European companies increasingly outsource payroll

Nearly six in ten employers (57%) plan to outsource both payroll software and services to an external provider within the next three years. Today, 50% already do so, up from 45% in 2024, confirming that payroll outsourcing is on the rise. More than four in ten employers (44%) already use Managed Payroll Services (MPS), compared to 35% in 2024, combining external software with partial support from external experts. Around 6% fully outsource payroll today, while one in ten expects to do so within three years. These findings come from new research by the leading European HR and payroll solutions provider SD Worx, based on a survey of 5,936 HR managers and 16,500 employees across sixteen European countries.

Today, one in five organisations (19%) still handle payroll calculations and administration entirely in-house. Within three years, that share is expected to drop to 14%. One in ten currently combines in-house payroll software with external staff, while just over one in five (22%) uses a SaaS solution, where internal teams rely on specialised payroll software from external providers.

Managed Payroll Services (MPS) represent the largest share: today, 44% of organisations use external software combined with partial support from external experts, up from 35% in 2024. This approach is especially popular in Belgium, Italy and the Netherlands (each at 57%). Looking ahead, 47% of employers expect to adopt this model within the next three years. Full outsourcing is also gaining ground: 6% do so today, rising to an expected 10% by 2029. Belgium, Finland, France and the Netherlands show the highest expected growth, each at 16%.

While companies increasingly outsource payroll, they continue to invest in their internal payroll teams. For 22% of European HR professionals, training and upskilling of internal payroll teams is the top priority in 2026, followed by expanded self-service solutions (21%), allowing employees to more easily access payslips or request time off, something six in ten employees still lack today. Another one in five (21%) plans to focus more on sustainable payroll practices, such as fully digital processes and more energy-efficient systems.

System integration (20%), connecting payroll with HR, finance, time tracking and benefits applications, and a stronger focus on privacy and cybersecurity (20%) complete the top five payroll priorities for 2026. The same share (20%) also plans to strengthen compliance efforts and respond more quickly to new labour and tax regulations, reflecting the growing complexity of the regulatory landscape.

Finally, 18% plan to invest more in AI within payroll processes. Today, HR professionals mainly use AI for time and attendance tracking (31%), reporting and analytics (28%), and payroll management (27%). Finland leads the way, outperforming the European average across all three areas, at 37%, 32% and 37% respectively.

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.