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Why Has Outsourcing Payroll Become So Popular?

by Byrne Anderson
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Payroll is an essential part of a business’ operation that, in recent years, has been outsourced by a significant number of companies around the UK. It is now common for both small and large businesses to reprioritise their internal staff and delegate their payroll management to reputable, external groups.

After the initial lockdown in 2020, there was concern that companies might revisit their outsourced responsibilities, potentially looking to consolidate their operation, however, this has not been the case. Instead, many external payroll companies have actually begun to see increased demand for their services.

What makes it so popular and why has demand grown during 2020?


One of the reasons driving the popularity of outsourced payroll is simply that it is more cost-effective for businesses. Aside from alleviating the regular responsibility of payroll processing from your internal departments, it actually saves a business in other ways too. The overall cost of employing specialist staff as well as the training necessary to develop and maintain their ability to operate an internal payroll department, as well as the additional and ongoing cost of software, is far greater than that of outsourced alternatives such as those offered by People Group Services.


In addition to undergoing training, payroll managers must also maintain a business’ compliance with the tax office, ensuring that tax codes and, in almost all cases, pensions are being fulfilled. If mistakes are made during this process, they can be costly for the business, delaying cash flow, frustrating employees, and even leaving a company vulnerable to penalisation.

At a time when many businesses are looking to secure their operation and avoid pitfalls, having the peace of mind associated with outsourced payroll means that employers can have confidence in their operation and focus their time on more pressing areas instead.

Remote Working Security

Now that remote working has become more widely established, some businesses are finding it difficult to securely manage their staff payroll while internal staff working further apart. Cloud-based operations require businesses to reassess their security methods in order to minimise the loss or breaching of sensitive data.

Handing over responsibility to a centralised and external payroll department ensures that documents are transferred and stored securely, minimising the risk of data compromise.

International Management

Coinciding with the rise of remote working is a telepresent, international operation, and more businesses are creating positions worldwide, requiring them to manage overseas staff. In addition to various working standards, tax obligations and currency transfers require specialised management that many internal departments are not capable of performing.


As many businesses have found themselves growing during the pandemic’s lockdown, they have needed to expand their operation and cover new types of payroll, which is often industry-specific. Increasingly the number of staff within a business and complying with different regulations can place a significant amount of strain upon internal departments and, in some cases, simply isn’t possible.

Not only do external payroll companies allow a business to expand its operation easily, but they also facilitate it, effortlessly managing the transition, as well as being on hand to support the employer with guidance.

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