsourced?

There are a number of tasks which form a part of the payroll process and a good outsourcing business should be able to provide all of these with arrangements made separately to make the actual salary payments:

  • Auto-enrolment
  • Administering employee benefits
  • Creating payslips, P45s and P11Ds
  • Year-end processing, including P60s
  • Calculating and withholding relevant taxes
  • Salary calculations including part-time workers
  • Calculating sickness, maternity, paternity pay, etc.
  • Withholding pension and social security contributions
  • Creating and submitting the documents HMRC requires
  • Running supplementary payroll for late starters or leavers
  • Paying salaries via BACS transfer or other appropriate means

All functions require a high level of knowledge of current legislation together with the terms and conditions of employment a business provides to its employees. You will also find that all good outsourcing companies use primary UK payroll software such as Brightpay, Intuit or Xero.

SO, How does an accountant know when to outsource payroll?

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 currently working on the area can be focused on more strategic tasks
  • Reduced software costs as you will be able to remove the payroll software from your books
  • No need to worry about late payments, filing mistakes, or tax compliance penalties

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?
  • 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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