Payroll often ticks along quietly in the background. Until something goes wrong, that is.
Did you know that:
These issues can have a big impact on a company and its people. That’s why it’s important for business leaders to regularly assess whether their payroll system meets current and future needs, ensuring continuity by keeping payroll stable even as the organisation evolves.
But choosing between managing payroll in-house or outsourcing it to an external provider can be tricky. Here we explore the pros and cons of each model so that you can make the right choice for your organisation.
What is in-house payroll?
In-house payroll is when a company manages employee pay internally using its own systems and people.
A dedicated department (typically finance or HR) takes full responsibility for processing wages, calculating tax, compiling reports, ensuring compliance and resolving issues. They use their own software, handle busy periods like year-end themselves, are responsible for navigating any new legislative changes and carry the daily operational risk.
5 benefits of in-house payroll
In-house payroll has been the traditional go-to approach for many organisations. It can deliver the following benefits:
1. Direct control
You have full responsibility for every step of payroll delivery, giving you total control.
2. Deep organisational knowledge
Every company has its own policies, pay structures, agreements and workflows which have often been established over several years. An internal payroll team will often have a deep understanding of these.
3. Flexibility
With an in-house solution, you can often make last-minute adjustments to hours, salaries, bank details or more, right up until the moment payroll is submitted.
4. Customisation
In-house payroll solutions and processes are often designed around how your organisation operates.
5. Perceived cost control
When everything is handled in-house, you don’t have to pay a monthly fee to an external provider.
Drawbacks of in-house payroll
As they scale, many organisations start to feel the pain that comes with managing payroll in-house. The biggest issues include:
1. Inefficient processes
In-house payroll processes are often manual, paper-based or rely on disparate systems. Workflows are often inefficient, having been established over long periods of time.
2. Key-person risk
Many in-house payroll teams rely on one or two longstanding employees who hold crucial knowledge or skills. Their absence can be incredibly disruptive.
3. Rising compliance pressure
UK payroll legislation is constantly evolving. Keeping up with change, audits and reporting requirements can be difficult.
4. Capacity strain
Many payroll teams are lean. Year-end, parallel runs, acquisitions or system changes can be overwhelming.
5. Technology limitations
In-house payroll systems often have limited integration, reporting, automation and security capabilities.
6. Mistakes are more likely
Manual data entry and a reliance on disparate systems including spreadsheets can often result in errors. Payroll mistakes are not just frustrating for employees – they can have a significant impact on their financial wellbeing and can impact their performance at work. In fact, 89% of employees say financial stress directly affects their concentration, confidence, energy and ambition.
7. Distraction from strategic work
Payroll teams can often end up spending all their time processing and firefighting.
What is outsourced payroll?
Outsourced payroll is when employee pay is managed by an external provider, with agreed service levels, controls and governance.
You still have full control over pay policies, approvals and strategic decisions. You remain accountable as the employer and retain oversight, control and governance. What you offload is the operational burden – the processing, compliance support and service delivery that often bogs down your team.
7 benefits of outsourcing payroll
1. Greater efficiency
Outsourced payroll solutions bring efficiency through automation. This lowers manual effort, reduces error-related costs and enables the data-driven optimisation of payroll and HR spend.
2. Less risk
With an outsourced solution, you’ll get specialist teams, documented and consistent processes and built-in backup. This ensures payroll continuity and removes reliance on any single individual.
3. Stronger compliance
Specialist providers guarantee payroll is delivered in line with UK and Ireland regulatory requirements. Automated checks and audit-ready controls further reduce the risk of errors and help ensure compliance.
4. Easy scalability
Outsourced solutions are flexible to scale with your needs, adapting to growth, restructures or acquisitions, and easily managing payroll peaks without you needing to add to your headcount.
5. Improved reporting and insights
Market-leading payroll solutions deliver real-time insights that can help HR, payroll and finance professionals make accurate, data-driven decisions.
6. Reduced operational burden
With much of the manual and repetitive processing work offloaded, internal teams have more capacity for higher-value work.
7. Improved employee experience
Accurate, on-time pay leads to less financial stress. This, along with clearer payslips and faster query resolution can improve employee financial wellbeing.
8. Flexibility
Adopting an outsourced solution doesn’t have to mean opting for a rigid, out-of-the-box solution. The right provider will offer configuration and customisation to meet your needs.
9. More predictable costs
Choosing to outsource your payroll can be more cost-effective. It can reduce hidden operational and error- related costs, and also replaces variable spend on system maintenance with regular, consistent fees.
Drawbacks of outsourcing payroll
Outsourcing your payroll isn’t about handing everything over and hoping for the best. Like any partnership, it requires the right fit and effective communication. Provider choice is critical: Experience, scale and local expertise make a real difference.
Change management matters too. The right provider will support onboarding and transition with careful planning and controls.
In-house vs outsourced payroll: Key factors to consider
Choosing the right payroll model isn’t just about cost. It’s about risk, resilience, capacity and your future goals as a business.
Use this framework to evaluate where your organisation currently stands. If you answer ‘yes’ to three or more of these prompts, your organisation may benefit from outsourcing payroll to a specialist provider:
1. Complexity
- Do you have multiple legal entities or payrolls across different locations?
- Do you manage variable pay, bonuses or complex deductions?
- Do you have multiple agreements, public sector rules or unionised environments in place?
- Do you see frequent payroll exceptions or adjustments?
2. Risk tolerance
- Have you faced any compliance errors, penalties or HMRC audits?
- Do you see greater demand for governance and reporting transparency?
- Would a payroll error create significant reputational risk for your organisation?
3. Capacity
- Does your payroll team rely on one or two key individuals?
- Do you often struggle to manage peak pressures such as year-end, acquisitions or system migrations?
4. Technology
- Is your payroll system challenging to maintain?
- Does your current software struggle to integrate with HR, finance or workforce management (WFM) platforms?
- Is it difficult to collect all the data you need for effective reporting?
- Do you have any repetitive processes that could be automated?
- Do you have any security or data protection limitations?
5. Employee experience
- Do you have a high volume of payslip queries or corrections each cycle?
- Is your payslip format confusing or inconsistent?
- Do you struggle to respond quickly to payroll queries from employees?
6. Future plans
- Do you have aspirations for organisational growth or international expansion?
- Are you planning any mergers, acquisitions or payroll harmonisation projects?
- Are you investigating shared services, system upgrades or automation initiatives?
When to outsource payroll: A summary
To summarise, there are several key signs that you need a managed payroll service. Organisations often make the move when faced with one or more of these triggers:
- Payroll team is stretched or heavily reliant on 1-2 experts
- Compliance complexity is rising (or audit findings are increasing)
- You’re dealing with acquisitions, harmonisation or system change
- High volume of payroll queries/corrections each cycle
- Leadership needs better reporting and stronger controls
- You’re moving away from legacy systems
- You need consistent coverage and continuity
Outsourced payroll services from Zellis
With Zellis Managed Pay Services, payroll becomes more than a process – it becomes a predictable, transparent and resilient foundation that supports your organisation’s growth, employee experience and strategic goals. With Zellis, you’ll get:
- Reliable payroll operations: Zellis delivers highly accurate payroll with built-in resilience and continuity, so your people are paid on time, every time without compromise.
- Stronger compliance confidence: Payroll is delivered in line with UK and Ireland regulatory requirements, reducing risk and helping protect critical operations.
- Insight and transparency: Live, self-serve Power BI dashboards provide instant visibility of payroll data and clear reporting to support confident decision-making.
- A better employee pay experience: Less errors, digital pay slips and optional extras including flexible employee benefits and financial wellbeing features keep your workforce happy.
How it works
Zellis combines expert support with technology to deliver a managed payroll experience that keeps operations running smoothly. You’ll get:
- Expert-led implementation: The Zellis team works with you to identify transformation opportunities and optimise the solution. Structured onboarding and seamless integration with payroll, HR and WMS ensure you feel the benefits, fast.
- Governance: Regular governance meetings, service level agreements and defined escalation paths provide clarity, control and accountability across every payroll cycle.
- Controls and approvals: Your team retains oversight with structured workflows, automated checks and real-time approvals to minimise risk.
- Real-time reporting and business intelligence: Live dashboards and detailed reports give you visibility into payroll operations and help support confident, data-driven decisions.
What makes us different
- Deep UK & Ireland expertise: Zellis brings over 60 years’ payroll experience and local regulatory knowledge, supporting complex payroll environments across the UK and Ireland.
- Proven scale: Zellis processes payroll for millions of employees every month and billions in payroll value annually.
- Integration and digital-first experience: The Zellis dashboard brings people, data and processes together in one place.
- Additional support: Zellis goes beyond processing with flexible benefits platforms, earned wage access and employee financial wellbeing tools – all designed to improve the pay experience for your workforce.
Ready to explore your options? Talk to a Zellis expert today or book a demo to see how managed payroll could work for your organisation.
