Topics: Industry, Outsourcing, Payroll, Payroll outsourcing, practice strategy

5 Reasons How Payroll Became a Prime Candidate for Outsourcing during WFH

4 MIN READ | Posted on May 11, 2021
Written By Shweta Pandey

5 Reasons How Payroll Became a Prime Candidate for Outsourcing during WFH

A nuisance, a burden, or an additional time-consuming service giving meagre returns – payroll could often be regarded as a cost & time-intensive offering in the accounting industry.

However, since the onset of the demand, two new trends became dominant in the accounting industry. With the launch of the Coronavirus Job Retention Scheme, the demand for payroll services has spiked for most accounting firms. And with remote working becoming the norm, more accountants warmed up to the idea of outsourcing their compliance work outside of the UK.

So, as we ventured in 2021, here at QXAS, we sought to analyse how the perception of payroll & outsourcing has changed among accountants. We surveyed 26 accounting firms across the UK, where the practice owners have been regularly outsourcing the payroll process to understand the impact of payroll outsourcing on their firms. However, what we found from the report was shocking and set the stage for breakthrough strategies for accountants in 2021.

One of our major findings was how payroll became a prime candidate for outsourcing during WFH and how it has transformed the not-so-profitable payroll service into a profit magnet.

Here are the 5 primary reasons making accountants consider payroll outsourcing services as a crucial part of their strategy to propel their firm forward and race towards more profits.

1. The Launch of CJRS & the Changing Percentages

Our research titled ‘Trading Strategies: Payroll Outsourcing Trends 2021revealed that a major contributor to the spike in payroll outsourcing business was the CJRS scheme and its contact iterations.

As per the Coronavirus Job Retention Scheme, the government took the responsibility of paying a ‘certain percentage’ for the hours not worked. However, the catch was that this ‘certain percentage’ kept changing throughout the year making accountants put extra time and effort to make sure of timely and accurate payroll.

The multiple iterations in CJRS led to the need for more resources and training for staff members making payroll more cumbersome than ever.

The solution? Either accountants had sought to hire specialist resources which could’ve been both cost & time-intensive or they could outsource to specialist payroll outsourcing providers offshore. Our research shows, the latter was the dominant choice.

2. Bump in Payroll Profit Margins by 5%-40%

Our research suggests that more than three-quarters of accountants (87%) who outsourced payroll witnessed a guaranteed spike of anything between 5% – 40% in their profit margins.

The spike in the profit margins is reflective of the of the socio-economic conditions of the past six months. It shows the increased demand of payroll outsourcing services and the challenges that came along for accounting practices being run from home.

These may include keeping up with iterations in the furlough scheme, complexities of furlough calculations, and the struggle to process payroll accurately for clients.

Here’s a workflow of how outsourcing helps improve profits margins, invest profits into improving processes & inviting more clients with payroll /upselling payroll work to existing clients.

3. Outsourcing made way for strengthening the WFH Processes

We all know that for most accounting practices the pandemic heightened the need to equip in-house teams to cope with evolving client needs & following digital processes implemented during WFH.

Our research revealed that almost half of 87% of our respondents who profited from payroll outsourcing, invested their profits into improving processes (50%) in their practice, possibly in an effort to strengthen practice management during WFH. The next area of investment was toward upskilling team members (37%) and exploring new technology platforms (12%).

Now when accountants have more time and increased profit margins to invest in their practice, they get the freedom to strengthen their WFH processes. They are now focusing more on the two most important pillars of their accounting practice: people & processes.

4. Freed up Time for Focusing on Clients

The pandemic propelled accountants to adopt a client-focused approach for SME business clients in the UK. The sense of intense uncertainty made accountants step up to guide and advise their clients on seeking government financial support, forecast cash flow and advise on the right financial moves – as their clients’ businesses hit a stumbling block due to social distancing measures & the back-to-back national lockdowns.

Our survey results reveal that outsourcing the payroll process helped 68% accountants ‘focus on clients’ by investing those saved-up hours.

Clearly, between 2019 to 2021, accountants have begun re-prioritising their focus from just service delivery to now also building relationships with clients.

5. Outsourcing Payroll had a Ripple Effect of Benefits for Clients

95% of accountants unanimously agreed that outsourcing payroll had a positive impact on their clients & businesses.

Payroll outsourcing has not only benefitted accounting practices but also had a positive impact on their clients & businesses. While accountants utilised the saved time to build better relationships with clients, saving costs and improving profitability, clients also prospered during back-to-back national lockdowns.

Our survey clearly suggests that payroll outsourcing has allowed accountants to free up more internal resources and made them invest their profits into improving digital processes and their relationship with clients.

Making Payroll Profitable in 2021

Clearly, 2020 was the year of payroll and 2021 will follow a similar trend where more SME businesses/clients will look for their accountants to offer payroll within their packages in the coming days.

One of our main objectives behind this research was to have accountants who have borne successful payroll outsourcing outcomes share their best practices with accountants who are considering outsourcing the payroll process but don’t know where to start.

To know more about how payroll outsourcing can benefit your business, call us at +44 208-146-0808 or drop us an email at [email protected].

 

shwetapandey

Creative and enthusiastic, Shweta turned into a marketer for her independent ventures long before she formally joined the realms of QXAS marketing team. Alumni of the University of Delhi and MICA - school of ideas, and with experience in creating content for multiple niches, Shweta now creates content and strategies to chart the changing landscape of the accounting industry.

Shweta Pandey

Creative and enthusiastic, Shweta turned into a marketer for her independent ventures long before she formally joined the realms of QXAS marketing team. Alumni of the University of Delhi and MICA - school of ideas, and with experience in creating content for multiple niches, Shweta now creates content and strategies to chart the changing landscape of the accounting industry.

Unauthorized copying or plagiarism of our content is a violation of intellectual property rights. We take such matters seriously and will pursue legal action to protect our original work. Anyone found engaging in such activities will be held accountable under applicable laws.

Originally published May 11, 2021 10:05:34, updated Feb 09 2024

Topics: Industry, Outsourcing, Payroll, Payroll outsourcing, practice strategy


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