payroll bureau vs. outsourced payroll

Payroll Bureau vs. Outsourced Payroll: What’s the Difference?

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The way you choose to handle your payroll has a significant impact on efficiency, compliance, and success. Two common options stand out: the payroll bureau and outsourced payroll services.

And while both serve the same fundamental purpose of paying employees accurately and on time, they are distinct in their approach and the level of involvement they require from you. So, let’s explore the key differences between the two solutions, helping you make an informed decision about which one is best suited to your needs!

What is a payroll bureau?

When using a payroll bureau, you run your payroll partly in-house and then offload certain functions to a third-party payroll provider—meaning you partly outsource your payroll process. So rather than having the entire process run in-house, you control part of it and outsource the remainder. This means that you employ your payroll team, you set the hours that they work and you oversee the processes.  

Ultimately, this means that you have more control over the process, whilst some elements are handled by your provider, such as printing payslips or processing expenses.  

It’s worth noting that language around payroll bureau’s can be used interchangeable, so always make sure you understand exactly what the service provider is offering. Some outsourced providers have started referring to themselves as payroll bureaus and vice versa—in some cases they offer both aspects of the payroll service, others offer a full service package that closely resembles outsourced payroll. You might also hear the term “part-managed payroll” or “co-managed payroll” or something similar, which likely also refer to a payroll bureau model. The key is getting total clarity from the providers!

The benefits of using a payroll bureau

If keeping control is important to you, payroll bureaus allow you to pick and choose which functions to retain in-house and which to pass over to t third party. This flexibility allows you to hand over tasks that you don’t have the in-house skills for, or those that consume the most time and effort, for example—allowing you save either time or cost.

You might choose to refocus your in-house staff on alternative tasks due to freeing up their time, or you might find you don’t need a full-time team anymore.  

As with outsourced payroll services, a bureau solution also provides you with access to expertise in legislation, regulations, and compliance.  

The downsides of using a payroll bureau

As you maintain a level of payroll work in-house, you’ll absorb the employment costs for your payroll team. That includes salary, National Insurance, holiday and sick pay, benefits, and so on.

Your in-house payrollers will undertake tasks like data collection, calculating overtime, administering pensions, and any other requirements not handled by the bureau—meaning that if someone in your team is away due to sickness (or even holiday), you risk your payroll process grinding to a halt.

You’ll also still need the relevant technology and payroll software required to manage these areas of payroll in-house, which will obviously come at an extra (and potentially significant) cost.

Then there’s the risk of mistakes. A payroll bureau is not as robust as an outsourced service in reducing the risk of mistakes as there are tasks that are out of their control. So when you retain parts of your payroll, you also retain a level of risk.  

What is payroll outsourcing?

Outsourced payroll involves engaging a payroll service provider to manage your entire payroll service. Again, there might be interchangeable terms here—sometimes it is called fully managed payroll or full service payroll.  

The supplier handles your entire payroll process from beginning to end. This is particularly helpful for organisations without an internal finance, HR or financial admin teams, or when those teams are needed to focus on business critical activities.  

Outsourced providers are experts in all aspects of payroll, including current and future regulations, keeping everything running even when the entire industry changes, for example when RTI (real time information) regulations and pensions auto-enrolment came in. They help you keep up to date with the minute details of payroll regulations, taking the compliance burden off your shoulders.

When outsourcing your payroll, the only thing required from you is the data. The outsourcing payroll provider will rely on you to provide information on things like starters and leavers, hours worked, bonuses, and so on, Then, they’ll handle calculations, deductions, payslips, compliance, processing, employee payments and everything else required.

The benefits of using payroll outsourcing

Outsourcing your payroll will help to reduce your overall payroll costs. While outsourced services might not seem cheap at face value, when compare to the costs of employing your own in-house team, you’ll see significant savings.

You’ll also free up your time and resources internally, allowing you to put effort into the parts of your business that need it most—not just payroll. 

Not forgetting the benefits of having a team of qualified professionals at your fingertips, ensuring service continuity. You’ll no longer need to worry about having the right knowledge internally, and can enjoy having the expertise of a company who fully understands the intricacies of payroll—and uses that expertise to keep your payroll accurate and compliant, minimising the risk of mistakes.

While there are many more benefits, we’ll finish on one of the most significant—preventing fraud. By adding a third-party into the payroll process, you lower the chances that attempted payroll fraud will go unnoticed, and creates a valuable separation in the process.

The downsides of using payroll outsourcing

One of the main areas organisations worry about when outsourcing payroll services is the reliability of the provider. Choosing a reputable payroll partner is vital. Spend time talking to the provider and asking as many questions as you need to feel comfortable. Bring up any unique requirements your organisation has at the beginning of the discussions, so that there are no surprises later that might affect the service. Find out if they have any kind of service level agreement or guarantee.  

The other area you should discuss is confidentiality and data security. Look for certifications and accreditations that confirm whether the provider is legitimate.  

Choosing between payroll bureaus and payroll outsourcing

Outsourcing part of all of your payroll is a significant decision, and choosing the right approach for your organisation is vital.  

You should look carefully at your current processes, procedures, costs, and needs before making a change.

  • If costs are a consideration, outsourced payroll is likely to be the most effective option for you.  
  • If you already have payroll expertise in-house, but lack some of the resource to process everything efficiently, then a payroll bureau could be a good route for you.
  • If you’re concerned about legislative changes, especially if you employ staff on variable or minimum wages, an outsourced service will provide peace of mind in keeping you fully compliant with all relevant regulations.  
  • If you want to maintain more control over your payroll, a bureau would likely be a more comfortable option for you.  
  • If you want to reduce your risk levels to the lowest possible levels, having an outsourced provider is the better option.

Ultimately, there is no single answer that is true for every organisation. The best path is to speak with a number of providers to see which offer a service that meets your needs.  

At Cintra, we’ve been delivery part-managed and fully-managed payroll services for over 40 years. Or, if you’re looking for a solution for managing your clients payrolls, we offer purpose built payroll bureau software.

We’re leading the way with our market-changing technology, and we’d love to tell you more about our services—get in touch!

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Danielle Nicholson
Danielle Nicholson
Danielle is our Communications and Content Manager, leading the content strategy for Cintra. Outside of her passion for all things copywriting, she loves being on the water in a kayak or taking long walks with her Golden Retriever!