A buyer's payroll outsourcing checklist
Use this page as a procurement document. It is designed to print or save to PDF. Give the same requirements to several providers, keep the evidence they supplied and use the scoring table to avoid judging quotations on headline price alone.
A. Record your payroll profile
- [ ] Number of people paid in a typical period, and seasonal peaks.
- [ ] Frequency: monthly, weekly, fortnightly or several schedules.
- [ ] Number of legal employers/PAYE references and any payrolls shared across sites.
- [ ] Variable components: overtime, tips, expenses, commissions, statutory leave, benefits and deductions.
- [ ] Pension scheme(s), enrolled workers and contributions workflow.
- [ ] Current payroll, accounting, time-and-attendance and HR systems.
- [ ] Planned first live payday and notice period with outgoing provider.
B. Specify the services you are purchasing
| Activity | Included? | Responsible approver | Evidence expected |
|---|---|---|---|
| Starter, leaver and change updates | ___ | ___ | Change log |
| Gross-to-net calculation | ___ | ___ | Draft payroll report |
| Variance/exception checking | ___ | ___ | Exception report |
| FPS / EPS submissions | ___ | ___ | Submission confirmation |
| Payslips and distribution | ___ | ___ | Agreed secure method |
| Pension data and contributions | ___ | ___ | Reconciliation/transfer confirmation |
| Bank files / payment release | ___ | ___ | Authorisation record |
| Payroll journals and management reports | ___ | ___ | Reconciled totals |
| Employee questions and corrections | ___ | ___ | Response path |
Payment release and employer duties must not be silently transferred by an ambiguous “fully managed” label.
C. Validate the people and controls
- [ ] Names and relevant experience of the individuals who will support your payroll.
- [ ] Sample anonymised variance report and payroll approval workflow.
- [ ] Agreed input and sign-off cut-offs, including UK bank holiday handling.
- [ ] Clear route for urgent amendments, discrepancies and software outages.
- [ ] Cover arrangements for absence or staff turnover.
- [ ] Explicit process for RTI rejections or incorrect pension files.
D. Validate information security
- [ ] Written controller/processor terms where applicable; subprocessors and permissions documented.
- [ ] Secure onboarding/transmission, access controls, retention and data-return arrangements.
- [ ] Incident reporting route, escalation owners and access revocation on exit.
- [ ] No employee-identifiable records requested over an unsecured sales form.
For the minimum content of a processor agreement, see ICO guidance.
E. Compare actual first-year cost
- [ ] Recurring charge and minimum monthly fee.
- [ ] Onboarding, setup, migration and parallel-run charges.
- [ ] Charges for multiple PAYE entities and extra frequencies.
- [ ] Number and cost of corrections, leavers and off-cycle pay runs.
- [ ] Support access and service limits.
- [ ] Contract term, annual increases, notice period and exit/data charges.
- [ ] VAT treatment and fees excluded from the headline quote.
Use the cost calculator to model scenarios—not as a substitute for a signed proposal.
F. Score the evidence (not the sales presentation)
Give each category 0–5 points and multiply by its weight / 5, producing a total out of 100.
| Category | Weight | Supplier A | Supplier B | Supplier C |
|---|---|---|---|---|
| Quality controls | 25 | ___ | ___ | ___ |
| Experience and fit | 20 | ___ | ___ | ___ |
| Data security | 20 | ___ | ___ | ___ |
| Reliability and support | 15 | ___ | ___ | ___ |
| True cost | 10 | ___ | ___ | ___ |
| Switching and exit | 10 | ___ | ___ | ___ |
| Total | 100 | ___ | ___ | ___ |
Ask why any category received a low score before committing. A supplier unable to demonstrate security or corrections is high risk, even if its price wins.
G. Agree the first payday sign-off
Before the first live run, document opening balance reconciliation, correct employee records, final approval authority, RTI reporting ownership, pension reporting, bank authorisation and escalation contacts. Record who checks the second pay cycle as well, after migration consultants have moved on.
Read the detailed payroll switching playbook or ask us about scoping your requirements.