Planning to Outsource Payroll? Keep This Ultimate Payroll Outsourcing Evaluation Checklist Handy

07 September 2024

Accountancy practices in the UK have functioned a certain way for several years. Traditionally, accountants preferred managing complex compliance tasks, such as payroll, in-house for several reasons. However, with technological advancements and the need for automation, coupled with the growing challenges the accountancy sector faces, accountants are now turning to payroll outsourcing.

• 1. Compliance
• 2. Administration
• 3. SWOT Analysis
• 4. Scope
• 5. Budget
• Next Steps

The scope of payroll outsourcing can be estimated from the figures in IMARC Group’s report on payroll trends. The study valued the global payroll outsourcing market at USD 9.7 Billion in 2024 and estimated the figure to reach USD 15.5 Billion by 2033.

With more and more companies looking to outsource their payroll with top UK payroll outsourcing providers, it is important to stay ahead of the game and outsource right. However, the process of outsourcing is not always easy. It can, in fact, be quite exhaustive and bewildering.

To help accountants understand if outsourcing is appropriate for their practice and make the right decision, we have compiled a comprehensive payroll audit checklist UK. Each point details a set of questions that accountants must evaluate and answer as a simple YES or NO.

1. Compliance

Payroll is all about compliance, and your firm’s understanding and preparedness for it is a major factor contributing to your outsourcing decision. Evaluate your firm’s compliance capacity and the average time your team spends on it.

Here are the important compliance-based questions you must answer to determine if your firm really needs to opt for payroll outsourcing services.

• Do you constantly monitor evolving payroll legislation and adjust your processes to ensure compliance?
• Are you up to date with all related legislation, such as auto-enrolment?
• Is your internal team fully equipped with knowledge of PAYE, RTI and other regulatoins?
• Do you have the best specialist software to process your clients’ payroll requirements?

2. Administration

Each accountancy practice varies in size and administrative capacity. Small and medium-sized practices are more likely to experience gaps in administration than large corporations. Your firm’s admin capacity largely determines the volume of work you can get done in a specific period.

To evaluate your firm’s admin capacity and whether your need to partner with a UK outsourcing provider, ask yourselves these questions.

• Do you always process payroll on time with 100% accuracy?
• Has your firm ever borne costly financial penalties for errors or non-compliance?
• Are you always able to answer payroll-related queries from your clients immediately and accurately?
• Are you putting valuable, strategic practice goals on hold to complete repetitive administrative tasks?
• Do you have the time you need to invest your skills and talents fully in your practice’s strategic goals?

3. SWOT Analysis

A SWOT analysis is practically applicable to any major business decision. It can be a crucial guiding tool for accountants to assess their firm’s strengths and weaknesses and focus on developing the latter. In the context of payroll outsourcing, accountants should conduct a SWOT analysis to determine their pain points with payroll processing.

Here are a few questions you can ask yourself to understand your firm’s standing.

• Does your internal team specialise in end-to-end payroll processing or only manages a part of it?
• Do you spend a lot of time training your team on payroll management?
• How many payroll clients does your firm currently have?
• Is your firm adept with the latest software and timely reporting?

4. Scope

Once you have evaluated your firm’s compliance and administrative capabilities and conducted a SWOT analysis, it is time to assess your firm’s outsourcing scope. This is a crucial factor in determining if your practice requires payroll outsourcing services at the moment and is ready for it.

To assess your practice’s scope and readiness for outsourcing, try to answer the following questions.

• Does your firm already offer payroll services or is planning to add it as an add-on offering?
• Do you plan to secure new clients for your firm’s payroll service?
• Is scalability a long-term or short-term goal for your accountancy practice?
• How many outsourced professionals would you require?
• Do you plan to outsource on a project basis or for a longer duration?

5. Budget

Last but not least, consider your firm’s budget before you partner with an outsourcing provider for payroll services for accountants.

Here are a few questions to help evaluate your accountancy practice’s budget, financial goals, and outsourcing capacity.

• Do you spend a lot on recruiting qualified payroll specialists to your team?
• Do overhead costs such as employee benefits and infrastructure override your estimated hiring costs?
• Do training and skill development put additional pressure on your finances?
• Is your practice financially capable of onboarding a full-time outsourced resource?

Next Steps

Once you have answered the above questions, you are very close to making the payroll outsourcing decision. You now know your firm’s capacity and pain points in exact detail.

The next step is to assess whether your firm’s issues can be resolved with outsourcing. Payroll outsourcing offers numerous benefits to accountancy practices and increases their capacity to scale quickly. Here’s what you can expect from an outsourced payroll provider.

Lastly, consider this final set of questions to make your outsourcing decision.

• Does payroll outsourcing sound like a sustainable solution to your firm’s challenges?
• Do you think you can save significant costs with outsourcing?
• Do you look at outsourcing as a permanent solution to your staffing woes?
• Does your firm need to automate its payroll processing for greater efficiency and accuracy?

If you answered YES to most of the questions, outsourcing might be an appropriate solution for you and your practice. Start with a no-obligation payroll outsourcing trial with QXAS and get a custom pricing quote tailored for your practice. To learn more about our services, call us at +44 208 146 0808 or drop an email at [email protected]. You can also schedule a meeting with our expert directly here.

Get a PDF version of your Payroll Outsourcing Evaluation Checklist here.

Mitul Soni

Mitul is a highly experienced UK Payroll professional with over 14 years of expertise in payroll processing, compliance, client management, and team leadership. He is recognised for ensuring seamless compliance with UK payroll regulations and building strong client relationships through the delivery of accurate, high-quality payroll services.

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