Outsourcing payroll guide: pros and cons for Australian businesses

On first glance, payroll might seem like a straight-forward process that involves just pressing ‘pay’. But anyone who’s ever processed payroll knows that payday in Australia is anything but that. It’s a complex process with layers and layers of legislation and rules.

That’s why so many employers are leaning on outsourced payroll services. By handing over the complex parts of payroll to experts, businesses can simplify their processes, reduce their compliance risk and refocus their energy on their people and growth.

What’s in the guide?

To help you consider whether outsourced payroll is right for your business, our guide covers: 

• What is payroll outsourcing and how does it work? 
• The benefits of outsourcing payroll
• Why you might want to keep payroll in-house
• What to look for when choosing an outsourced payroll provider

Download the full guide now by filling out the form on the right hand side. 

What is payroll outsourcing?

As your business grows, payroll becomes more complex and more important to get right. Outsourcing payroll means putting this critical function in the hands of experts who live and breathe compliance, freeing your team up to focus on other business critical tasks.

How payroll outsourcing works

Outsourcing payroll involves handing the management of pay runs, entitlements and payroll compliance over to a team of experts who handle it all for you. The process starts with setup. Your provider learns how your business operates, configures the system to match your pay structure and securely migrates employee data like pay rates, leave balances and superannuation details.

Once everything is set up, your provider runs test pay cycles to check accuracy before going live. From there, they take care of each pay run. This includes calculating wages, tax and super, along with generating payslips and making sure everything is up to date with current legislation and modern awards.

You’ll still have visibility of payroll information through reports, but without the day-to-day admin. Your payroll partner manages the details and provides ongoing support, giving you more time to focus on growing your business while knowing your team is paid correctly and on time.

Why businesses consider outsourcing payroll

Australia’s recent wave of underpayment scandals has forced businesses to take payroll more seriously than ever. More than one in three payroll managers (36%) say these cases have sparked major cultural shifts across payroll, HR and finance teams. This has led to many organisations re-evaluating how payroll is managed, investing in better systems and turning to expert support to protect their people and their reputation.

And as your team grows, payroll only gets more complicated. What might start as a quick monthly task in HR or finance can turn into hours of data entry, award interpretation and compliance checks. Add in complex award conditions, different work types and timesheet variations and even small errors can lead to costly underpayments and penalties.

The pros of outsourcing payroll

Time and cost savings

Running payroll in-house can quickly become a time drain as your business grows. Managing pay runs, timesheets, employee queries and reports can pull your team away from higher-value work.

Running payroll in-house comes with hidden costs, from software and training to staff hours spent processing pay runs and managing employee queries. These expenses can add up quickly, especially as your team grows.

Compliance and risk reduction

By outsourcing payroll, you gain access to experts who stay up to date with evolving legislation and award changes.

Access to expertise and technology

Outsourcing payroll gives you access to specialists who live and breathe Australian payroll. These are the experts who stay ahead of legislative updates, modern awards and compliance changes, so you don’t have to.

Alongside their in-depth knowledge, you gain the advantage of powerful payroll technology that automates calculations, updates awards in real time and integrates seamlessly with your other tools.

Scalability and flexibility

As your business grows, so do your payroll needs. Outsourced payroll gives you the flexibility to scale up (or down) without the stress of hiring, training or overhauling your existing systems. 

Whether you’re expanding into new states, adding new employment types or managing a team of seasonal staff, your payroll partner understands your unique business needs and adapts with you.  

The cons of outsourcing payroll

Before choosing a provider, it’s important to understand the potential drawbacks and how to manage them effectively.

Loss of control over payroll data

When you outsource payroll, you’re placing a part of your business in someone else’s hands. This can sometimes make employers feel a step removed from the process, especially when it comes to making last-minute adjustments or accessing detailed payroll information. 

This is why choosing the right provider is so important. Look for one that offers transparent communication, real-time reporting and system access can help maintain visibility and control. 

Security and privacy concerns

Payroll data is among the most sensitive information a business holds. That’s why it’s crucial to work with a partner who uses encrypted systems, secure data storage, strong access controls and who complies with Australian data protection laws. The right provider will make data security a top priority.

Hidden or ongoing costs

When looking for an outsourced payroll provider, some businesses might worry about the potential for hidden fees. Beyond the upfront cost, there may be charges for system updates, additional reports or complex pay adjustments. 

To avoid surprises, it’s important to partner with a provider that offers transparent pricing and clear inclusions.

Dependency on third-party providers

Outsourcing means relying on an external partner to manage an essential business function. While that can free up your team’s time, it also creates dependency on the provider’s systems, technology and timelines. To mitigate this, choose a provider with strong service-level agreements (SLAs), responsive local support and a proven track record of reliability.

How to decide if payroll outsourcing is right for you

Australian payroll legislation is confusing, complicated and difficult to get right. But as many legal cases have shown, getting payroll wrong can spell disaster. Errors can lead to time-consuming audits, financial penalties, reputational damage and even staff overpayments.

The reality is that the dedication to running payroll in-house can affect your bottom line. Not to mention that keeping up with Australia’s complicated and ever-changing government regulations can become an unenviable task. 

You need to ask yourself, “Is now the time to outsource payroll?”. Once you hand over the complex tasks of payroll management to the experts, you’ll get the peace of mind that a critical function of your business is in safe hands.

How Employment Hero can help streamline payroll

With Employment Hero Outsourced Payroll, you can hand it all over to our team of payroll experts. Our Australian-based specialists can manage your entire pay process with precision and care using our powerful Employment Operating System. 

Here’s just a few reasons why over 750 businesses rely on us to process their payroll every payday. 

• Expertise you can rely on: Our payroll specialists live and breathe Australian payroll. They stay on top of every legislative change, making sure your people are paid correctly and on time, every time.
• Seamless setup and ongoing support: We handle the heavy lifting. From onboarding and data migration to go-live, your dedicated implementation manager ensures a smooth transition. Once you’re up and running, our support team can answer your questions.
• Integrated with your HR systems: Employment Hero’s payroll service connects directly with our HR platform, time and attendance tools and rostering software, so everything from onboarding to payday runs in sync. It’s one intuitive platform that becomes your single source of truth.
• Secure by design: Your data is handled with strict security protocols and encrypted systems. In fact, we’re the only vendor in our space to hold all three information security certifications – ISO 27001 (information security management systems (ISMS)), ISO 27017 (Cloud Security) and ISO 27018 (Protection of Personally Identifiable Information in the Cloud). In October 2025, we also received SOC 2 Type II certification by the independent auditors at Global Compliance Certification (GCC). 
• Save time and reduce costs: Running payroll internally takes time and resources, from manual data entry to compliance checks and staff queries. With Employment Hero, we take care of it all, so your team can focus on what they do best.
• A partner that scales with you: Whether you’re a small business or a growing scale-up, our payroll services grow alongside you. From simple weekly pay runs to complex award calculations, we’ve got you covered.

If you’re ready to find out how managed payroll can benefit your business, get in touch with one of our payroll experts at Employment Hero today.

Download the full guide now by filling out the form on the right hand side. 

Disclaimer: The information in this guide is current as of 23 October 2025, and has been prepared by Employment Hero Pty Ltd (ABN 11 160 047 709) and its related bodies corporate (Employment Hero). The views expressed in this guide are general information only, are provided in good faith to assist employers and their employees, and should not be relied on as professional advice. The Information is based on data supplied by third parties. While such data is believed to be accurate, it has not been independently verified and no warranties are given that it is complete, accurate, up to date or fit for the purpose for which it is required. Employment Hero does not accept responsibility for any inaccuracy in such data and is not liable for any loss or damages arising either directly or indirectly as a result of reliance on, use of or inability to use any information provided in this article. You should undertake your own research and to seek professional advice before making any decisions or relying on the information in this guide.