UK · Payroll & compliance
UK Payroll Outsourcing
UK payroll outsourcing costs £5 to £15 per employee per month and is worth it when your team lacks the time, confidence, or HMRC fluency to run it monthly in-house. The options are your accountant, a dedicated payroll bureau, or a managed payroll service: you still run the business, they run the payroll.
The HMRC compliance obligation stays with you as the employer, but the operational burden shifts to the provider.
The decision to outsource is not about whether payroll is hard. Modern cloud software makes UK payroll mechanically straightforward.
The decision is about whether anyone on your team has the time, confidence, and willingness to run it every month without error.
And what happens when they go on holiday, leave the company, or make a mistake that triggers an HMRC penalty.
If the answer to “who runs payroll when Sarah is on holiday?” is silence, you need to outsource.
Should you outsource your UK payroll?
Reviewed April 2026
What does payroll outsourcing actually involve?
- Monthly gross-to-net calculation
- PAYE and National Insurance Contributions (NIC) deduction
- Real Time Information (RTI) submission to HMRC on or before each payday
- Auto-enrolment pension administration
- Statutory payment calculations (SSP, SMP, SPP)
- Year-end processing (P60s, P11D)
- Payslip generation and distribution
What they typically do not handle: employment contracts, HR policy, performance management, benefits brokerage, or workplace pension scheme selection. Payroll outsourcing is processing, not HR.
That distinction matters when you are scoping the contract.
The line between payroll software you run yourself and outsourced payroll is labour. Software gives you the tool. Outsourcing gives you the tool plus the person who operates it.
For a 20-person business, that difference is roughly 2-4 hours per month of someone’s time, around £50-£100/month at an admin salary.
The outsourcing premium is often comparable, which means the cost argument is tighter than most people assume.
We reviewed market pricing from accountancy firms, payroll bureaux, and managed service providers across the UK in Q1 2026. The picture is consistent: the meaningful gap between DIY and outsourced payroll is not price.
It is accountability.
What does UK payroll outsourcing cost?
We analysed pricing from UK accountancy firms, payroll bureaux, and managed payroll platforms in Q1 2026. Here is how the main options compare for a typical SME.
| Option | Typical cost | What you get |
|---|---|---|
| Your accountant | £5-15/employee/month | Full processing, RTI, auto-enrolment, year-end |
| Payroll bureau | £3-10/employee/month | Processing only, you review and approve |
| Managed payroll service | £8-20/employee/month | Full processing + dedicated payroll manager |
| DIY software (comparison) | £7-33/month flat | Tool only. You run it. |
Source: Market research, April 2026. Prices are indicative and vary by provider, location, and complexity.
For a 20-employee business: your accountant costs £100-£300/month. A bureau costs £60-£200/month. A managed service costs £160-£400/month.
BrightPay (DIY) costs £139/year, but you need a capable person to run it every month.
For a full breakdown of UK payroll provider pricing and features, see our UK payroll providers comparison.
The cost premium for outsourcing over DIY software is real. But the premium buys you something specific: you never think about payroll until the payslips appear.
For a business owner or People Ops lead whose time is worth more than £15/hour, that trade-off is often straightforward. The harder internal conversation is with Finance, who will see the per-head line item and ask why you are not just running it in Xero.
The answer (risk absorption, continuity, error accountability) is not always obvious from a cost spreadsheet alone.
When should you outsource vs run payroll yourself?
The honest answer is that outsourcing is the right call for most UK SMEs. The cases where DIY payroll makes sense are narrower than they look on paper.
Outsource if: Nobody on your team wants to own payroll. You do not have a backup when your payroll person is unavailable.
Your team’s time is better spent on revenue-generating work. You have had HMRC errors or penalties from manual processing. Your employee count is growing and your current process already feels precarious.
Run it yourself if: You have a capable admin person who actively wants to own payroll and has capacity. Your employee count is stable and simple (no variable hours, no complex statutory payments). You use Xero or Sage and payroll is integrated into your accounting workflow.
You are comfortable absorbing the single-point-of-failure risk personally.
The hybrid approach: Use payroll software but have your accountant review and file.
This is common for businesses with 10-30 employees who want control over timing but do not want to carry the RTI submission risk themselves.
You run the payroll in the software, your accountant checks the numbers and submits to HMRC. Cost: the software fee plus a reduced accountant fee (£2-5/employee/month for review only).
We have seen the hybrid model work well when the internal payroll lead is experienced and the accountant relationship is already close.
Where it breaks down is when input data is consistently late, which creates a bottleneck that the accountant absorbs, and eventually charges for.
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The outsourcing decision is not really about cost. It is about risk tolerance and bandwidth.
A £200/month bureau fee is not expensive if it prevents one HMRC penalty, one payslip error, or one month where payroll is late because the person who usually runs it is on sick leave.
The mistake we see most often is businesses that run payroll in-house successfully for years, until the person who does it leaves. Then there is a scramble to find someone who knows the software, the tax codes, the auto-enrolment settings, and the reason that one employee is on a W1 emergency tax code.
Outsourcing removes the single-point-of-failure risk.
If your company also hires outside the UK, see our UK EOR guide for how EOR fits alongside outsourced domestic payroll.
What are the UK compliance requirements you are still responsible for?
This is where many businesses get a false sense of security. Outsourcing payroll does not transfer your legal obligations to the provider. You remain the employer. HMRC holds you accountable.
The obligations that stay with you regardless of who processes the payroll:
PAYE and Employers’ NI. You are responsible for ensuring that Income Tax and both employee and employer National Insurance Contributions are calculated correctly and paid to HMRC by the due dates.
If your provider calculates Employers’ NI incorrectly and you underpay, the shortfall, interest, and any penalty fall on you, not the provider.
Real Time Information (RTI). Full Payment Submissions (FPS) must reach HMRC on or before each payday. An Employer Payment Summary (EPS) is required in months when you pay no employees.
Late RTI submissions trigger automatic penalties starting at £100 per month. Your provider handles the filing, but you are accountable for the deadline.
Auto-enrolment. The Pensions Regulator holds employers responsible for auto-enrolment compliance: correct enrolment, accurate contribution rates, timely opt-out processing, and three-year re-enrolment cycles.
Some bureaux will tell you they handle auto-enrolment end to end.
Check whether that means they submit contributions to your pension provider or merely calculate them. There is a meaningful difference.
P11D reporting. Benefits in kind must be reported to HMRC annually via P11D forms, or via payrolling benefits. Some outsourced providers treat this as a separate, billable service.
If your employees receive any company benefits (car allowances, private medical, gym memberships): clarify upfront whether P11D is included.
Understanding where your legal exposure sits is the most important thing you can do before signing an outsourcing contract. The payslips appearing on time is not the same as the compliance being right.
What should you check before outsourcing?
HMRC recognition. Your outsourced provider’s software must be HMRC-recognised for RTI filing. All major platforms meet this requirement.
Smaller independent bureaux occasionally run older systems. Confirm this before engaging.
Auto-enrolment scope. Confirm the provider handles pension auto-enrolment end to end: enrolment, contribution calculation, opt-out processing, and re-enrolment.
Some bureaux process payroll but leave pension administration to you.
The distinction rarely appears clearly in the service description. Ask explicitly.
Year-end processing. P60 generation, P11D filing, and the final EPS submission must be included. Some providers charge extra for year-end. Clarify before you sign.
Employee access. Can your employees access their payslips online? Cloud-based providers (Sage, Xero) typically include employee self-service. Bureau services may email payslips or rely on you to distribute them.
For a Remote or hybrid workforce, self-service access is increasingly expected.
Error liability and professional indemnity. If the provider makes a calculation error that triggers an HMRC penalty, who pays?
Most providers carry professional indemnity insurance for their own errors, but the HMRC penalty itself falls on you as the employer.
When providers say they are “fully managed” and carry “full liability”, ask exactly what that means. In practice, the indemnity covers their professional fee for fixing the error, not the downstream penalty from HMRC.
Clarify what happens if the provider gets it wrong before the contract is signed, not after.
Transition and data ownership. If you switch providers, how do you get your payroll history out? Some bureau systems export cleanly.
Others lock historical data into proprietary formats. Your payroll history, particularly for RTI purposes and employee P60 records, belongs to you. Confirm the exit process before you commit.
Your Finance Director will ask about the fee structure, the contract length, and what happens in year two when the introductory rate expires.
Having clean answers to those questions before the internal sign-off meeting saves a round trip.
Check current provider details
How do you switch to an outsourced provider?
Switching from DIY payroll to an outsourced provider mid-year is more friction than it looks.
The main complication is that your existing payroll history: tax codes, year-to-date pay figures, cumulative NIC, pension contribution records, needs to transfer accurately so that year-end P60s are correct.
Most professional providers will ask for a payroll export from your current software covering the year to date. The cleaner that export, the smoother the transition.
If your current records are a mixture of spreadsheet and software, the onboarding will require manual reconciliation, which takes time and sometimes cost.
The lower-friction timing is at the start of a new tax year (April), when year-to-date figures reset and the transfer is straightforward.
Mid-year switches work, but budget for a 2-4 week parallel-run period where you provide the data, the new provider processes it, and you reconcile before the first live run.
You should tell your new provider the following before the first payroll run:
- Current tax codes for all employees
- Year-to-date pay and tax for each employee
- Pension scheme details and contribution rates
- Any employees on statutory pay (SSP, SMP, SPP)
- Any employees with court orders or attachment of earnings
Missing any of these will create reconciliation issues that compound over the year.
Frequently asked questions
How much does it cost to outsource UK payroll?
The range is £3-20/employee/month depending on the service level.
Your accountant typically charges £5-15/employee; a payroll bureau charges £3-10/employee; a managed service with a dedicated payroll manager runs £8-20/employee.
For a 20-employee business, expect £60-£400/month depending on which route you choose. For comparison, DIY software like BrightPay costs £139/year, but you bear the operational and compliance burden yourself.
The price gap between DIY and fully managed outsourcing is real, but so is the risk gap.
Who is responsible for HMRC compliance when payroll is outsourced?
You are, as the employer. PAYE, National Insurance, RTI submissions, and auto-enrolment compliance remain your legal obligation even when a third party processes the payroll.
If your provider files an RTI submission late or miscalculates Employers’ NI, HMRC issues the penalty to you, not the provider. Your provider may carry professional indemnity insurance that compensates you for their error, but that covers their professional fee for correcting the mistake, not the HMRC penalty itself.
This is a fundamental distinction that the word “outsourcing” does not change, and it is worth being clear on before you sign any contract.
Should I use my accountant or a payroll bureau?
Your accountant is the simpler option: one relationship, payroll data feeds directly into your accounts, and they already understand your business structure and tax position.
A bureau is typically cheaper (£3-10 vs £5-15/employee) but creates a second provider relationship with its own onboarding, communication, and quality-control overhead.
If your accountant offers payroll at a reasonable rate, consolidating in one place usually reduces coordination cost and the risk of payroll data and accounting data falling out of sync. If the accountant is expensive or does not offer payroll, a bureau is the more cost-effective route.
Just factor in the extra coordination time.
Does outsourcing payroll include auto-enrolment?
Not always, and this is one of the most common gaps in bureau contracts.
Many payroll bureaux will calculate pension contributions as part of payroll processing but stop short of submitting those contributions to your pension provider or managing the enrolment and opt-out process.
You need to ask explicitly whether auto-enrolment administration is included: enrolment of eligible employees, opt-out and opt-in processing, contribution submission to the pension scheme, and three-year re-enrolment.
The Pensions Regulator holds you responsible for all of these regardless of who you have engaged to handle payroll.
Can I switch payroll providers mid-year?
Yes, though it is more friction than switching at tax year-end.
Your new provider needs accurate year-to-date pay and tax figures for every employee, current tax codes, pension contribution records, and details of any employees on statutory pay.
Clean data from your current software makes the transition straightforward; messy or incomplete records create reconciliation work that delays the first live run.
A 2-4 week parallel period, where you run both systems and reconcile before going live, is standard practice for mid-year switches and worth building into your timeline.
Disclosure
Whichapp is an independent comparison site. We do not sell payroll services. This guide draws on market pricing research, HMRC published guidance on PAYE and RTI obligations, and The Pensions Regulator’s auto-enrolment requirements.
This does not constitute financial or tax advice.
Last reviewed: April 2026
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