Takeaways from Employment Hero's Outsourced Payroll Report

Words by
Rebecca Fowler
July 6, 2023
July 6, 2023

With so much change over the past few years, client expectations have significantly evolved, bringing about substantial changes for accountants, bookkeepers and payroll specialists within the professional service industry. To stay competitive, professional service firms must adapt and make informed business decisions.

Our friends at Employment Hero, a fully integrated recruitment, HR, payroll and employee benefits cloud-based software, recently conducted a survey to 313 accountants, leaders, payroll professionals and bookkeepers. The respondents were working for accounting, consultancy, bookkeeping, payroll bureau and financial businesses in the United Kingdom.

Perceptions of outsourced payroll services

Ask an accountant about outsourcing payroll to clients and you will usually get a grimace.

In the State of Outsourced Payroll in the UK report, perceptions of offering outsourced payroll services were quite negative - just 12% saw it as a profit-driver, while 11% saw it as a “necessary evil” and 35% thought of it as a way to attract and retain clients, not drive revenue itself. 

In other words, while a lot of the firms offered outsourced payroll services, they seemed to do so begrudgingly. There is no doubt that there are some real challenges to payroll in the UK, however the findings in the report show that existing negative perceptions are potentially misguided. 

Employment Hero’s survey results explain why. Here are some of the highlights.

The bad news: Most pay runs take far too long in the UK

One of the most startling findings from the research concerns the average length a pay run takes. 

The median time from respondents was one whole day, with 59% saying it took one day or longer. One in ten said it took either four or five days. 

Compared to Australia and New Zealand, where the median pay run time took less than two hours. Indeed, 71% of respondents there said a typical pay run took two hours or less, compared to just 8% of those in the UK.

What’s behind this? Undoubtedly part of the picture is the jumble of shifting UK regulations, which are especially liquid as we manage our way out of the European Union. But another big factor is software.

Software-driven automation is crucial to the future of payroll. That doesn’t mean replacing the human touch - but it does mean cutting down on those repetitive tasks that make pay runs such headaches. There’s no reason to spend a whole day on pay.

💡 Did you know: People who connect Telleroo to Employment Hero process a pay run for 100 employees in an average of just 4 minutes!

Cloud software can do more

Payroll used to involve waiting for a new software update to take in changes to legislation, or watching a patch slowly install before an urgent pay run. Cloud software like Employment Hero Payroll fixes all those problems. And means payroll professionals can work from anywhere with an internet connection.

The survey showed that professional service firms do generally value the cloud, with 77% agreeing that cloud applications saved time with automation features.

But things could definitely be better. The average firm used six different cloud applications - which could lead to a lot of double-handling of data and issues making all the different services talk to each other. And serious concerns remain for some firms, particularly ones working with sensitive clients. Just over a quarter (26%) said they were concerned about data privacy on cloud applications, while 24% cited security as a concern. There’s also just some friction inherent in changing the way you do things - the two most commonly cited gaps in cloud software were user training (29%) and client training (28%). 

In other words, embracing change can be tough when things are basically working out. But that long pay run - and the fact that so many see payroll as a headache - shows there could be a huge opportunity there.

Outsourced payroll services are a profit driver

Despite issues with long pay runs, shifting legislation and multiple applications, Employment Hero’s research suggests offering outsourced payroll services drive profits.

Outsourced payroll providers earned on average £12,639 or 17% more from each client than firms that didn’t offer payroll. Across a whole professional services firm this difference is worth millions in revenue each year.

The average firm in our survey earned just under £23m in revenue each year across 276 clients. But the firms that offered outsourced payroll services earned more - an average of just under £25m - while firms that didn’t offer outsourced payroll services earned just £19.7m.

This shows that offering outsourced payroll services isn’t just a nice to have. It’s essential to attract more clients and achieve the economies of scale needed to drive huge profits. 

You can access Employment Hero's full report here. And don't forget to check out our blog on how to speed up weekly payroll.

Employment Hero Payroll seamlessly integrates with Telleroo to automate payroll from end-to-end with built-in leave and expense management. Learn more about the integration here.