Benefits of Outsourcing Your Payroll vs Doing It In-House

Gary Green
Gary Green
June 28, 2021

Many employers investigate the possibility of outsourcing their payroll function and for some it can make sense to outsource.

Handling the payroll requirements can be a difficult and laborious process and outsourcing this function can be beneficial for employers looking to streamline their processes and increase efficiency.

But, as with any business decision, there are multiple issues to consider and both options offer a different mix of advantages and disadvantages.

Below, we set out a comparison of some of the issues to be aware of when outsourcing your payroll versus choosing to do it in-house.

Why should you outsource payroll?


Payroll is a complex and time-consuming process. By outsourcing, you can use specialist, skilled help to handle your payroll requirements. Processing payroll in-house can be challenging. Using an outsourced payroll function can free up more time for your staff to attend other business areas, therefore creating more opportunities and raising efficiency in the business.

Cost savings

The overall cost of retaining a payroll specialism in-house can become expensive. By outsourcing you can save on the cost of hiring specialist payroll staff. There are also costs for payroll software and training costs.


There are significant regulatory non-compliance penalties for failing to meet payroll deadlines and for compliance failures. Outsourcing your payroll can help if meeting these requirements is proving problematic.

Choosing what to outsource

Most outsourcing companies allow you to choose how much of your payroll and compliance tasks are outsourced. This can be beneficial for employers that only want to outsource part of the payroll function

Real Time Information (RTI)

The introduction of major changes to the way PAYE information was collected began with the introduction of the RTI system in April 2013. The system involves employers sending HMRC information about tax and other deductions from employees' pay when the employee is paid, rather than at the end of the year. Whilst this system offers many advantages it has made payroll a more labour-intensive process and outsourcing may help.

Complex requirements

As part of the payroll process it is necessary to calculate the correct amount of Income Tax due alongside calculating other deductions such as National Insurance, pension contributions, student loan and child maintenance payments.

Changes in payroll rules

The payroll rules change frequently so it is important to ensure that the process for calculating pay and benefits is kept up to date.

Cost cutting

The cost of outsourced payroll can lower costs but obviously each employer needs to consider their circumstances on a case-by-case basis.

Smaller companies

The cost per employee of maintaining a payroll function in-house can be significantly more per head when there are fewer staff. This could mean that the use of outsourcing makes more financial sense.

Benefits of keeping payroll in-house

More control

The most important reason usually cited for keeping payroll in house relates to a loss, or perceived loss of control, when dealing with your employers. By outsourcing the payroll function you are required to share access to sensitive data such as employees’ names, salaries, bonuses etc. By keeping payroll in-house, you can keep your employees’ information private.

Lower cost

Contrary to what many payroll providers will argue, it can be the case that keeping the payroll function in-house can actually lower cost over time. Having a payroll specialist in-house can also be beneficial. However, depending on the size of your business, this may not always be the case.

Data security

One of the biggest concerns for employers when it comes to outsourcing payroll, and the processing of it, is data security. If employers do decide to outsource their payroll function, they will need to ascertain what safeguards are in place to ensure their data is secure.

Checking payroll

Ultimately, an employer is still responsible for checking that their payroll is correct. If this function is outsourced, the employer still needs to spend time checking that all payroll related submissions are correct. Even by outsourcing, there is no way of avoiding this important function within your business.

If you're looking to find out more about payroll, you may be interested in our previous articles:

If you have any questions about the issues raised in this article, we at Key Business Consultants can help. We have experience as external accountants who can compliance check your business and represent you well with the authorities. Get in touch with us today or call us directly on 02037 282 848.

Interested in our services?
Fill in your details and a member of our experienced team will be in touch shortly to discuss your needs.
Contact Form Demo (#1)
We adhere to strict GDPR rules and do not reveal or sell your data to any third-parties. For more, please read our Privacy Policy.
Latest Insights
October 23, 2023
PAYE Investigations

Dive into the world of PAYE investigations. Uncover the facts, implications, and insights in this informative blog

September 29, 2023
London-based accountancy business acquired by Key Business Consultants

Exciting Merger Alert: London's Reed Taylor Benedict & Benedict Leff Accountants Acquired by Key Business Consultants.

September 18, 2023
Tax Tribunals – An Overview

Dive into the realm of Tax Tribunals: A comprehensive overview shedding light on this crucial aspect of taxation.

September 2, 2023
What Is A COP8?

Learn about COP8, a tax-related Code of Practice issued by HMRC for suspected tax avoidance cases. Discover when COP8s are used and the penalties associated with them.

August 20, 2023
HMRC Compliance Checks

Navigate the complexities of HMRC compliance checks confidently. Our comprehensive guide covers everything you need to know about handling tax inspections and more.

August 6, 2023
Tax Evasion and Tax Fraud

Untangling the complexities of tax evasion and fraud. Delve into our comprehensive guide to understand the differences, consequences, and preventive measures.

June 18, 2023
Which Jobs In The UK Have The Best Salary Growth Potential?

Explore the top UK jobs with the highest salary growth potential. Uncover promising career paths and industries that offer substantial earning potential.

May 23, 2023
How To File Dormant Accounts Through Companies House

Learn the step-by-step process of filing dormant accounts through Companies House with our comprehensive guide.

May 19, 2023
Customs Declaration Service (CDS) and VAT

Discover how the Customs Declaration Service (CDS) and VAT intertwine in this insightful blog article.

View Our latest insights »
Get the latest UK tax & business news and guidance delivered straight to your inbox
Newsletter Form (#2)
We care about the protection of your data. No spam. Unsubscribe anytime.
Copyright © 2022 Key Business Consultants LLP. Reg: E&W OC389322
linkedin facebook pinterest youtube rss twitter instagram facebook-blank rss-blank linkedin-blank pinterest youtube twitter instagram