Should you hire a payroll consultant?

Small Business Guides

7 min read

Payroll is part of doing business. But that doesn't mean you have to do it yourself. Hiring a payroll consultant can be a good way to get the work done efficiently. So is it the right decision for your business?

Not everyone enjoys doing payroll

Payroll is a necessity if you run a business that employs people. Even if you don't employ anyone, you may want – or need – to be on the payroll of your business. In some countries it's a legal requirement.

Modern accounting software makes the process of paying yourself and your staff quite straightforward. But it still may not be something you want to do in-house. If you're not an expert in this yourself, you might not want to invest time and effort in becoming one.

Business owners have all sorts of different skills. Sometimes it makes sense to concentrate on what you're good at, and leave the number crunching to the experts.

That's where payroll consultants come in. They can take over the work, help you maintain compliance and keep everything running smoothly.

There are pros and cons to hiring a consultant. In this guide we'll look at whether it's the right choice for your business. If it is, we'll give you tips on how to find the right consultant for you.

What are your payroll needs?

Before deciding what to do with your payroll, take the time to understand what it actually involves for your business. For example, your tasks will include some of the following:

  • make regular salary payments to your staff
  • handle new employees and leavers
  • differentiate between employees and contractors
  • keep all bank details up to date
  • track hours, for full-time and part-time staff
  • manage tax codes and payroll tax reporting
  • handle holidays and sick leave
  • update employee addresses and other personal details
  • manage benefits and bonuses
  • use payroll software that integrates with your accounting software
  • track pension and healthcare contributions

Once you're up and running with the right software, payroll isn't usually too hard. But it is extra work, and someone has to do it.

If you're happy to manage this yourself, or if your accountant or bookkeeper can do it for you, that's great. But it might be more efficient – and cheaper – to hire someone to handle it for you.

The pros of hiring a payroll consultant

If you decide to outsource the work to a consultant, they could do more than just the tasks listed above. They could also:

  • set up a new payroll system quickly
  • prepare useful reports
  • help you meet your tax obligations, since tax laws change frequently
  • handle any staff changes as they happen
  • advise you on ways of making your payroll more efficient
  • let you focus more time and energy on your core business.

It's often useful to have someone else looking over parts of your accounts. That's especially true if they've worked for other clients, or perhaps for an agency. A consultant may save you enough money to cover their cost by finding mistakes and improving efficiency.

The cons of hiring a payroll consultant

There are some potential downsides to hiring a consultant. Here are three major ones:

  • Loss of control
    You will be handing over an important part of your business to someone who isn't an employee. That may reduce your direct control over the way the work is done.
  • Expense
    Hiring a consultant costs money. Probably not as much money as hiring someone full-time, but it still won't be cheap.
  • Loss of skills
    What if your business grows to the stage where you need an in-house payroll person? Then you'll have to start from scratch to build those skills.

You need to consider the pros and cons as they apply to your business. It might help to discuss this with a business advisor or your accountant.

Before deciding what to do with your payroll, take the time to understand what it actually involves for your business.

An insight into your business

The work that a payroll consultant would do varies from one business to another. You will have to discuss the details with whoever you hire. As mentioned earlier, there are plenty of 'needs' that have to be fulfilled.

But there's more to it than that. A good payroll consultant will give you an insight into your business. And it's an insight from an outside perspective.

That can be very useful. A consultant may work in several different companies part-time. They will come to your business with a critical eye and – hopefully – a broad experience of similar work.

That knowledge and perspective can be useful to you. It can help you identify areas where your own payroll processes can be improved. So if you do hire a consultant, don't just hire and forget. Be sure to talk to them regularly. Ask them for reports and advice on the way your payroll is being run. That way you're likely to get better value from them.

Finding the right consultant

If you've decided to hire a consultant, where and how do you find the right one for your business? A search for 'payroll consultant' online will return plenty of results, but that's not really what you want.

Your business needs someone who can be trusted with payroll. That's a serious responsibility. Here are some suggestions:

  • Ask your accountant or financial advisor for recommendations.
  • Find out if your business partners and customers use consultants. If so, would they recommend them?
  • Talk to local chambers of commerce and other business advice institutions.
  • Try to find people who know your area of business. Every sector is different.

That should give you a few contacts to start with. But you still need to make sure you find the right person.

Hiring a consultant is similar to hiring an employee in this respect. Even if the consultant will only be working for you part-time, they still need to fit into your organisation. They need the right work ethic and attitude.

So read our guide to hiring the right employees for useful information. That will help you choose someone who suits your business.

Sharing information makes payroll more efficient

Whoever you decide to hire to manage your payroll, it's important that they can use the same systems as you.

Ideally you'll be using cloud-based software. That will let you exchange data easily with the consultant and with your accountant. It will let the consultant do their work securely from anywhere, at any time.

Good payroll accounting software is easy to use. But it will save time if the consultant already has experience using the same software as you. That way they can be up and running straight away.

Ask them about their experience. Make sure they understand mobile and cloud-based accounting applications. This will help them do the work more efficiently.

Making it work

Outsourcing your payroll to a consultant is a big step. It's more likely to go well if you plan carefully. So before your consultant starts, you should:

  • decide what you want them to do
  • make a detailed list of their tasks on a weekly basis
  • set them up with secure access to your accounts – limited to what they actually need
  • be prepared to answer any questions they may have.

Take some time in the first week to help them integrate into your business. The more work you put in at this early stage, the more smoothly things should run later.

Monitor their performance

Just like any other employee, keep track of your new hire's performance and delivery of payroll tasks. They should be:

  • making salary payments on time
  • hitting all deadlines for reporting and filing
  • keeping your payroll information up to date
  • keeping you in the loop at all times.

If this doesn't happen, it pays to act sooner rather than later. Discuss the issue with the consultant and give them time to improve. The whole point of hiring a consultant is to save you time and effort. So if they cost you time and effort instead, that’s not a good result for your business.

Make time for your business

Only you can decide whether it makes sense for your business to hand over payroll work to a consultant. For very small businesses and sole traders it might not. And for larger businesses, it may be better to have an employee do the work instead.

But for businesses of a certain size, it can be useful to have a consultant take over the work. As well as bringing their professional experience to the role, they may have a fresh take on business systems and processes.

This can help you consider new ways of doing things. That might mean paying your staff more efficiently or handling tax filing differently.

You may need more information before making your final decision. If so, you can read our other payroll guides.