Focus on Recruitment Agencies – Outsourcing and Payroll

In this article we focus specifically on recruitment companies and why they, in particular, are relying more and more on outsourcing their payroll to external payroll specialists, such as J L Payroll.

The greater the turnover of staff and the larger the range of types of contract, the more complex payroll becomes, and this is especially true of the recruitment industry. The recruitment industry in the UK places c.1 million agency workers into work every day, and c.1.1 million permanent workers into new positions every year – figures that are growing year on year which have important implications for recruitment agencies.

Let’s Look at Some Big Numbers

Recruitment companies in the UK employ c.115,000 people. And this figure is growing as the number of recruitment agencies is growing by c,10% per annum. Many of these agencies are small businesses who need the help of an outsourced payroll specialist.

In addition, all of these agencies spend all of their time recruiting people to all kinds of jobs. Full time, part time, temporary or permanent, fixed or flexible contract, maternity cover- the list goes on

This means that there is a fragmented and complex one, as some statistics shop. For example:

  • 85% of contract placements are for 12 or more weeks. 45% are for 6 months or longer.
  • For temporary assignments, 36% of appointments are for less than 12 weeks, whilst only 20% are for 6 months or more.

What this means for recruiters is that nearly every worker on their books has a different contract. This means that keeping track of all of them can be difficult and time consuming, which can lead to costly mistakes. It is no surprise, therefore, that more and more recruitment companies are outsourcing their payroll to external providers.

What About the Status of Workers?

It’s not simply the number of workers that increases the complexity of payroll, it’s also the increase in the number of types of worker status and contract types. These include employed, zero hours, self-employed, umbrella workers to name just a few. As a result, it can be very easy to lose track and make mistakes. And mistakes can lead to fines.

What About Foreign Workers?

A relatively high proportion of foreign workers make their way onto recruiters’ books in the UK, and this adds to the complexity of payrolls. For a start off, the tax and national insurance arrangements for foreign workers will vary depending on their country of origin and their intended duration of their in the UK.

Brexit, if, as, when it happens will impact on this area to some degree or other, but it’s another reason to outsource your payroll to experts who always know what is happening.

Compliance with the Rules (or red tape)

Recruitment touches on many areas of tax, NI and employment legislation, all of which must be complies with or risk a fine. Handing payroll over to a dedicated payroll provider means compliance becomes their problem, not yours. Likewise, as rules change, as they always do, year on year, it is your payroll provider’s responsibility to be aware of the changes and implement them accurately and at the right time.  If you keep payroll in-house, then the burden of compliance is yours.

The Cost of Mistakes

It’s not just the cost of employing staff to process payroll that can mount up. It’s also the cost of errors and rework, especially when the payroll staff employed are not experienced enough or not given the right on-going training. When mistakes are made, fines for non-compliance often result, putting a business’s costs up. Employ an outsourced payroll specialist and any mistakes made are their mistakes, shifting the potential burden of cost from you to them.

The Moral of this article? It’s not just recruitment agencies who will benefit

We have focused on the reasons why recruitment agencies benefit from outsourcing their payrolls, Of course, all types of company will also benefit and for all of the same reasons, especially smaller businesses.

There is, of course, a cost to outsourcing your recruitment payroll. But in our experience, the many benefits of outsourcing more than outweigh this cost

Call us or on 0121 422 0550 or contact us for a FREE initial chat.

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