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Payroll is one of the most critical functions in any organisation. It ensures employees are paid correctly and on time, maintains compliance with tax laws, and often serves as the backbone of employee trust. Traditionally, many businesses outsource payroll to third-party providers for convenience and perceived cost savings. However, more organisations are now reevaluating that approach and bringing payroll in-house.
So, what’s driving the shift, and could it make sense for your business? Let’s explore the benefits, challenges, and best practices of insourcing payroll.
When payroll is managed internally, your team has direct access to employee data, tax filings, and payment processes. This means fewer delays when questions arise and provides more transparency into how payroll is handled.
While outsourcing can feel affordable at first, third-party providers often charge per employee, per pay cycle, and for every adjustment or special service and can charge up to £10 per employee, per payslip a month, even for a fairly basic service. An in-house system may involve upfront costs for software and training but can save money as your workforce grows.
With sensitive employee information at stake, data privacy is paramount. Managing payroll in-house reduces the number of external parties handling confidential data, lowering the risk of breaches and improving employee confidence.
Every business is unique, and so are payroll needs. In-house payroll teams can adjust processes, integrate with HR and accounting systems, and tailor reporting to support better decision-making.
Questions about payslips, deductions, or tax forms can be answered faster when the payroll function is in-house. Employees want quick answers to their questions and employers are starting to respect this. According to Gartner, 47% HR leaders are prioritising employee experience in their payroll processes. A dedicated internal payroll team can facilitate this through accurate and fast responsiveness.
If you’re considering bringing payroll in-house, here are a few strategies to ensure success:
Look for tools that integrate seamlessly with your HR and accounting systems and offer strong security, and user-friendly interfaces, such as Opera 3 SE.
Equip your payroll team with knowledge of compliance, reporting, and system functionality.
For the first few pay cycles, run your in-house payroll alongside your outsourced provider to catch discrepancies before going fully live.
Establish a process for monitoring changes in tax laws and labour regulations so as not to get caught out.
Bringing payroll in-house is not just about cutting costs, it’s about gaining control, enhancing security, and providing a better employee experience. While the transition requires thoughtful planning and investment, the long-term rewards often outweigh the initial challenges.
If your business values transparency, customisation, and efficiency, it may be time to take payroll back under your roof.
For more information about payroll software from Pegasus please get in touch today to arrange a free demo and to discuss your requirements further.
Posted On: September 24, 2025
