Payroll: outsource the run, keep the sign-off

Key takeaways

A payroll sign-off process means a named person in your business checks and approves each payroll before anyone is paid. Payroll calculation, filing and payslips outsource well, but the employer stays responsible to HMRC and The Pensions Regulator. The sign-off checks starters, leavers, pay changes and totals, and usually takes under an hour a month.

• Outsource: calculations, RTI filing, payslips and pensions uploads.
• Keep: approving changes and signing off totals before payment.
• Compare each run with last month and explain differences.
• The employer stays responsible, even with a payroll bureau.

Why keep payroll sign-off in-house?

Because payroll is the biggest regular payment most SMEs make, and errors land on staff and on the employer. HMRC holds the employer responsible for PAYE reporting even when a bureau files it, and pension duties stay with the employer. Sign-off also catches fraud, such as a fictitious employee or a changed bank account.

• Which business processes should you never outsource?
• In-house vs outsourced payroll for small businesses

What should you check before approving?

Use the same short list every month.

• Starters and leavers match what HR expects.
• Pay rises, bonuses and deductions are approved.
• Gross pay total versus last month, with differences explained.
• Any employee bank detail changes were verified.
• Pension contributions are included.

• Pension auto-enrolment admin: duties you cannot skip
• Fraud controls: the checks that must stay inside

What does the payroll provider do?

Calculates pay, tax, National Insurance and deductions, submits Real Time Information to HMRC, produces payslips, handles statutory payments and uploads pension contributions. It should send a sign-off pack: a summary, a variance report against last month and a list of changes.

• Keep the decision, outsource the admin around it
• Pay rises and bonuses: decisions that stay in-house

Who should sign off payroll?

A director or senior manager who did not prepare the changes. In a very small business, the owner signs off. Where possible, the person approving pay changes during the month should not be the only person approving the final run.

• The four eyes principle for small businesses

What does this look like in practice?

A pattern we see: a leaver is paid for an extra month because nobody told the bureau. A monthly sign-off that compares headcount and totals with the previous run catches this before money leaves.

• See client work
• BPO Solutions for UK businesses

Payroll sign-off checklist

• Agree a monthly cut-off for changes.
• Receive a sign-off pack with variances.
• Check starters, leavers and pay changes.
• Verify any bank detail changes.
• Approve in writing before payment.

• Tax returns: your accountant files, you are responsible
• Fraud controls: the checks that must stay inside

Next step

Ask your payroll provider for a variance report against last month with your next run. If they cannot produce one, that is the first improvement.