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.
Some agencies choose to do payroll themselves because:
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.
Most growing creative agencies — especially those with 3–10 employees — find outsourcing gives them:
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.
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.
When payroll is wrong, employees understandably get annoyed — and HMRC can get involved quickly. Outsourcing dramatically reduces that risk.
Your ops team can focus on client delivery and internal workflows — not sifting through gov.uk guidance trying to calculate holiday pay.
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.
Here are the issues I see most often — and they’re the reason many agencies eventually decide to outsource:
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.
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.
Automatic enrolment is a legal obligation.
Common pitfalls:
These mistakes can create regulatory problems with The Pensions Regulator.
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.
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.
Creative agencies often have younger teams and a growing mix of parents.
Common pitfalls:
HMRC expects Real Time Information (RTI) submissions every pay period.
Common mistake: The payroll gets run… but the EPS or FPS never gets filed.
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.
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.
From pro-rating holiday to issuing correct final payslips, P45s, and paying outstanding bonuses — lots gets missed.
Here’s the simplest way to decide:
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.