search
Payroll computation is complicated. Although each company handles its payroll differently, there is a systematic process for calculating an employee’s payroll. This involves a series of calculations and considerations, understanding payroll accounting is highly difficult.
Every country has different laws and legislation for payroll. This is per the taxes payable by employees, nature of employment, benefits offered by the government, and more. Besides, HR professionals also take into account critical employee data, such as attendance and leaves, expenses, compensation, etc., while calculating payroll.
Owing to the complexity of payroll, HR professionals alone may not be equipped to manage it. Companies need a dedicated team of payroll administrators to understand its nuances and process it efficiently. This is one of the primary reasons companies and accountants depend largely on UK payroll service providers.
Payroll accounting involves numerous challenges including regulatory changes, talent and time crunch, technological requirements, and frequent errors. These complexities can be dealt with efficiently using the latest technology and HMRC-approved payroll software, and getting external help in the form of payroll outsourcing.
In this blog, we will break down UK payroll and explore some surefire ways to battle its complexities while not losing focus on your practice.
In order to manage a company’s payroll, it is important to understand its most important components. As an accountant, you are already familiar with this, but there’s always a chance of oversight if you do not have a checklist handy.
Here’s a quick checklist to help you compute your clients’ payroll.
No two employees’ salaries are the same. Thus, payroll cannot be generalised. Payroll administrators calculate each employed individual’s wages separately, making it a highly time-intensive process. Accountants, therefore, heavily rely on payroll software, automation technology, and payroll outsourcing services to get the job done.
Let’s address some of the common challenges accountants encounter with payroll management.
Governments periodically make changes to the legislation pertaining to taxes, grants, and other important schemes, which have a direct relation to payroll. These regulatory changes are difficult to comprehend and regularly keep track of.
The accounting world also faces a challenge with respect to technological advancements. Payroll has evolved massively in recent times, thanks to the latest technology, such as cloud computing and AI. However, working with these technologies requires a great deal of expertise.
Moreover, accounting firm owners must train their teams before integrating these changes into their processes, making it both time- and cost-intensive.
Staffing is currently a global issue in the accounting industry. A 2024 ICAEW survey of managing partners shed light on the growing crisis, with 67% citing recruiting qualified staff as a problem. Further, 60% of the respondents mentioned retention as a major challenge.
Fueled by staffing shortages, time crunch is another major issue facing accounting firms. Since payroll is a cumbersome task, a lack of time and resources can significantly affect the payroll process.
Lastly, payroll has no scope for errors. Even the slightest mistake in this task can result in dissatisfied clients, unhappy employees, and hefty fines from HMRC.
Also Read: The Biggest Payroll Challenges and How to Overcome Them
Considering the complexity of payroll and the challenges facing the accounting world, accountancy firms have two ways out – relying on the latest technology or outsourcing payroll services.
The future of payroll is technology. Modern payroll software helps automate complex payroll calculations so that you do not have to manage them manually. Moreover, with the help of technology, these software solutions also capture and implement the changes in legislation.
Technology, thus, helps minimise errors in payroll and makes it an efficient and hassle-free process. Moreover, it also saves time and effort on the part of the payroll administrator.
While technology is a viable solution to combat payroll challenges, it can be cost-intensive to set up. Therefore, an easy way to tackle all your payroll challenges is to outsource payroll.
Outsourcing gives accounting firms access to global talent, thus helping them scale effectively whenever required. Outsourced payroll professionals have sound technical knowledge, vast experience, and up-to-date knowledge of the changing legislation. By outsourcing payroll services to an industry leader like QXAS, you can create capacity for your firm and provide top-notch services to your clients.
To discuss your firm’s challenges in detail, book a free consultation with one of our expert advisors today. To learn more about our services, call us at +44 208-146-0808 or drop an email at [email protected].
Payroll is complex and prone to errors. You need specialised expertise and a dedicated team to handle this task for your clients, which may eat into your firm’s capacity. This is where technology and outsourced payroll services play a crucial role.
Ensure you invest in good payroll software that can automate compliance for your firm. If you still use an offline tool, now is the time to shift gears and switch to a cloud-based solution. Additionally, consider outsourcing to empower your team with the right support and make payroll accurate, error-free, and profitable.
Understanding payroll accounting is important because it ensures accurate employee pay, correct tax and NI deductions, and compliance with HMRC rules. It also helps accountants advise clients on cost management and statutory reporting.
Knowing payroll accounting helps accountants correctly calculate tax, National Insurance, and pension contributions. It ensures accurate RTI submissions, timely payments, and avoids penalties from HMRC for non-compliance.
Some key components of payroll accounting include calculating gross pay, tax and National Insurance deductions, pensions, benefits, and overtime. It also covers payroll reporting, RTI submissions, and compliance with HMRC rules.
In UK payroll accounting, record gross salaries as expenses, deduct PAYE tax and National Insurance as liabilities, and post net pay to cash/bank. Employer NI and pension contributions are also recorded as liabilities until paid.
For small businesses, payroll accounting is simpler with fewer employees, straightforward deductions, and often manual or basic software processing. Large organizations handle complex structures, multiple pay types, pensions, benefits, and require robust software and compliance controls.
Suvarna is a seasoned payroll professional with over 10 years of experience in payroll processing, compliance, HMRC regulations, and pension administration. She is skilled in staff training, leading high-performing teams, and delivering accurate, high-quality payroll services tailored to client needs.
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.
Explore outsourcing solutions, request a free trial or discuss your practice’s needs with our expert consultants.
Book a Virtual Meeting 
Book an In-person Meeting 