Running payroll sounds simple until you actually have to do it. You need to collect employee information, work out gross and net pay, calculate tax and National Insurance, deal with pensions, produce payslips and report the right information to HMRC. Then you have to do it all again on the next payday. A payroll bureau can take much of this work off your hands. But what is a payroll bureau?
A payroll bureau is a specialist company you can hire that processes payroll for other businesses. You normally keep control of employee information and payroll decisions, while the bureau handles much of the technical payroll work. This can be useful if you want expert payroll support without employing a full payroll team of your own.
In this guide, we explain what a payroll bureau does, how the process works, and we even touch on what the difference is between fully outsourced payroll and a payroll bureau. We also talk about how to decide whether your business needs one or not. If you happen to be an accountant, we have a separate article for you that will help you while looking for the best payroll bureau software.
What is a payroll bureau?
A payroll bureau runs payroll for other businesses. Instead of calculating employee pay yourself, you send the bureau the information it needs. The bureau processes the payroll using their specialist software and sends the results back to you.
For example, imagine you have 50 employees who are paid monthly.
Before payday, you might send the bureau information about:
- new employees
- employees who have left
- salary changes
- overtime
- bonuses and commission
- unpaid leave
- sickness (for sick pay)
- maternity or other statutory leave
- pension changes (for pension contributions)
- other deductions
The bureau then uses this information to calculate the payroll. You normally receive a draft payroll to check before anything is finalised. Once approved, the bureau may produce payslips, prepare payment files and submit the required payroll information to HMRC. For more info on everything a payslip contains, read our article that explains payslips.
What does a payroll bureau do?
A payroll bureau can handle several parts of the payroll process, depending on the type of service you pay for. Some providers offer a fairly basic payroll calculation service, while others provide much more support than that.
Payroll bureax calculate employee pay
One of the bureau’s main jobs is working out how much each employee should be paid. This normally starts with determining gross pay and then takes account of deductions and other payments.
A bureau may calculate:
- basic salary or hourly wages
- overtime pay
- bonuses and commission
- PAYE Income Tax
- employee National Insurance
- employer National Insurance
- pension contributions
- student loan deductions
- statutory payments
- other authorised deductions
The final figure is the employee’s net pay, or take-home pay.
A payroll bureau may report payroll information to HMRC
Payroll also involves regular reporting to HMRC. Employers normally need to report employee pay and deductions through a Full Payment Submission, or FPS, on or before payday. A payroll bureau will often prepare and submit this information for you as part of the service.
You may also need an Employer Payment Summary in certain situations, such as when no employees were paid in a tax month or when certain reductions need to be reported. There is a guide on HMRC on payroll providers that explains how businesses can pay a bureau or accountant to do PAYE for them.
A payroll bureau can produce payslips
A payroll bureau can also produce employee payslips for you to distribute.
These payslips usually show:
- gross pay
- tax
- National Insurance
- pension deductions
- other deductions
- net pay
Depending on the provider, payslips may be sent securely through an employee portal, by email or in another agreed format.
Handling starters and leavers
Payroll changes whenever somebody joins or leaves the business. When working with a payroll bureau, you need to give the bureau accurate new starter and leaver information so the employee is treated correctly in payroll. For a new employee, this may include information from their P45 form or starter declaration. For a leaver, the bureau may calculate final pay, update the payroll and prepare the information needed for their P45.
Good employee records make this part of working with a payroll bureau much easier. Our guide to employee records management explains how to keep payroll and other HR information organised. Software like Factorial can help automate your workflow of collecting and organising documents. Check out our document management software or if you need help collecting and preparing documents specifically for payroll, our payroll preparation features may be even more interesting.
Processing pension deductions
Payroll bureaux can also help process workplace pension information. This might include assessing workers, calculating pension deductions and producing contribution information for your pension provider.
The Pensions Regulator explains that payroll software can support many automatic-enrolment duties, including assessing employees and calculating contributions, but the employer still needs to make sure its workplace pension duties are being met. HMRC also underlines this, so make sure all information is correct and keep track of important deadlines.
How does a payroll bureau work?
A payroll bureau takes care of processing payroll for your business, but how does it work in practice? Here’s a simple breakdown of the process and what you can expect when working with one.
A simple monthly payroll might work like this:
- You collect payroll changes: HR and managers confirm starters, leavers, bonuses, overtime, absences, salary changes and other updates.
- You send the information to the bureau: This might happen through a secure portal, spreadsheet, HR system or another agreed method.
- The bureau runs the payroll: It calculates pay, deductions, pensions and other payroll items.
- You receive a draft: You check that employees, payments and deductions look correct.
- You approve or request changes: Mistakes or missing information can be corrected before the payroll is finalised.
- The bureau finalises payroll: Payslips, HMRC submissions, reports and payment files can then be prepared.
- Employees and HMRC are paid: Depending on your arrangement, you may make these payments yourself or the provider may offer a payment service.
The most important part is the information you send at the beginning. The information you send needs to be accurate and up to date. For example, if an employee gets a £1,000 bonus, leaves the company or works 20 hours of overtime, you need to let the bureau know. Even if someone else processes your payroll, your business is still responsible for providing the right information.
What are you still responsible for?
Even if you hire a payroll bureau, your business is still responsible for making sure payroll is done correctly. According to HMRC, employers are still legally responsible for their PAYE tasks, even when they outsource payroll.
This means you still need to make sure:
- Employee details are correct
- New starters and leavers are reported on time
- Working hours and overtime are accurate
- Salary changes and bonuses are correct
- Payroll is checked before it’s finalised
- PAYE and other payments are made on time
- Payroll records are kept properly
You also need to keep PAYE records for three years after the end of the tax year they relate to. Your payroll bureau may keep these records for you, but it’s important to check what they store, how long they keep them and how you can access them. For more info on data retention, read our article on how long to keep records, which differs from document to document.
Payroll bureau vs outsourced payroll
A traditional payroll bureau usually focuses on processing payroll. Your business still collects employee information, manages payroll changes and approves the results, and a fully outsourced payroll provider may take care of more of the day-to-day payroll work. However, on the other hand, payroll bureau and outsourced payroll are sometimes used to mean the same thing. There isn’t really a single definition, so what matters most is what the provider actually offers.
| Area | Payroll bureau | Fully outsourced payroll |
|---|---|---|
| Payroll calculations | Usually handled by provider | Usually handled by provider |
| Collecting internal changes | Usually the employer | Provider may manage more of the process |
| Payroll approval | Employer normally approves | Employer usually still checks and approves |
| Employee payroll questions | Often handled by employer | Provider may answer directly |
| HMRC reporting | Often included | Usually included |
| Payslips | Often included | Usually included |
| Day-to-day payroll administration | Shared | More work handled by provider |
| Employer’s legal responsibility | Remains with employer | Remains with employer |
You can think of a payroll bureau as a middle ground of sorts. While your business still handles some payroll tasks, a specialist at the bureau takes care of the more technical work.
Payroll bureau vs running payroll in-house
Another option is to manage payroll yourself, without using an external provider. This means using payroll software and having someone (or a team of people) in your business process employee pay each month or week. There are a few benefits to running payroll in-house. For example, it gives you more control and you can make last-minute changes easier. You also don’t need to send payroll information to an outside provider.
However, someone in your business needs both the time and the knowledge to manage payroll correctly. They also need to keep up with tax changes, payroll deadlines, statutory payments, pensions and HMRC reporting. For a small business with a few employees on fixed monthly salaries, this may be easy to manage, but as your business grows, payroll can become a lot more complicated. Overtime, bonuses, commission, pensions, statutory leave and employees joining or leaving all add more work that your in-house payroll team would need to manage.
If you’re setting up payroll for the first time, our guide to PAYE registration explains the basic steps you need to follow.
What are the benefits of using a payroll bureau?
Using a payroll bureau can save your business time and make payroll easier to manage. Here are some of the main benefits.
Less payroll admin
One of the biggest benefits is saving time. Your team no longer needs to handle all the payroll calculations, payslips and HMRC submissions themselves. You still need to provide the right employee information, but the bureau takes care of much of the technical work.
Access to payroll specialists
Payroll bureaux have specialists who deal with payroll every day. This can be helpful if your payroll is currently managed by an HR manager, office manager or finance team employee who already has other responsibilities. Instead of doing everything themselves, they can rely on payroll experts to handle the calculations and reporting.
Support as your business grows
Managing payroll for five employees is much easier than managing it for 200. As your business grows, there are more employees, changes and payments to keep track of. A payroll bureau can help you manage this extra work without needing to hire a full payroll team.
Less dependence on one employee
In some businesses, only one person knows how to run payroll. This can cause problems if they go on holiday, get sick or leave the company. A payroll bureau means you don’t have to rely on just one employee to get everyone paid.
What are the disadvantages of a payroll bureau?
While payroll bureaux have many benefits, they also have some disadvantages worth considering before you choose one.
You still need to provide accurate information
As mentioned earlier, a payroll bureau relies on the information your business sends. If you forget to report overtime, a salary change or an employee leaving, mistakes can still happen. This means your team still needs to keep employee information accurate and up to date.
Last-minute changes can be harder
When you manage payroll yourself, you may be able to fix a mistake straight away. With a payroll bureau, you usually need to follow their deadlines and processes. This can make urgent changes more difficult, so it’s worth asking how they handle late updates or corrections.
Costs can increase
Payroll bureaux usually charge based on the number of employees, how often you run payroll or the services you use. Some may also charge extra for pensions, additional pay runs, corrections or year-end tasks. Make sure you understand the full cost before signing a contract.
You need to share sensitive information
To process payroll, your bureau needs access to personal and financial employee information. This means you need to make sure your provider keeps that information secure. Before choosing a bureau, ask how they protect your data, who can access it and what happens to it if you stop using their services.
Do you actually need a payroll bureau?
A payroll bureau can be a good choice if managing payroll is taking up too much time or becoming difficult for your team.
Here are some signs that your business might benefit from using one:
- Only one employee knows how to manage payroll
- Your business is growing quickly
- You regularly hire new employees or have employees leaving
- Your employees work different hours each week
- You pay overtime, bonuses or commission
- Payroll mistakes are happening more often
- Your HR or finance team spends too much time on payroll
- You don’t have a payroll specialist in your business
However, you might not need a payroll bureau if you already have an experienced payroll team and good payroll software. It may also be unnecessary if you have a small business with just a few employees and simple monthly salaries. In the end, it comes down to how much time payroll takes, how complicated it is and how much you’re willing to spend. If managing payroll yourself is becoming too much work, using a payroll bureau could make things easier.
How to choose a payroll bureau
Before choosing a provider, ask exactly what it will do for you.
Check:
- which payroll calculations are included
- whether HMRC submissions are included
- whether pensions are included
- how employee payslips are delivered
- how starters and leavers are handled
- who deals with employee payroll questions
- how you send payroll information
- how payroll approval works
- how quickly corrections are handled
- what reports you receive
- how employee data is protected
- what support is available
- what happens if your normal bureau contact is unavailable
- which services cost extra
Also ask about the process before signing a contract. If you are comparing the systems used by payroll providers and accountants, our payroll bureau software buyer’s guide looks at several UK options. Accountants offering payroll services can also see our guide to payroll software for accountants and our practical advice on running payroll for multiple clients.
How Factorial can help when you use a payroll bureau
As mentioned earlier, using a payroll bureau doesn’t mean all the payroll work is taken off your hands. You still need to collect the right information and share it with your provider. That’s where Factorial can help.
Factorial is an AI-first platform for business management that shows up where you already do your work. It helps you save time by collecting and organising information from across your business in one secure place.
This makes it easier to gather everything your payroll bureau needs without chasing updates or switching between different tools. In short, Factorial helps you prepare the information, while your payroll bureau takes care of processing payroll. Request a free demo of Factorial to see how it can help you!
FAQs about payroll bureaux
A payroll bureau processes payroll for other businesses. Services can include calculating wages, PAYE and National Insurance, handling pension deductions, producing payslips, processing statutory payments and submitting payroll information to HMRC. The exact service depends on the provider you choose.
A payroll bureau often works as a shared service. Your business collects and checks payroll information while the bureau handles the technical processing. Fully outsourced payroll usually means the provider manages more of the day-to-day payroll process. Always check the actual service agreement because providers use these terms differently.
The employer remains legally responsible for its PAYE duties even when a payroll provider runs payroll on its behalf. This is why you should give the bureau accurate information, review payroll before approving it and understand who is responsible for each part of the process.
Payroll bureau prices depend on the provider, number of employees, number of pay runs and services included. Some providers charge a base fee plus a cost per employee, while others use packages. Ask whether pensions, year-end work, extra payrolls, corrections, payment services and employee support cost extra.
A payroll bureau can be useful for a small business that does not have an experienced payroll employee or wants to spend less time running payroll. A very small business with simple pay and good payroll software may prefer to keep payroll in-house. The best option depends on how complicated your payroll is, how much time it takes and how much specialist support you need.
