UK Employers accelerate move to full payroll outsourcing

UK organisations are increasingly shifting payroll away from in-house teams and towards external providers. While 7.8% of UK employers fully outsource payroll today, that is set to rise to 13.8% as the preferred approach over the next three years.

Managed services and SaaS remain central to the UK payroll mix. Currently, 36.3% use Managed Payroll Services (MPS/external payroll software with expert support) and 28.3% use SaaS payroll software. Looking ahead, 37.8% expect MPS to be their preferred model and 21.3% expect SaaS to be their preferred approach.

Meanwhile, reliance on fully in-house payroll is set to fall: 21.7% currently manage payroll using their own software and people, compared with 18.8% who expect this to be their preferred approach in three years. A further 5.8% currently combine in-house payroll software with external staff, rising to 8.2% as the preferred model over the next three years.

These findings come from new research by the leading European HR and payroll solutions provider SD Worx, based on a survey of 305 UK HR decision-makers, as part of its broader “HR & Payroll Pulse” study.

While organisations move towards outsourced and hybrid delivery models, UK HR and payroll leaders are also focused on modernising payroll operations. Looking ahead to 2026, the top payroll-related priorities for UK organisations are:

• System integrations with HR, finance, time-tracking or benefits platforms (24.4%)
• Employee financial wellbeing initiatives (e.g. earned wage access, financial education) (23.7%)
• Improving payroll data privacy and cyber security (21.8%)
• Strengthening compliance and adapting to new labour or tax regulations (20.3%)
• Pay transparency initiatives (e.g. pay gap analysis, clearer payslips, employee insights) (19.6%)

SD Worx, a leading European HR and payroll services provider, supports organizations of all sizes with their HR and payroll challenges. To stay closely connected to both employers and employees, SD Worx regularly conducts in-depth surveys across Europe. The latest “HR & Payroll Pulse” study provides organizations with valuable insights to refine their HR and payroll strategies and prepare for the future.

The survey was conducted between January 27 and February 20, 2026, across 16 European countries: Belgium, Germany, Finland, France, Ireland, Italy, Croatia, the Netherlands, Norway, Poland, Romania, Serbia, Slovenia, Spain, the United Kingdom and Sweden, by the SD Worx Research Institute. In total, 5,936 HR decision-makers and 16,500 employees were surveyed. The results provide a representative view of the labour market in each country.