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Outsourcing your payroll

Third-party payroll providers

As an LGPS employer you’re responsible for making sure all data submitted to your pension fund and the administration shared service is correct and sent on time to meet all statutory deadlines.

You can outsource some or all of this work to a third-party provider.

The information on this page is to help you when setting up a contract with a third-party payroll provider.

Make sure your new payroll provider is aware of the responsibilities you are delegating to them when outsourcing your payroll/pensions responsibilities. Some third-party payroll providers offer a full administration service which may include some or all pension responsibilities, while others may only offer payroll services.

Here are some key points/documents to help you understand all of the roles and responsibilities that need to be covered by either you as the employer or the payroll provider. There is also some tips and resources that you may find useful.

  • Deduct employee and employer contributions

  • Calculate Assumed Pensionable pay when applicable, and deduct the appropriate employee and employer contributions

Awarding a third-party payroll provider

Setting up a new payroll provider

  • Your new provider’s portal access needs setting up as soon in good time before their first monthly return upload is due.
  • Do the right people in your organisation have access to the portal?
  • Does anyone who has access need to have it removed?
  • Monthly returns must be uploaded by the 19th of the month following the month of deduction.
  • Contributions must be paid over on the same day the monthly return is uploaded.
  • Keep your contacts up-to-date.

Although we can’t recommend a provider to you or advise you on your choice, we can tell you about scheme requirements and provide training for you or your new payroll provider. You must authorise your new provider to view and access your employee data payroll; we’ll provide ‘authorisation’ and ‘new main contact’ forms when you tell us who your new provider is. Please do this as soon as possible to ensure continuity of service for your pension scheme members.

Review your members records

  • Are your records up-to-date, for example in the correct status and with hours changes up to date.
  • Carry out a membership audit before starting your contract with your third party provider
  • Continue to carry out membership audits periodically during the contract to have confidence that records are being kept accurate and reduces the number of queries at year end.

If you’d like some training on how to do a membership audit, please contact your Pension Fund Representative who will be happy to arrange something at your convenience.

Costs and contract management

  • Are you getting a full or partial service from your payroll provider. If you payroll provider is covering all of the pension responsibilities this could be a higher cost than just payroll provision.
  • You need to make sure you have steps in place to effectively manage the contract with your payroll provider. Ensuring that they are delivering on the service you have agreed with them in the time frames.
  • Incorrect or late returns are liable for fines. If you payroll provider is not adhering to the contract you have with them you may have grounds to pass such fines on to them.

Tying up loose ends

You can be working on a number of other housekeeping items before outsourcing so your data is in a good state for transfer, including:

  • Outstanding monthly returns
  • Outstanding leaver forms, including historical leaver forms
  • Ongoing queries on existing cases
  • Year-end queries depending on the time of year