What is 'Outsourcing Payroll' and why do it?


There’s no doubt cost saving is a major factor in choosing to outsource your payroll, with the average financial commitment of employing a qualified and/or experienced payroll professional up to circa £25,000 PA, and that’s without taking into account fees for software, training etc.

Cost aside, there are lots of other benefits to outsourcing too:

  • Ensures full control and compliance
  • Helps resolve any process issues and reduces risk of errors
  • Minimises leakage of payroll data, ensuring the General Data Protection Regulations (GDPR) are adhered to
  • Provides better management information
  • Improves the employee experience (especially where an employee portal is available)
  • Easily enables acquisition and/or disposal
  • Integrates processes

What to expect from outsourcing

  • You remain accountable for your payroll
  • An external party will take on the responsibility for the everyday processing of the payroll transactions and ensuring you are compliant with the latest legislation
  • There will be a formal contract in place, often referred to as a ‘Service Level Agreement/Engagement Letter’
  • Typically the outsource contract would be expected to continue for 3 to 5 years, (due to the potential large undertaking of bringing it back in-house.)
  • You may need to make changes to the way in which you work to make it work!

Key traits of a great payroll service provider

When comparing service providers it can feel like apples and pears, but there are a few key areas that can make a huge difference to the level of service you receive, from the systems used - i.e. are they future proofed? - through to size, scale, experience, plus the ability to offer additional services too.


Engaging with a payroll provider with a team of professionals can provide the reassurance needed for contingency should your dedicated member of staff (assuming the provider offers one) be absent.

Qualifications and Experience

Qualifications and membership of a recognised professional body, such as the Chartered Institute of Payroll Professionals (CIPP), offers reassurance of robust training, as does having experienced people – who are constantly updating their skills and knowledge with a continuing abundance of new legislation.


Non-compliance can lead to very large penalties and when choosing a service provider you need to satisfy yourself that they have clear procedures in place to ensure compliance.

Future Proofing & Growth

Will your payroll provider grow and develop with you? Do they have a strategy in place which is aimed at providing even more benefits to their customers?

Additional Services

Would you like to have all payments processed by Bacs and/or perhaps you would also like your provider to be able to take care of third party payments e.g. to HMRC on your behalf?

Data Protection

GDPR/Data Protection should be of high importance to businesses. When choosing a provider it is crucial to check they are on top of this.

Cost Vs Value

As with any service a business engages in there will be a cost for that service and payroll is no different.  Is cost the most important factor to you, or is getting value for money the most important?

For further information on outsourcing your payroll please get in touch with Karen Thomson on 0808 144 5575 or email karen.thomson@armstrongwatson.co.uk

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