When should you outsource payroll administration? 5 signs
Short answer: Consider outsourcing payroll when it takes time away from your business, when you are unsure about the reporting, or when it becomes too complex to run without errors. At Lønkontoret it starts with a free call and a fixed quote.
Most companies we speak with do not have a plan for when they should outsource payroll. They simply reach a point where it no longer makes sense to keep doing it themselves. These are the five situations that most often trigger that decision.
1. Payroll administration takes more than 2–3 hours a month
That does not sound like much when said out loud. But most people who run payroll themselves spend the time spread across evenings and weekends – not in one block. We have a client, a trade company on Zealand, where the owner Thomas used to spend Sunday evenings on payroll and receipts. Today he simply calls when he has a question. The rest runs by itself, and he has got his weekend back.
2. You are not completely sure the reporting to SKAT is correct
That uncertainty usually creeps in when you have set up payroll yourself once and never really had it checked since. It is a sign that is easy to ignore, because it has “always gone fine” – until the day it does not.
3. Employees ask questions you cannot answer
This is often the sign that hurts most, because it is about trust. A shop owner on Funen with six employees was constantly asked about pay by staff – questions he could not always answer precisely. Today they contact us directly instead, and he is free of standing in the middle between his employees and their payslips.
4. The company grows, and payroll becomes more complex
A consultancy in Jutland grew from 3 to 12 employees and outsourced payroll along the way. What is manageable with three employees in an Excel sheet is rarely manageable with twelve – new hires, leavers and different pay terms pile up faster than you expect.
5. You want to spend your time on growth rather than administration
The last sign is less concrete than the other four, but it is often what finally decides it. At some point the question is no longer “can I work this out myself?” but “is this the best use of my time right now?”
What happens when you outsource?
The transition begins with a review of what already exists: the payroll system, the collective agreement, employee information, time registration and the routines you follow today. This is where we find the places where errors have arisen, and agree what needs to change before the first payroll run is run by us.
After that we agree a fixed rhythm: when we receive hours and information, when the payroll run is prepared, and when you approve it. You keep the approval, so you always know what is paid out. And you get a fixed contact person you can call during opening hours.
What should you have ready?
It helps to have the collective agreement, the current contracts, a list of employees with start dates and pay, and the most recent payroll runs ready for review. If you have time registration, that is also a good start. If something is missing, we work out together how it can be obtained without delaying the transition.
Outsourcing does not mean letting go
The employer responsibility still lies with you. A good collaboration therefore includes a clear approval routine, an agreement about what happens when there is uncertainty, and ongoing checks that rates and supplements are up to date. That is the difference between buying a service and getting a partner.
How to choose a payroll provider
Ask who your fixed contact person is, how quickly they reply, and what is included in the price. Also ask how holiday, parental leave and collective agreements are handled, and how the payroll run is checked. And ask about data processing: where the data is held, who has access, and how it is agreed. You are welcome to read our data ethics policy if you want to see how we think about it.
What does outsourcing cost?
The price depends on the number of employees and the package you choose. At Lønkontoret you pay a fixed base fee plus a price per employee per month, and all prices are published on our pricing page. You also get a concrete quote after a free call, so you know exactly what you get before you decide.
How to compare quotes
When you compare payroll providers, compare what is included. A low price per employee can be a base fee or an extra service away from the total amount. Ask about all the extra services you expect to need: new employees, leavers, reimbursement applications and contract review.
Our prices are published on the pricing page, so you can calculate it for your own company. If you have questions about what is included, we are happy to have a conversation.
What outsourcing does not change
Outsourcing moves the work, not the responsibility. You are still the employer, and it is still you who must ensure that employment terms, collective agreement and working hours are in order. What changes is that the daily payroll run, the checking and the reporting sit with a partner who works with it every month.
Common misunderstandings
One misunderstanding is that outsourcing is a one-off task. In practice payroll is an ongoing process, and the best form of collaboration is one with fixed routines for changes, new employees and absence. Another is that a payroll provider automatically knows your collective agreement. That must be agreed and set up, which is why the transition is important.
Frequently asked questions
What does it cost to outsource payroll?
The price depends on the number of employees and the package you choose. Basic costs DKK 99 per employee per month plus a base fee of DKK 500, all excl. VAT. All packages are listed on our pricing page.
Do I lose control of payroll?
No. You approve the payroll run before it is paid out, and you keep the employer responsibility you have always had. What changes is that the ongoing checking and reporting is handled by us.
What happens to employees’ data?
We process personal data on the basis of a data processing agreement. Before we start, we review where the data is held and who has access.
How long does the transition take?
It depends on how much needs to be moved and how well organised the existing basis is. We agree a transition plan in the conversation, so you know what happens before the first payroll run.