Payroll software

Advantages and disadvantages of outsourcing your payroll

Managing the payroll in-house often requires an individual, or a team, with a thorough knowledge of workings of the PAYE tax system. If your business doesn't have these skills in-house, you can organise your payroll by outsourcing it.

Typically, businesses outsource payroll to:

  • an accountant or bookkeeper
  • a specialist payroll company

If you're considering outsourcing payroll to someone else, you should weigh up the pros and cons.

Advantages of outsourcing your payroll

Outsourcing to a payroll specialist or a company can give you an assurance that your tax obligations and payroll responsibilities will be taken care of accurately and on time, and that your business will stay on top of regulations and the required paperwork.

Outsourcing can sometimes save you time or staff hours, although you should balance this against the financial cost and the risk of communication errors, particularly for complex payrolls.

Disadvantages of outsourcing payroll

Costs of outsourcing payroll can be high, especially for a young business. There is a certain degree of risk if communication lapses – for example, if you don't advise the payroll specialist of a staff member starting or leaving.

Outsourcing will also mean losing control of some of the key elements of your business, eg:

  • you may not have instant access to payroll if it has been outsourced
  • you won't always be able to check it when you want to, or add anything that's missing
  • you will have to hand over confidential and sensitive staff information

Read more on outsourcing and, more specifically, the advantages and disadvantages of outsourcing.