The Greater London Authority (GLA) is outsourcing its payroll function to Northgate Information Solutions in a three-year deal.
The agreement will see Northgate providing a fully managed payroll service for the GLA's 560 workers.
The team that set up the strategic authority temporarily handed over the payroll service to the London Fire and Emergency Planning Authority - one of the GLA's functional bodies - as a temporary answer to the issue.
But, after a tendering process, the GLA decided that an in-house system could not be justified.
"It was not worthwhile to have an in-house service for almost 600 staff," said Clive Mason, finance manager at the GLA.
The GLA explained that the continuation of an outsourced system is more effective than setting up an in-house service, and that cost savings will be made.
"It was clear that the cost of the GLA's payroll contract would be less than the salary cost of the required number of officers to provide the service in-house," said Mason.
Yvonne Charlton, account executive at Northgate, indicated that the deal will free up human resources, allowing the GLA to concentrate on its core business of service provision.
"There are a lot of benefits to outsourcing. It's a fixed cost which takes away the risk and brings in expertise," she said.
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