Choosing how to run payroll is one of the most important decisions an enterprise can make. Payroll managers and HR leaders across Australia and New Zealand often ask:
“Should we keep payroll in-house, get external support, or move to a fully managed service?”
Each model has trade-offs in terms of cost, compliance, control, and resource requirements. In this guide, we explain the three operating models, compare them side by side, and provide a framework to help you choose the right fit for your organisation.
The 3 payroll operating models explained
In-house payroll
Definition: Your payroll team manages the entire payroll cycle internally using software tools. Tasks include data collection, pay calculations, compliance monitoring, reporting, and handling employee queries.
Pros:
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Full control over processes and data.
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Direct visibility of payroll operations.
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Works well if you already have experienced payroll staff and robust systems.
Cons:
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Requires significant internal expertise.
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High compliance risk if staff leave or knowledge gaps exist.
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Time-consuming for payroll managers who are often already stretched.
Supported payroll
Definition: A shared model where you run payroll on a software platform but receive specialist support from a vendor for complex tasks, troubleshooting, or compliance advice.
Pros:
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Balance of control and expert backup.
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Reduces risk of errors in award interpretation or compliance.
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Provides access to local experts without fully outsourcing.
Cons:
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Still requires dedicated internal resources.
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May be harder to scale if workforce complexity increases.
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Costs more than software-only, but less than fully managed.
Fully managed payroll
Definition: The provider takes responsibility for the entire payroll function, combining technology, compliance, and people. Affinity, for example, acts as your payroll department – handling calculations, lodgements, super/KiwiSaver, and employee queries.
Pros:
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Eliminates the need to recruit or retain specialist payroll staff.
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Guarantees compliance with AU/NZ laws (Fair Work, Holidays Act, STP, KiwiSaver).
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Frees HR and Finance teams to focus on strategy.
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Scales seamlessly across multiple entities.
Cons:
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Less direct day-to-day control.
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Cultural adjustment required to trust an external team.
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Typically higher ongoing cost than in-house software.
Comparison table at a glance
| Factor | In-house | Supported | Fully managed |
|---|---|---|---|
| Cost predictability | Variable (staff + software) | Moderate | High, fixed fee |
| Compliance assurance | Dependent on staff expertise | Shared responsibility | Guaranteed, vendor-led |
| Control | Maximum | Balanced | Lower (strategic, not operational) |
| Scalability | Limited by internal resources | Moderate | High – scales with workforce growth |
| Internal resource needs | High | Medium | Low |
| Employee experience | Varies by team capability | Enhanced with support | High (employee queries handled by experts) |
Key factors to consider when choosing
When evaluating models, weigh these factors:
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Complexity of awards and agreements: The more awards or EBAs you manage, the harder it is to run payroll internally without risk.
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Headcount and entities: Multi-entity or multinational structures usually benefit from supported or fully managed solutions.
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Payroll expertise availability: Can you realistically hire and retain accredited payroll staff in-house?
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Appetite for compliance risk: Who carries the risk of errors, underpayments, or missed filings?
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Reporting needs: Finance leaders often require real-time insights, costing, and audit trails.
Which model fits different scenarios?
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Small/lean payroll teams → Fully managed is usually best, as it removes the pressure of compliance and resourcing.
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Enterprises with strong HRIS/Finance functions → Supported payroll strikes a balance, letting teams stay hands-on with software while tapping external experts for assurance.
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Organisations with dedicated payroll departments → In-house can work if you have accredited staff, strong systems, and appetite for ongoing training and compliance management.
How to decide with confidence
The right operating model depends on your unique mix of:
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Team size and expertise
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Compliance risk tolerance
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Budget and cost predictability needs
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Appetite for outsourcing non-core functions
Next steps
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Explore our Fully Managed Payroll page to see the benefits in depth.
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Learn about SaaS Payroll for software-first delivery.
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Read our enterprise case studies to see how other AU/NZ organisations made the switch.
📞 Or talk to an advisor today to discuss your payroll needs.
Frequently asked questions
What is supported payroll?
Supported payroll means you run payroll in-house on a software platform but with expert help from your vendor for complex tasks, troubleshooting, and compliance advice.
What is the difference between managed and supported payroll?
In supported payroll, responsibility is shared between your team and the provider. In fully managed payroll, the provider takes ownership of end-to-end payroll operations.
Is outsourced payroll more cost-effective than in-house?
It depends on scale and complexity. In-house may be cheaper for small, simple payrolls. For large enterprises, outsourcing often reduces risk and long-term costs by avoiding errors, fines, and recruitment overheads.
Which payroll model is best for compliance in AU/NZ?
Fully managed payroll provides the strongest compliance guarantee, as the vendor’s accredited experts stay across Fair Work, ATO, IRD, and Holidays Act requirements.
How long does it take to transition between models?
Typically 8-16 weeks depending on data quality, configuration, and the number of entities involved. Affinity has proven migration frameworks to ensure a smooth transition.
Closing thought
There’s no one-size-fits-all payroll model. By understanding the trade-offs between in-house, supported, and fully managed payroll, your organisation can choose the operating model that reduces stress, ensures compliance, and gives your team valuable time back.
