The deal will see Northgate provide a fully managed payroll service for the GLA's 560 workers.

The team that set-up 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 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 in a statement.

The GLA said the continuation of an outsourced system is more effective than having to setting up an in-house service.

And it says 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, said the deal will free up human resources and the GLA can concentrate on its core business of service provision. 'There are a lot of benefits of outsourcing, it's a fixed cost which takes away the risk and brings in expertise,' she added.