Factors to Consider before Choosing Payroll Outsourcing Service Provider

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You’re in charge of payroll operations at your agency, and you probably feel like you have enough on your platter without worrying about the payroll processing service provider you choose. But as with any other important business decision, choosing the right payroll outsourcing service provider can significantly impact your agency’s overall financial health, including employee morale, time to hire and time to invoice, profits and customer satisfaction. These factors ultimately translate into your success as an agency owner.

What is payroll process outsourcing?

We have provided a quick overview for those who are still alien or oblivious to the concept of payroll outsourcing services. Payroll process outsourcing is one of many types of HR-focused outsourcing and refers to an arrangement in which a recruitment agency has its payroll duties handled by an outside agency. All agencies don’t need to outsource payrolls; some small organizations can handle payroll in-house just fine. However, large companies—such as those with numerous locations or employees spread across various cities—might find it easier to delegate these duties and focus on higher-level tasks.

Which Payroll Functions can be Outsourced

An outsourcing payroll provider will handle everything from checking pay details to calculating net pay, issuing and banking of payslips, and running end-of-year and year-end reporting for you. Payroll services include paying your agency staff, including any remuneration for overtime hours that may be applicable, issuing workers their payslips each month, send reminders to your employers on payment dates, among others. Outsourcing payroll functions can increase efficiency and save time.

Here are some functions listed below:

  • Ensure compliance with payroll processes and latest legislation changes
  • Calculation of payments involving statutory payments like sick pay and maternity pay
  • Processing payroll end-to-end from start to finish according to your timelines
  • Payments of wages and salary payments via BACs
  • Create employee payslips, P45s and P11Ds
  • Produce, reconcile and submit documents to comply with HMRC
  • All Year-End processing, including employee P60s

A growing number of recruitment agencies have turned towards outsourcing their payroll to an external agency or direct provider as they look to increase their margins and free up time for their core focus areas. So what should UK recruitment agencies consider when choosing a payroll outsourcing service provider?

Here are essential things to keep in before you partner with a payroll service provider:


An important thing to look for in a payroll outsourcing service provider is accessibility. Is there a readily available support line when you need them? Is there someone you can give a quick call or email at odd hours of the day or night? What if your time zone is different from theirs, will they still be willing to chat with you during off-hours and on weekends? Ask yourself these questions before selecting one payroll outsourcing service provider over another, as they might make all of the difference.


If there’s one thing you should look for in a payroll outsourcing provider, it’s accuracy. Mistakes in your employee payroll can have severe consequences for your business and reputation. Do not let an outsourced payroll provider who does not check for accuracy work for you! Ask for references of previous or existing clients and ask how they ensured their payroll was accurate before making any decisions.


Many payroll providers outsource payroll to third-party companies, which may not have adequate security measures in place. Find out if your provider stores data securely, and ask for references from other recruitment agencies who’ve used their services in the past.

Make sure your potential payroll outsourcing company is fully compliant with all relevant regulations and that they have comprehensive policies in place to ensure that your sensitive employee data is stored securely. You should also sign an agreement that protects your rights over future decision-making regarding payroll. There’s no point handing over day-to-day control of these functions if you’re not happy with how your provider manages them.


Ensuring your payroll is completely compliant with local and international regulations is critical. A recruitment agency has different compliance needs than other types of businesses. In addition to payroll outsourcing services, you’ll need to ensure that your service provider can support these unique requirements. Suppose you have remote employees or work with subcontractors outside of your country. In that case, you’ll need to determine whether your service provider will be able to provide that level of support.


The reputation of payroll outsourcing companies is essential to consider before partnering with them. The reason is simple—if you partner with reputable companies, they will have your best interests at heart, which means your business stays protected, and your money will be invested wisely. On the other hand, if you partner with less-than-reputable companies, they may have only their own best interests at heart and not yours. This can have a negative impact on your recruitment agency’s profits and productivity.

Scope of Service

Before partnering with a payroll service provider, make sure you’re clear on what exactly they can offer. When it comes to payroll outsourcing services, your partners should be able to deliver bespoke payroll solutions based on your needs. It is equally important to have access to quality data is vital for recruiting agencies. Don’t sacrifice quality for cost—only hire providers with fast and accurate processing solutions in place.


As an agency owner, you want to grow your business, attract new talent, and plan workforce expansion. That’s why it makes sense to outsource your payroll functions to a specialized firm—one that can manage all of your payroll for you. With any payroll outsourcing service provider, you’ll need some measure of trust: after all, they will be handling sensitive information about your business, such as employee data and work contracts. Ultimately, success depends on your ability to nurture the relationship with your payroll outsourcing service provider.

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