The Complete Guide to Payroll Bureaus in the UK

Payroll. It’s one of those critical functions that can feel like a major headache for busy businesses. Getting it right is expected. Getting it wrong can lead to costly mistakes.

In the UK, businesses have two powerful, tech-driven paths to payroll peace of mind. The first is managing it in-house with a smart, automated platform. The second is partnering with a specialist payroll bureau or accountant who handles it all for you.

So, which path is right for you? At Employment Hero, our platform powers both. We believe in the power of choice. This guide is a deep dive into outsourcing your payroll to give you the clarity you need to make the best decision for your business.

What is a payroll bureau?

Let’s start with the basics, by defining what a payroll bureau is. At their core, they are specialist service providers that manage payroll on behalf of businesses.

While many companies use an in-house team supported by an automated platform (like Employment Hero), many others choose to partner with a bureau or accountant to leverage their expertise and free up internal resources.

Businesses often turn to outsourcing payroll  for three key reasons:

• Cost savings – outsourcing can be more affordable than hiring dedicated payroll staff.
• Compliance – staying on top of ever-changing UK legislation, tax rules and reporting requirements can be difficult. Payroll bureaus and accountants live and breathe payroll, and bring specialist knowledge that can reduce risk.
• Efficiency – with dedicated systems and processes, bureaus can complete payroll tasks quickly and accurately, freeing business owners and advisors to focus on growth.

How does a payroll bureau work?

When a business outsources its payroll, the payroll bureau or accountant becomes responsible for the full cycle of paying employees and ensuring compliance. The process typically follows these key steps:

1. Data collection
   The business provides their payroll provider with all necessary employee data, such as contracted hours, overtime, salaries, bonuses, pension contributions and any deductions (like student loans or childcare vouchers). This information is usually submitted each pay period through secure channels.
2. Calculation of wages and taxes
   Using this data, the bureau calculates gross and net pay, applying the correct tax rates, National Insurance contributions, pension deductions and any statutory payments such as sick or maternity pay. This ensures each employee is paid accurately and in line with local legislation.
3. Payslip generation
   Once calculations are complete, the bureau produces payslips for employees. These are often distributed electronically via secure employee portals.
4. Reporting and compliance submissions
   Payroll bureaus and accountants handle the submission of required reports to regulatory authorities. For example, in the UK, this includes real-time information (RTI) submissions to HMRC. This step ensures the business remains compliant with statutory obligations.
5. Payment processing
   Depending on the arrangement, the bureau may either prepare payment files for the employer to authorise or, in some cases, initiate payments directly to employees and tax authorities.

Communication cycle between business and bureau

Most bureaus operate on a regular payroll schedule — weekly, fortnightly or monthly. Before each pay run, the employer sends updates such as new hires, terminations or changes to employee pay. After processing, the bureau provides confirmation reports and payslips. This structured communication cycle ensures payroll runs smoothly and businesses remain confident that their obligations are met.

What does a payroll bureau do?

A payroll bureau or accountant takes on a wide range of responsibilities to ensure businesses can pay their employees accurately, on time and in full compliance with UK legislation. 

Here’s what they typically handle:

• Payroll calculations (tax, pension, deductions)
  Bureaus process employee data to calculate gross and net pay, applying income tax, National Insurance, pension contributions and other statutory or voluntary deductions.
• Issuing payslips and managing payments
  Once calculations are complete, payslips are generated and distributed to employees, often via digital portals. Some bureaus also prepare or initiate payment files to transfer salaries directly into employees’ bank accounts.
• Filing statutory returns
  Payroll bureaus and accountants manage compliance reporting, such as submitting real-time information (RTI) to HMRC in the UK or equivalent authorities in other regions. They ensure deadlines are met and filings are accurate to avoid penalties.
• Handling queries from employers
  Bureaus often act as the first point of contact for payroll-related questions, helping employers resolve issues like tax code queries, missing payments or deduction discrepancies.
• Value-added services
  Tech-savvy bureaus understand that payroll is connected to the entire employee experience. That’s why many now provide value-added services, often through trusted partner referrals, to offer holistic business support. This includes recommending an HRIS, advisory services, Employee Assistance Programmes (EAP) and more. 

Why are so many organisations investing in payroll bureaus?

Outsourcing payroll has become an increasingly attractive option for businesses of all sizes.

Here are the top reasons why businesses are opting to outsource their payroll:

• Time savings – Managing payroll in-house can be complex and repetitive. By outsourcing, employers reclaim valuable time to focus on business growth and strategic priorities.
• Compliance confidence – Employment laws and tax regulations change regularly. Bureaus stay up to date with these requirements, reducing the risk of fines and penalties.
• Scalability – As businesses grow, payroll can become more complicated. A bureau can easily adapt to handle additional employees, multiple pay schedules or new compliance needs.
• Cost efficiency – For many organisations, outsourcing can be more cost-effective than hiring in-house payroll specialists. 

In short, payroll bureaus and accountants offer businesses peace of mind knowing payroll is handled by experts who prioritise compliance, accuracy and efficiency.

Are payroll bureaus regulated?

In the UK, payroll bureaus are not formally regulated by HMRC. However, HMRC sets payroll compliance requirements that bureaus must follow, such as submitting RTI reports accurately and on time. Failure to do so can result in penalties for both the bureau and their clients.

While not legally mandated, many bureaus seek professional accreditation to demonstrate their credibility and expertise. Membership of bodies such as the Chartered Institute of Payroll Professionals (CIPP) or the Institute of Chartered Accountants in England and Wales (ICAEW) signals adherence to recognised industry standards and ongoing professional development.

It’s also essential for payroll bureaus and accountants to comply with data protection obligations, such as the UK GDPR and Data Protection Act. This is put in place to ensure that sensitive employee data is secure. Complying with the UK GDPR and Data Protection Act means bureaus must ensure secure handling of personal information, apply data minimisation principles and have clear procedures for breach reporting.

In short, while payroll bureaus may not be formally regulated as standalone entities, they operate under a framework of compliance, professional standards and legal responsibilities that ensure they deliver payroll services safely and accurately.

Are payroll bureaus required to register under PSD2?

The Payment Services Directive 2 (PSD2) is an EU regulation designed to increase competition, innovation and security in the payments industry. It applies to businesses that provide payment services, such as transferring funds or initiating payments directly on behalf of clients.

For payroll bureaus and accountants, whether PSD2 applies depends on the scope of services offered:

• When PSD2 applies
  If a payroll bureau or accountant directly initiates salary or tax payments from a client’s bank account to employees or government bodies, it is considered to be providing a regulated payment service. In these cases, the bureau may need to register with the relevant financial authority (such as the Financial Conduct Authority in the UK) and comply with PSD2 requirements.
• When PSD2 does not apply
  Some payroll bureaus and accountants limit their role to preparing payroll calculations, generating reports and supplying payment files to the employer. The employer then authorises and executes the payments through their bank. In this scenario, the bureau is not performing a regulated payment service and does not fall under PSD2.

Ultimately, the distinction comes down to who initiates the transaction. Bureaus that only calculate and provide payment instructions operate outside PSD2, while those that directly move client funds may need registration and compliance.

Does a payroll bureau act as a vendor under GDPR?

Under the General Data Protection Regulation (GDPR), organisations handling personal data must be classified either as a data controller or a data processor. Understanding this distinction is essential when it comes to payroll bureaus.

• Data controllers are the organisations that determine the purpose and means of processing personal data. In payroll, this is usually the employer, since they decide why and how employee data is used.
• Data processors are third parties that process personal data on behalf of the controller. Payroll bureaus and accountants fall into this category, as they use employee information supplied by the employer to carry out payroll calculations and related tasks.

As data processors, payroll bureaus and accountants have clear responsibilities under GDPR, including:

• Secure handling of data – implementing technical and organisational safeguards to protect sensitive employee information.
• Data minimisation – only processing the information necessary to complete payroll tasks.
• Breach reporting – notifying the employer (controller) promptly if a data breach occurs, so they can take appropriate action.

Employers, as the data controllers, retain overall responsibility for employee data. This means they must choose payroll bureaus and accountants that can demonstrate compliance with GDPR and they should have robust contracts in place outlining data protection obligations.

In summary, payroll bureaus and accountants act as data processors, but both the bureau and the employer share responsibility for safeguarding personal data under GDPR.

The technology behind a modern payroll bureau

The role of payroll bureau software has evolved significantly with the rise of cloud platforms and automation. No longer reliant on manual data entry or outdated desktop software, modern payroll bureaus and accountants now leverage advanced technology (like Employment Hero) to deliver faster, more accurate and more secure services. This shift not only improves efficiency but also enhances the experience for both employers and employees.

Some of the key innovations shaping today’s payroll providers include:

• Automated calculations and compliance updates
  Cloud payroll systems automatically apply the latest tax rules, pension requirements and legislative updates. This reduces the risk of human error and ensures compliance without the need for constant manual monitoring.
• Employee self-service portals
  Employees can securely access payslips, update personal information and view payroll history without needing to contact their employer or bureau. This saves time and improves transparency.
• Integrated HR and payroll workflows
  When payroll and HR are connected, data flows seamlessly reducing duplication and ensuring accuracy across the employee lifecycle.
• Reporting dashboards for real-time insights
  Modern platforms provide employers with accessible, data-rich dashboards. These offer real-time visibility into payroll costs, compliance risks and workforce trends — enabling more informed decision-making.

How Employment Hero empowers payroll bureaus

At Employment Hero, we are the engine behind many tech-savvy bureaus and accountants. Our bureau payroll platform gives them the tools to manage all their clients from a single dashboard, delivering a faster and more accurate service to you. 

When you choose to outsource to a bureau powered by Employment Hero, you get the best of both worlds:

• Expert service: You get the dedicated, professional service of a payroll partner who handles all the complexity for you.
• Integrated technology: You also get the choice to add our modern HR platform, which is seamlessly linked to the payroll your bureau manages. This connection allows data like approved leave and timesheets to flow automatically to your bureau, eliminating manual work and errors for your business. 

Payroll Bureaus: A smarter way to manage payroll

Payroll bureaus play a vital role in the UK business ecosystem, offering the expertise and efficiency that allows SMEs to thrive. For businesses seeking a trusted partner to manage this critical function, a modern, tech-powered bureau is an excellent strategic choice.

Ultimately, the best payroll solution is the one that fits your business. Whether you choose the control of managing it in-house with a powerful platform or the peace of mind that comes from partnering with an expert bureau, the foundation of great payroll is always great technology

If you’re a business exploring your options, discover how Employment Hero can simplify your operations.If you’re a payroll bureau or accountant looking to future-proof your practice, learn how our Bureau Partner Programme can help you scale, streamline your operations, and deliver more value to your clients.