What are payroll bureaus, and how are they different from outsourcing?

Running a company without an operational payroll process is like driving a car without a fuel pump. Sooner or later, fuel doesn’t get to the engine, and it stops working — making the car come to a grinding halt. 

Without receiving payment for their work on time, your employees, too, will likely become disenfranchised and unmotivated to work.

However, payroll involves more than just paying employees. It includes making accurate salary deductions, submitting all the correct forms (like FPS & EPS) to HMRC, and complying with other UK payroll and tax laws.

Considering how delicate the payroll process is, with little to no room for error, some companies use payroll bureaus to handle their payroll process.

This guide will explore what payroll bureaus are, how they work, their benefits, downsides, how they differ from outsourcing payroll, and much more.

What is a payroll bureau?

A payroll bureau offers businesses a hybrid payroll service that combines the efforts of your internal payroll team with an outsourced team of experts.

The payroll bureau handles specific payroll services like providing HMRC with information, processing payments & expenses, preparing payroll reports, and processing and sending out payslips.

As the payroll bureau handles these specific responsibilities, you’ll likely still need an in-house team to manage other internal payroll processes.

What is the difference between a payroll bureau and outsourcing?

You might be wondering, “A payroll bureau sounds a whole lot like outsourced payroll,” and you’re not entirely wrong.

These two share a lot of similarities, but there is a difference that tells them apart.

Payroll bureaus handle specific payroll processes you don’t want to handle internally — whether because of how monotonous it gets, or because you don’t have an in-house specialist. 

Most of the time, when using payroll bureaus, organisations usually still have an in-house team and therefore still have a measure of control over the entire payroll operation.

On the other hand, with an outsourced payroll service, organisations are handing over their entire payroll process to a third-party company. This third-party provider is expected to have a team of experts who will help you handle your payroll from top to bottom.

The bottom line about the difference between payroll bureaus and outsourced payroll is that with payroll bureaus, you can choose how much control you want to have over the entire process.

What are the pros and cons of using a payroll bureau?

Using a payroll bureau offers distinct advantages, primarily in saving time and ensuring accuracy. By offloading specific tasks, you free up your internal team to focus on strategic initiatives, while relying on experts to navigate complex UK legislation and minimise calculation errors. This expertise helps ensure you remain compliant with HMRC without needing a full in-house legal specialist.

However, relying on an outsourced provider comes with challenges. Costs can vary significantly due to retainers and additional fees for services like pensions or end-of-tax-year preparation. Additionally, the disconnect between your team and the bureau can lead to communication delays, potential data security risks during transfer, and a lack of efficiency compared to modern automated payroll software.

Is there an alternative to using a payroll bureau?

After considering the pros and cons of using a payroll bureau, you may be keen to understand the alternative solutions that are out there for dealing with payroll.

And the good news is there are alternatives. And they aren’t to build a robust internal team or to outsource all your entire payroll processes to a third-party company. Instead, it’s to take a best-of-both-worlds approach. In other words, to combine your existing internal team with in-house payroll software. Read our post on in-house payroll vs. outsourcing to find out more.

By doing this, you get to keep control over your operation while enjoying the benefits of outsourcing at a fraction of the cost and effort. Here are some ways payroll software can help you:

• Saves time - With payroll software, you can save time on tasks, as most processes are automated, and there is no back-and-forth communication.     

• Ensures compliance - HMRC-recognised payroll software can handle all HMRC submissions and pension filings on your behalf.

• Offers integrations - Integrations allow payroll software to work seamlessly with your other management tools, saving you time while allowing you to scale operations.      

• Support from experts - Even if you don’t have a payroll expert, some support services offfer a team of experts who can always provide you with personalised help and support.

• Generate data reports - You can create customised reporting to see your business operation from a payroll standpoint.

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