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NSBA’s 2015 Small Business Taxation Survey found that 59 per cent of business owners agree that administrative tasks, including payroll, are the biggest challenges for their business.

This means that many businesses often turn to external services. Outsourcing payroll is common as it can help lift the weight off an organisation’s own demands, leaving room to get on with other important tasks. If you’re considering outsourcing your payroll, it’s important to determine if the change is right for you and your business.

Whilst outsourcing may be tempting to many businesses, there are many important things to consider first. Here are the advantages and disadvantages to outsourcing your payroll.

Cutting down on costs

Outsourcing payroll provides opportunity to cut down on business costs, because it removes the need to buy payroll software and hire skilled payroll staff to use it.

In a survey conducted by BPO analyst firm NelsonHall, 85 per cent of respondents said that cutting down costs was their primary business goal. By saving money, businesses are able to make more efficient business decisions and further determine where resources are spent.


Most businesses aren’t experts in complex tax regulations. Keeping track of records and reports can be a tricky process and without expert payroll staff on board, mistakes are likely to happen.

It is a legal requirement for businesses to accurately report on employment taxes and follow the correct legislation. Failure to do so can cause serious trouble for businesses.

Late filing penalty statistics revealed by GOV.UK for 2015-2016 revealed that 176,704 penalites were imposed for private and public limited companies. These statistics were up nearly 15,000 from the previous year, showing that more businesses are incorrectly reporting their tax each year.

Businesses lacking expert staff may find outsourcing payroll useful to their needs, because there is no worry about deadlines or whether internal efforts are meeting the government’s strict legislative standards.

Saving on time

Outsourcing payroll can also help businesses save time. The 2015 Small Business Taxation Survey discovered that the average time it took for businesses to prepare their taxes was more than 80 hours per year.

As it’s essential for these administrative tasks to be completely accurately, this can be a lengthy process for staff. Outsourcing payroll means that not only are you able to save on time, but you’re also allowing staff to use their own time more effectively.

Where the responsibility lies

One disadvantage to outsourcing payroll is that the responsibility still lies with you. Whether you outsource or not, if taxes aren’t paid accurately or on time, then it is your business that will be held accountable.

If you do choose to outsource, it’s still important to keep on top of systems you have in place to ensure taxes are paid right. Keeping track of your external services will mean that you can flag any deadlines or potential inaccuracies before it’s too late.

Threatening confidentiality

By outsourcing, you will be sharing some of your most valuable data and information with an external party. This poses a risk, as giving third parties access to important and confidential records means information could be compromised.

Do your research and choose a trustworthy company. Putting a penalty clause into contracts will also mean you will be protected should a data breach occur.

Finding skilled professionals

A downside to outsourcing your payroll is that you can’t choose the people that work for you. By having your own payroll department with dedicated staff, you will know just what expertise and talent your company has. This will also have a direct effect on your other employees, helping grow their own expertise.

Having your own dedicated staff means individuals are able to develop a deep understanding of your business, this is something external payroll staff won’t have chance to possess.

Is outsourcing payroll right for you?

Deciding whether to outsource payroll is a big decision for any business and it should never be taken lightly. Whilst you will cut down on time and money, you are putting your trust in an external service.

It may be true what they say: if you want something done properly, do it yourself. By having your own payroll staff on board, you can ensure you have the best possible team working for you.

Whether you choose to outsource or not, a well-functioning payroll team is beneficial to your success. Having designated staff working on these important financial matters will enable you to focus your attention on other aspects of the business, such as staff development and management.

Author Bio: -

Adam Maidment is a content writer for Portfolio Payroll, the only payroll recruitment agency recommended by the Chartered Institute for Payroll and Pension Professionals. Their services specialise in recruiting for job roles such as payroll administrators, officers and managers