Should Your Creative Agency Run Payroll In-House — or Outsource It to an Accountant?

For many creative agencies, payroll feels like one of those admin tasks you should be able to handle internally. After all, you’ve got a studio manager or operations assistant who’s great with detail, so why not keep it in-house?

But payroll is one of the most tightly regulated areas of running a business — and HMRC doesn’t give creative businesses any slack for getting it wrong. When you’re juggling shoots, campaigns, edits, deadlines, and client expectations, it only takes one small oversight to create a world of pain: incorrect tax deductions, angry staff, compliance penalties, or year-end clean-ups that cost far more than outsourcing would have.

So, should your creative agency run payroll internally or outsource it? Let’s break it down.

The Case for Keeping Payroll In-House

Some agencies choose to do payroll themselves because:

• They already have admin staff familiar with HR tasks

• They feel they’ll have more control

• They assume it will save money

• Their payroll is “simple” — just a handful of employees

If you have dedicated, trained staff who understand PAYE, pensions, leave entitlements, and HMRC filing deadlines, this can work well. And for very small teams with minimal turnover, the monthly process can feel relatively manageable.

But even “simple” payroll isn’t actually simple. The rules change constantly, HMRC regularly issues new codes, and good payroll is about consistency, accuracy, and compliance — not just pressing a button once a month.

The Case for Outsourcing Payroll to an Accountant

Most growing creative agencies — especially those with 3–10 employees — find outsourcing gives them:

1. Accuracy and compliance without the stress

Accountants stay up to date with tax codes, NIC thresholds, minimum wage rules, pension rules, parental leave regulations, and real-time reporting obligations. You don’t have to.

2. Consistency even during sickness, holidays, and busy periods

Your payroll won’t grind to a halt because your studio manager is off on shoot, at a festival, or off sick the day the pay run needs doing.

3. Protection from HMRC enquiries and employee disputes

When payroll is wrong, employees understandably get annoyed — and HMRC can get involved quickly. Outsourcing dramatically reduces that risk.

4. Time back for the things your agency actually gets paid to do

Your ops team can focus on client delivery and internal workflows — not sifting through gov.uk guidance trying to calculate holiday pay.

5. Often cheaper overall

By the time you factor in software subscriptions, training, processing time, corrections, and year-end clean-ups, outsourcing frequently costs less than doing it in-house.

The Common Pitfalls Creative Agencies Face When Doing Payroll Themselves

Here are the issues I see most often — and they’re the reason many agencies eventually decide to outsource:

1. Not setting the correct initial PAYE code

When an employee starts, their tax code depends on the starter checklist, previous employment, and HMRC notifications.
Common mistake: Agencies default to 1257L or “emergency code” instead of using the correct code for that individual — leading to over- or under-payments of tax.

2. Not checking for tax code updates every month

HMRC issues tax code changes frequently through electronic notifications.
Common mistake: Internal staff forget to check these or don’t know they exist, so deductions become wrong for months.

3. Incorrect auto-enrolment pension handling

Automatic enrolment is a legal obligation.
Common pitfalls:

• Missing the staging date

• Not issuing the statutory letters within set deadlines

• Forgetting to re-enrol eligible employees every 3 years

• Not using qualifying earnings properly

These mistakes can create regulatory problems with The Pensions Regulator.

4. Miscalculating holiday pay

This is a huge one for creative agencies, especially those with part-timers, variable hours, or irregular overtime.
Common mistake: Using a simple percentage instead of the correct 52-week rolling reference period. This has been the cause of countless back-pay claims.

5. Not applying National Minimum Wage and National Living Wage correctly

Rates change every April — and age brackets matter.
Common mistake: A birthday moves an employee into a new wage band and the admin team misses it.

6. Missing statutory payments or calculating them incorrectly

Creative agencies often have younger teams and a growing mix of parents.
Common pitfalls:

• Incorrect Statutory Sick Pay (SSP) calculations

• Missing Statutory Maternity/Paternity/Shared Parental Pay rules

• Not reclaiming SMP properly

7. Forgetting to send the FPS and EPS submissions on time

HMRC expects Real Time Information (RTI) submissions every pay period.
Common mistake: The payroll gets run… but the EPS or FPS never gets filed.

8. Incorrect staff benefits reporting

Creative agencies often offer perks: software subscriptions, coworking, gym allowances, travel reimbursements.
Common mistake: Not recognising when something is a taxable benefit requiring payroll adjustments or P11D reporting.

9. Poor record-keeping

HMRC expects records for 3+ years, including hours worked, rates, holiday accruals, pension contributions, and tax calculations.
Common mistake: Relying on spreadsheets or inconsistent files that don’t meet audit requirements.

10. Not knowing what to do when someone leaves

From pro-rating holiday to issuing correct final payslips, P45s, and paying outstanding bonuses — lots gets missed.

So… Should Your Agency Do Payroll In-House or Outsource?

Here’s the simplest way to decide:

In-house may work if…

• You have a trained finance or HR professional

• You have stable headcount with few changes

• Your payroll is straightforward (no variable hours, bonuses, or benefits)

• You’re willing to keep up with legislation each year

Outsourcing is the safer option if…

• You’re growing

• Your staff structure is creative-industry typical (mix of perm, part-time, apprentices, juniors, and flexible patterns)

• You want guaranteed compliance

• You want to reduce risk and free up admin time

• You’ve already made one or two mistakes doing it internally (it happens!)

Final Thoughts

Payroll mistakes aren’t creative — and HMRC doesn’t appreciate imagination in this area.

If your agency has the capacity, expertise, and appetite to manage payroll in-house, it can work. But for most growing studios, outsourcing removes stress, protects your team, keeps HMRC happy, and ensures your employees get paid correctly every time.

If you're a creative agency owner and you’re not sure which route is right for you, we're always happy to have a quick chat about what makes sense for your setup. Book a meeting with us here.