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Growth of the contractor workforce: How to manage payroll for flexible workers

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Key takeaways:
  • Research the different types of outsourced payroll providers available. If you want to make sure you always comply with IR35 rules, consider a payroll partner that pays your workforce through its own payroll.
  •  Using an end-to-end outsourced payroll service means your business always complies with the latest employment legislation, pre-employment checks and industry compliance checks.
  • Outsourcing your payroll saves time and is a cost-effective way to process regular payroll for your contingent and temporary workforce.
  • Using an outsourced payroll service makes scaling your contingent or temporary workforce easier, so you can react quickly to changes in the market.
  • To make sure you have instant access to important business data, choose a payroll provider that offers real-time reporting.

It’s a simple fact that we are living in a changing world. Whether it is the UK workforce becoming more globally diverse, the emergence of new technologies or management styles, or just the sheer speed at which innovation progresses, there are many factors to consider when making sure your business is future ready. As the business landscape evolves, it’s important to consider how these changes affect your company’s ability to stay competitive—and attract the best talent.

Economic uncertainty and a shortage of skilled workers have created volatile conditions in the recruitment market. To cope with these changing conditions and mitigate risk, employers are turning increasingly to the use of contract workers.

According to the latest figures from the Office for National Statistics, there were an estimated 1.62 million temporary workers in the country as of September 2022, compared with just over 1.45 million in January 2020—an increase of over 11 percent. Data suggests that the growth of the contract labour market will continue into 2023. In APSCo’s November recruitment trends snapshot, staffing agencies reported that contract revenue had increased 7 percent from September, with an annual comparison showing a 14 percent increase.

Contract workers and freelancers are gaining popularity among business leaders looking to manage capacity during rapid growth, seasonal uptick in demand, special projects, or simply when they are not ready to commit to a full-time hire. Between contingent, temporary, and freelance workers, outside consultants, and other forms of flexible and collaborative team members, there are millions of individuals hired each year through a flexible or contract workforce model.

Although a flexible workforce model offers many advantages, it also presents challenges, such as a lack of internal resources to manage the model. Processing payroll can be complicated and time-consuming, particularly when you are dealing with weekly or bi-weekly payments to a large contractor or temporary workforce.

Fortunately, help is available. Payroll outsourcing offers flexibility to scale up or down rapidly, without putting pressure on your existing back-office team. As temporary and contingent workers become a significant part of today’s workforce, business leaders are turning to outsourcing payroll as a cost-effective and efficient way of processing payroll for these workers.

The payroll function is one of the most important aspects of any business, yet it’s also one of the most time-consuming. Many businesses are already taking advantage of the benefits of outsourcing their IT, with over a third (34%) of British businesses surveyed by YouGov seeking external support to resolve IT issues. As the landscape of the workforce changes and develops, more and more businesses are engaging the support of a trusted payroll partner, with 28 percent of UK businesses choosing to outsource payroll to help streamline the process, save time, and ensure they remain compliant with regulations.

For many business leaders, outsourcing payroll is about more than just practicality. It’s a strategic move. Not only does it take away the hassle of managing contractors’ payroll in-house, but it also reduces employment costs and risk, improves compliance and reporting efficiency, and helps maintain a competitive edge.

Whether you are already operating a flexible workforce model or you’re considering growing your contingent workforce in the future, here are five reasons outsourcing your payroll could improve your business operations:

1.     Saves time

One of the main reasons business leaders outsource their payroll function is to save time. If your accounts team manages payroll as part of their role, it can distract them from core duties. This can mean key tasks get delayed, leaving you without important financial information when you need it.

Outsourcing your contingent workforce payroll to a team of qualified experts means your accounts team is free to focus on other business priorities, without getting caught up in the time-consuming task of processing payroll.

2.    Helps improves payroll accuracy

Payroll is one area where mistakes can be costly – so getting it right the first time is vital. Businesses who do not have sufficient experience in handling temporary and contingent worker payroll may make mistakes that could lead to fines and penalties from HMRC or even legal action if employees are underpaid or overpaid because of errors made by their employer.  

Payroll is a complex process that requires extensive knowledge and experience. If you don’t have these skills in-house, it makes sense to outsource your payroll functions to a specialist provider who does.

3. Flexible and scalable

Outsourcing payroll may seem daunting if it’s not something you are familiar with. However, many business leaders are now including outsourcing as a key business strategy. Engaging trusted third-party business partners to manage some or all your back-office business functions allows your business to be more agile. You can react quickly to changes in market forces, helping you to stay ahead of the competition.

With recent data showing a growing trend for employers engaging contract workers, outsourcing payroll lets you scale your business quickly, without having to commit to growing your internal accounts team.

4.     Financial security

Some payroll outsourcing services purely manage the processing of your payroll, taking away the administrative burden from your business. However, there is another choice – funded payroll. This option not only removes the processing aspect of payroll, but the third-party payroll provider effectively becomes the legal employer of your contingent or temporary workforce. Why is this important? It means your contractors and temporary workers will always be complainant with IR35 rules.

Besides being responsible for paying all upfront employees’ wages and associated costs, like national insurance and pension contributions, funded payroll providers also remove risks and liabilities that may arise from employment legislation. In this scenario, the outsourced payroll provider manages all employer responsibility for your flexible workforce, from onboarding to pastoral care and pre-employment checks. 

5.     Compliance

Compliance is an important part of running any type of business—but it can be time consuming and confusing if you don’t know what you’re doing. In some sectors, such as healthcare, not meeting your regulatory compliance obligations not only puts patient safety at risk, but it can also lead to fines and irreparable damage to your company’s reputation. 

When you use the services of an end-to-end outsourced payroll service, you benefit from the expertise and dedication of a specialist compliance team. So, you can rest easy, knowing your workforce has been fully vetted and all necessary regulatory compliance checks have been made. 

6.      Real-time monitoring and reporting

In today’s data-driven environment, instant access to information about important metrics, such as time to hire, diversity and inclusion, and turnover, is essential. If you need data at your fingertips and real-time reporting capabilities to track this information, then having the technology available that offers customisable dashboards and reporting tools is vital.

Real time reporting means that the data collected is measured in real time, with no lag between the collection and reporting of information. This is important because it allows for immediate feedback on how well your business is performing and where it needs to improve. By collecting this data in real time, you can gain valuable insights into how your business is performing. This allows you to make strategic decisions about what changes need to be made to improve performance and ultimately affect your business results.


As the saying goes, time is money and outsourcing payroll can save both precious resources for more important things — like growing your business. Outsourcing your payroll function to an end-to-end provider frees up time, so your team can focus on pressing business issues, instead of worrying about processing payroll, onboarding new employees, or dealing with difficult tax legislation and compliance regulations.  

Outsourcing payroll for your contingent and temporary workforce takes the heavy lifting—and the worry—away. Third-party payroll services can manage administrative and compliance payroll tasks efficiently and professionally, so you can concentrate on making your core business even more successful.  

Final thought…

When choosing a payroll supplier, one of the most important decisions you’ll make is whether to choose a provider that just provides basic payroll processing, or an end to end, fully funded contract staffing back-office provider. 

Cpl UK Payroll Solutions provides fully funded, end-to-end payroll for employers of contingent and temporary workforces. We take on employment responsibility for your contract workers, so you don’t need to worry about IR35. We’ll also carry out all pre-employment checks, regulatory compliance checks, and onboarding, as well as directly paying and processing payroll for your flexible workforce.
Learn more about Cpl UK's Payroll Solution, or get in touch with our team at [email protected]

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