Payroll software suits a small business with a simple payroll and someone who has the time and know-how to run it every pay day. Outsourcing to a payroll bureau suits a business that would rather pay a predictable fee than spend those hours and carry the risk of getting it wrong. The deciding factor is rarely the headline price; it is who will run payroll accurately, on time, every time.
This guide sets out what each option involves, what it really costs, and how to decide which is right for your business.
What running payroll with software involves
If you run payroll yourself, you must use payroll software that reports to HMRC online, unless you are exempt. According to GOV.UK, the software should help you record employee details, work out pay and deductions, report to HMRC, work out what you owe HMRC and calculate statutory pay such as sick pay and maternity pay.
HMRC publishes a list of recognised payroll software but cannot recommend one product over another. HMRC also offers its own free option, Basic PAYE Tools, for businesses with fewer than 10 employees. GOV.UK notes that it has some limitations and is not designed for agents or bookkeepers, so check what it covers before relying on it.
The software does the arithmetic, but you still do the work. Every pay run you enter changes, check the results, send a Full Payment Submission on or before payday, issue payslips, and pay HMRC and your pension provider. You also handle starters, leavers, statutory payments, auto-enrolment and year end.
What outsourcing payroll involves
With a payroll bureau, you send the changes for each pay period: hours, new starters, leavers, sickness and pay rises. The bureau calculates pay, tax, National Insurance and pension contributions, sends you a summary to approve, then issues payslips and makes the RTI submission to HMRC.
You stay the employer and keep control of pay decisions. The bureau takes on the processing, the deadlines and the job of keeping up with legislation. Our guide to payroll services for small businesses explains how this works in practice.
The true cost of each option
Comparing a software subscription with a bureau fee misses most of the cost. A fairer comparison includes:
- Time: the hours spent on each pay run, plus pension submissions, queries from staff and year end.
- Learning: getting to grips with the software, and keeping up with new rates, thresholds and rules each tax year.
- Risk: HMRC can charge monthly penalties for late FPS filing, starting at £100 a month for employers with 1 to 9 employees, and pension contributions paid late can lead to fines from The Pensions Regulator.
- Cover: payroll cannot wait if the person who runs it is on holiday or off sick, so someone else needs to know how to do it.
A bureau’s fee covers all of these. At Payroll Service (UK) Ltd, pricing starts from £2.50 + VAT per payslip, with no setup fees and no long-term contract. Pension auto-enrolment and routine starters and leavers are included. See our payroll pricing for details.
Payroll software vs payroll bureau at a glance
| Payroll software | Payroll bureau | |
|---|---|---|
| Direct cost | Free (Basic PAYE Tools, fewer than 10 employees) or a software subscription | A per-payslip or monthly fee |
| Your time each pay run | Entering data, checking, submitting and paying | Sending changes and approving a summary |
| Keeping up with rule changes | You | The bureau |
| RTI submissions | You send them | The bureau sends them |
| Pension auto-enrolment | You assess staff and send contribution data | Handled by the bureau |
| Holiday and sickness cover | Needs a trained backup | Covered by the bureau team |
| Best suited to | Very simple payrolls run by someone confident with payroll | Businesses that want payroll handled without learning it |
When payroll software makes sense
- A very small, stable payroll: a handful of salaried employees whose pay rarely changes.
- In-house experience: someone who already understands PAYE, National Insurance and auto-enrolment.
- Time to spare: the hours each pay run are genuinely available, including for year end.
- Reliable cover: a second person who can run payroll if the first is away.
When outsourcing makes sense
- Your time is worth more elsewhere: owners and managers who would rather run the business than the payroll.
- Variable pay: overtime, shifts, commission or regular starters and leavers.
- More than one pay frequency: for example, weekly staff alongside monthly salaried staff.
- Specialist requirements: CIS, director-only payrolls, or UK staff employed by an overseas company.
- No one to cover: payroll currently depends on a single person.
The hybrid option
It does not have to be all or nothing. Many businesses keep the parts that need local knowledge, such as timesheets, holiday records and pay decisions, and outsource the processing, submissions and pension work. Others ask their accountant to arrange payroll, and the accountant uses a bureau behind the scenes.
What matters is that every task has a clear owner. If you keep some work in-house, agree in writing who sends the changes, who approves the payroll and who pays HMRC and the pension provider.
Frequently asked questions
Is there free payroll software in the UK?
Yes. HMRC’s Basic PAYE Tools is free for businesses with fewer than 10 employees. It has some limitations, so check it covers everything your payroll needs.
If I outsource payroll, am I still the employer?
Yes. A payroll bureau processes payroll on your behalf, but your business remains the employer. Payroll Service (UK) Ltd is a payroll bureau, not an umbrella company or an employer of record.
Can I move from payroll software to a bureau partway through the tax year?
Yes. Your year-to-date figures for each employee are carried over and your PAYE scheme stays the same. Payroll switching and migration is one of the services we offer.
Is outsourcing worth it for just one or two employees?
Once you are registered as an employer, even a payroll of one needs an FPS every pay run, and most employers with staff have automatic enrolment duties (some director-only companies do not). Because pricing is per payslip, outsourcing can be a practical choice even for very small payrolls and director-only companies.
Get a quote for outsourced payroll
Payroll Service (UK) Ltd has run payroll for UK employers since 2011 and works with more than 500 clients across the UK from our base in Cardiff. We handle weekly, fortnightly, four-weekly and monthly payrolls. Explore our payroll services or contact us for a free, no-obligation quote.
About Payroll Service (UK) Ltd: we are a Cardiff payroll bureau, established in 2011 and run by director Jack Lloyd-Lewis. We run weekly, fortnightly and monthly payrolls, pension auto-enrolment and CIS for UK employers, overseas companies with UK staff, and accountancy practices that outsource their clients’ payroll, using Sage 50 Payroll and BrightPay.