Payroll
Do payroll yourself or outsource it? Compare tasks, costs and software
Torn between doing payroll yourself or outsourcing it? Compare software, service costs and responsibilities, and see a worked example.
Do you run your payroll yourself, together with an adviser or entirely through a service provider? Compare the division of tasks, the knowledge required and the total costs. A fictitious example for five employees shows why internal hours count too.
Three ways of working for payroll
Whoever organises the monthly payroll usually chooses between three models, each with its own division of tasks and expenses:
- Processing everything yourself in payroll software: You carry out all the work in-house. An internal employee registers new employees, processes changes in hours and expense claims, checks pension contributions and sends the electronic payroll tax return directly to the Dutch Tax Administration (Belastingdienst). This requires up-to-date professional knowledge of legislation and collective labour agreement (cao) provisions.
- Working with a payroll adviser (hybrid model): Your organisation uses cloud software to enter hours worked, holiday days and master data. The external adviser or accountant checks the trial payroll, flags changes to the cao and files the final payroll tax return. In their explanation of doing payroll yourself and working together, the supplier Loket describes how this division of tasks combines practical support with your own control over staff changes.
- Outsourcing entirely: An administration office or specialised payroll bureau handles the whole cycle based on the documents supplied. You provide hours and contract changes each month and receive the payment files, payslips and journal entries back.
The monthly cycle and legal responsibility
Whichever model you use, payroll administration goes through fixed phases every month:
| Phase in the monthly cycle | Operational task | Employer's responsibility |
|---|---|---|
| Preparation | Collecting changes relating to joining, leaving, salary changes and address details. | Timely and complete delivery of source documents and contracts. |
| Processing | Entering variable hours worked, overtime allowances, travel expenses and leave hours. | Checking the content of hours worked and agreements made. |
| Checking and trial payroll | Running the trial calculation, checking pension contributions and cao scales. | Approving the trial calculation before final processing. |
| Payment and payslips | Creating the SEPA payment file for the bank and making digital payslips available. | Authorising the payment through the business bank account. |
| Tax return and pension | Sending the electronic payroll tax return and exchanging data with pension funds. | Ultimate responsibility for the timely and correct payment of payroll taxes. |
Agree with the service provider who supplies data, checks the payroll run, files the return and authorises payments. For current rules, consult the Payroll Tax Handbook (Handboek Loonheffingen) of the Dutch Tax Administration. Choosing software or a bureau does not replace those task agreements.
Comparing software and service providers
In the market for payroll software you will find a wide range of solutions:
- Nmbrs: Focused on online collaboration between employers, employees and accountants. The system works with task-oriented workflows for monthly changes and gives employees access through their own portal.
- AFAS Payroll: Part of the broader AFAS software environment. This solution is intended for organisations that want to integrate payroll calculations with central personnel files, time tracking and expense claim flows.
- SD Worx HR & Salaris: Offers software modules combined with payroll advice and legal support, suited to companies that need specialised services.
- Youforce: Developed by Visma for large enterprises, healthcare institutions and educational organisations with complex secondary employment conditions and extensive cao structures.
For smaller business owners who only want to produce payslips themselves, the supplier Employes describes, in its information on doing payroll yourself, features that let employers enter changes directly and handle the link with the Dutch Tax Administration (Belastingdienst).
Bear in mind that payroll software automates administrative calculations, but offers no automatic guarantee of error-free compliance with legislation. Entering contract terms and checking cao agreements always require human attention.
Worked example: the same five employees, three ways of working
The amounts and hours below are fictitious assumptions. They are not market rates. We use five employees, twelve payroll runs per year and an internal hourly rate of €45. All amounts are exclusive of VAT. In this example, the outsourced option includes the software.
| Item per year | Do it yourself | With an adviser | Outsource |
|---|---|---|---|
| Software | 12 × €30 = €360 | 12 × €30 = €360 | Included |
| External processing or checking | €0 | 12 × €40 = €480 | 12 × (€25 + 5 × €12) = €1.020 |
| Internal preparation and checking | 12 × 2 hours × €45 = €1.080 | 12 × 1 hours × €45 = €540 | 12 × 0,75 hours × €45 = €405 |
| Annual closing outside the items above | €0 in this example | €0 in this example | €100 |
| Total | €1.440 | €1.380 | €1.525 |
With these assumptions the difference is small. Extra changes, corrections, training or a missing stand-in can change the choice. So ask explicitly what happens with a late change, a correction covering an earlier period and a question about the annual statement. Also include the time required when outsourcing: someone has to keep supplying the right data.
Decision framework: which route suits your organisation?
Use the following criteria to determine the right approach:
- Choose to do it yourself in software when: Your team works with straightforward employment contracts without complicated allowance systems, there is someone internally with sufficient payroll knowledge and you have enough time to keep up with tax changes.
- Choose a hybrid approach when: You prefer to enter the operational changes for hours worked and leave yourself, but want to entrust the checking of cao scales, pension returns and the final payroll run to an experienced payroll expert.
- Choose full outsourcing when: Your organisation has no internal back-up for the illness or holiday of administrative staff, you want to minimise the risk of processing errors or your management wants to focus all attention on the company's core activities.
