The Two Sides of a Coin: The Pros and Cons of Payroll Outsourcing

Payroll is partly an accounting component and partly a compliance issue. It involves several complex calculations and an in-depth understanding of the latest payroll regulations. This complexity makes it one of the most widely outsourced services by accounting firms in the UK. As its complications continue to rise post the coronavirus pandemic, payroll outsourcing is a trend to look out for in 2022 and the years to come.

Payroll has always been complicated and time and resource intensive. Moreover, the global coronavirus pandemic in 2020 significantly impacted payroll as the UK government introduced schemes such as the Coronavirus Job Retention Scheme (CJRS) which massively affected salary calculations. Ever since, payroll has become increasingly tedious and prone to error.

Outsourcing payroll is a significant decision for an accounting firm as it can turn around the face of a business. However, before outsourcing, it is essential to understand the pros and cons of the service and how it can impact your firm.

Pros of Payroll Outsourcing

Permanent Solution to Talent Gaps

The last few years witnessed a significant rise in accountants quitting firms, especially small practices, and switching to large corporations. We are in the midst of the Great Resignation and the talent gaps keep getting worse each month.

With the salaries of UK accountants touching the skies, practices need a solid plan to resolve their staffing challenges once and for all. This is where payroll outsourcing services can be crucial.

Top outsourcing firms providing payroll services specialise in dedicated and tailored staffing solutions. They help accountancy practices hire talented resources offshore from countries like India at highly competitive prices. By bridging the talent gaps and building the workforce of the future, your payroll outsourcing provider can end your staffing woes permanently.

Access to the Latest Technology

Technology is an area where accountancy practices have always struggled. Most small and medium-sized firms do not have the budget to upgrade their technology to automate the payroll process. Additionally, upgrading to the latest technology means you must train your staff for it, which is an added investment in terms of time and finances.

Payroll outsourcing can help resolve this problem too. Leading outsourcing providers train offshore experts on the latest payroll software and process automation. These payroll experts minimise the scope of human error in the process and thus make it more efficient.

Huge Savings on Operational Costs

Payroll services for accountants have been popular for their cost-savings benefit. Although there is more to outsourcing than just saving costs, this benefit is significant and cannot be ignored. A survey conducted by QXAS on payroll outsourcing trends in 2021 revealed that about 81% of the respondents who outsourced payroll saw a considerable spike (between 5% to 40%) in their profit margins.

Faster Turnaround Time

Turnaround time is critical for accountants working on strict timelines or taking up deadline-based projects. If you are adding a new service to your portfolio or onboarding a new client, you may require additional resources to take up the work. But the problem with building an in-house team is that you must invest a lot of time (and money) to train and prepare them for the job.

Payroll outsourcing services kill the additional time involved in the process as the outsourced resources are highly skilled and trained for the job. Thus, a lot of time is saved in the process, which can speed up things for your practice.

End-to-End Data Security

In a world where cyber attacks on financial firms and institutions are rampant across the globe, data security automatically becomes a concern for accountancy practices. Accountants can put an end to this issue with payroll outsourcing.

When you outsource your payroll to a reliable outsourcing firm, you get the advantage of a highly secure network to transfer and protect your data. These firms comply with all the necessary data protection laws such as GDPR and ISO 27701 so that you can secure your clients’ crucial financial data.

Better Work-Life Balance

With the onset of the Great Resignation and the rapidly changing payroll regulations, payroll professionals are often overworked. They have little time to focus on other key services or upskill themselves for career advancement.

Payroll services for accountants help make things easier for payroll specialists. By outsourcing your work, you can free up your internal staff for more critical responsibilities or upskilling, thus ensuring a good work-life balance.

Also read: 5 Reasons to Offer Payroll as an Add-On Service to Clients

Cons of Payroll Outsourcing

It May Take Time to Yield Results

Outsourcing payroll is a viable solution for accountancy practices to build capacity and facilitate cost savings. However, it is gradual and may take time to show results. If you are looking at payroll outsourcing beyond the cost savings benefit to grow and scale your practice, you need to be patient to see the results.

Complex Communication Channel

Another common disadvantage of outsourcing payroll is that it creates a complex communication channel. When you outsource to a firm providing payroll services for small businesses, you transfer the job to a third party. This may make communication difficult between your client and outsourcing partner and create the risk of miscommunication of critical information.

Decreased Control

Outsourcing often poses the risk of decreased control. Since payroll outsourcing involves the association of a third-party firm, accountants sometimes face issues making last-minute changes or making minor changes to reports.

Summing Up

Outsourcing is a significant decision and involves both pros and cons. Although the pros outnumber the cons, the latter cannot be ignored entirely. Accountants must understand these factors to make the right decision about payroll outsourcing services.

The disadvantages and limitations of payroll outsourcing can be countered by partnering with the right outsourcing provider. Accountancy firms can get the best out of outsourcing with adequate due diligence and research.

QXAS is a leading UK payroll outsourcing provider with dedicated staffing solutions. To learn more about our services, log on to Outsourced Accounting, Bookkeeping, and Payroll Services | QXAS UK (qxaccounting.com).