How to Choose a Payroll Provider in the UK: Options, Questions and Red Flags

To choose a UK payroll provider, first decide how much you want to hand over: just the processing (a payroll bureau), the whole process (managed payroll), or employment itself (an employer of record). Then test any provider on RTI, pensions, statutory pay, data protection and year-end. Remember that outsourcing payroll doesn’t outsource your legal responsibility for it.

GOV.UK puts it plainly in its guide to choosing how to run payroll. You can run payroll yourself with software, or pay a payroll provider to do it. Either way, you remain responsible for PAYE. So you need a provider whose work you can check and trust.

What are the main ways to run payroll in the UK?

There are four common models. They differ in who does the work, who carries the employer obligations and how much of your own time is involved.

Model	Who runs payroll	Who is the legal employer	Best suited to
In-house software	Your own staff, using HMRC-recognised software	You	Businesses with payroll skills in-house
Payroll bureau	An outside provider processes your inputs	You	Small and mid-sized employers who want processing done for them
Managed payroll	A provider runs the full process, including queries, pensions and year-end	You	Employers who want payroll off their desk entirely
Employer of record (EOR)	The EOR, under its own PAYE scheme	The EOR	Overseas companies hiring in the UK without a UK entity

In-house payroll software

You buy HMRC-recognised software and someone on your team runs each pay period. GOV.UK lists recognised software but doesn’t recommend one product over another. This gives you the most control. It also puts all the knowledge in one or two people: tax codes, starter checks, statutory pay, pension assessment and RTI deadlines. Holidays and resignations are the usual weak points.

Payroll bureau

A payroll bureau takes your inputs each period (hours, new starters, leavers, changes) and does the processing. That means calculations, payslips, RTI submissions and reports. You stay the employer and you approve each run. A bureau suits most small employers. How well it works depends on how clear your inputs are and how quickly the bureau responds.

Managed payroll

Managed payroll goes further. The provider handles employee queries, pension scheme submissions, statutory pay calculations, HMRC correspondence and the year-end. Some also make the salary payments to employees. You still sign off, but you aren’t doing the work.

Employer of record

An employer of record is different in kind. It becomes the legal employer of your UK staff, so payroll runs under its PAYE scheme and it takes on the employer duties: contracts, auto enrolment, right to work checks and statutory pay. This is the usual route for overseas companies that want to hire in the UK before setting up a company here.

What questions should you ask a payroll provider?

Use this checklist in every conversation. A good provider will answer each point clearly and in writing.

RTI submissions and HMRC payments

• Will you send the Full Payment Submission on or before every payday, and the Employer Payment Summary by the 19th when it’s needed?
• How will you tell us what we owe HMRC, and by when? (Payment is due by the 22nd of the following tax month, or the 19th if paying by post.)
• How are late-reporting reasons and corrections handled, and who pays any penalty caused by your error?

Our RTI submissions guide explains these deadlines in detail.

HMRC authorisation

• Will you act as our agent with HMRC, and how will that authorisation be set up?
• What will you be able to see and do on our PAYE account, and how is access removed if we leave?

Workplace pensions

• Do you assess every worker for auto enrolment on every pay run?
• Will you send contribution files to our pension scheme and make sure contributions reach the scheme on time?
• Do you handle opt-outs, refunds, postponement letters and re-enrolment?

See our auto enrolment guide for what these duties involve.

Statutory pay

• Do you calculate statutory sick pay, maternity, paternity, adoption and shared parental pay, including average weekly earnings?
• Will you reclaim eligible statutory payments through the EPS?

Paying employees

• Will you produce a BACS file for us to approve, or make the payments yourselves?
• What is the cut-off for changes before payday, and what happens with a late change?

Data protection

• Will you sign a written data processing agreement setting out how you handle our employees’ personal data?
• Where is the data stored, who can access it, and how are payslips delivered securely?
• What happens to our data if we end the contract?

Year-end and leavers

• Will you send the final FPS of the year and issue P60s to employees by 31 May?
• Do you produce P45s for leavers promptly?
• Do you support P11D and P11D(b) reporting by 6 July, and are you ready for mandatory payrolling of benefits from April 2027?

Service and escalation

• Who is our named contact, and who covers when they’re away?
• How quickly do you reply to a payroll query, and to an urgent payday problem?
• What is the escalation route if something goes wrong, and how is it put right?

What are the red flags when choosing a payroll company?

Look for these warning signs during the sales process and the first few pay runs.

• Vague answers on deadlines. If a provider can’t say when the FPS and EPS go to HMRC, it’s guessing.
• No sign-off step. You should approve a payroll summary before anything goes to HMRC or employees.
• Pensions treated as an extra. Auto enrolment is a legal duty for almost every employer. It shouldn’t be an afterthought.
• No data processing agreement. If the provider won’t put its handling of your employees’ data in writing, walk away.
• Shared logins or emailed spreadsheets of bank details. Insecure habits early on tend to continue.
• No reports you can check. You’re still responsible to HMRC. Without payroll reports, payment summaries and submission confirmations, you can’t check the work.
• Unclear exit terms. Ask how you get your payroll history and year-to-date figures if you leave mid-year. A clean handover is essential for P45s, P60s and RTI continuity.
• Pressure to sign quickly. Payroll moves are best planned around a clean start date, ideally the start of a tax year or a quiet month.

How do you switch payroll provider without disruption?

1. Pick a start date and work back from the first payday the new provider will handle.
2. Gather the data: employee records, tax codes, year-to-date pay and deductions, pension details and any statutory pay in progress.
3. Set up access for the new provider with HMRC and your pension scheme, and remove the old provider’s access once the move is complete.
4. Run a parallel payroll for one period if you can, and compare net pay line by line.
5. Check the first RTI submissions were accepted, and that your first HMRC payment matches what HMRC expects.

Choosing the right level of help

Most employers don’t need everything. They need the right model for their size, their in-house skills and whether they have a UK entity. If you have a UK company and want payroll handled properly, our payroll services cover RTI, pensions, statutory pay and year-end. If you’re hiring in the UK without a company here, an employer of record may be the simpler route.