While there is robust debate as to the basis of many of Morrissey's songs, 'Best Friend On The Payroll' may be an exception, with the subject (the "Best Friend") generally believed to be Jake Owen Walters. Morrissey’s relationship with Jake lasted about two years, give or take, with the two of them living together in London circa 1994 - 1995.
Assuming that the song is in fact about Jake (which it almost certainly is), then 'Best Friend On The Payroll' offers the listener a rare and decidedly wry glimpse of Morrissey's domestic life with Jake ("More breakfast in bed, and I'll bring the paper in later").
Morrissey wrote the song at some point in 1994, with an instrumental version recorded in December 1994 at Miraval Studios in France (the fabled 'Miraval Sessions') with Boz Boorer (guitar), Alain Whyte (guitar), Johnny Bridgwood (bass) and Woodie Taylor (drums), but no Morrissey.1 There was also a vocal demo and an acoustic outtake (the latter was leaked and is available online).
The studio version of the song was recorded - along with the other songs that would appear on Southpaw Grammar - between March and April 1995 at Hook End Manor (Oxfordshire, England), with Spencer Cobrin (who had replaced Woodie Taylor) on drums, and producer Steve Lillywhite. This was only a few months after Morrissey's relationship with Jake likely ended (according to Morrissey in Autobiography, sometime around the end of 1994, or perhaps very early in 1995).
'Best Friend On The Payroll' ended up as the 7th track on Southpaw Grammar, which was released in August 1995. The aforementioned acoustic outtake of the song seems to have garnered more favorable attention than the studio version. Morrissey’s vocals and the songs lyrics give the track an almost playful sound, with an undercurrent of regret running throughout.

Morrissey writes of meeting Jake, as well as the eventual dissolution of his relationship with him, in Autobiography:
'...I am illuminated by an accidental introduction to Jake Owen Walters. Seated at dinner in a badly lit restaurant in Notting Hill, Jake's face is one amongst many, and as his food order arrives I stare intently at what appears to be a sloppy dish of dog food on his plate. Jake and I have scarcely spoken to one another, so he can't possibly know that I have long-since passed the stage of attending any table where dead animals are served up as food. I therefore automatically stand up and walk out of the restaurant. I walk all the way back to Regent's Park Terrace [Morrissey's home in London at that time]. Once inside the house, the doorbell rings. It is Jake. He obviously understood my sudden exit, and he had been curious enough to follow me home. He steps inside and he stays for two years.'
Sometime near the conclusion of the relationship, neighbor Alan Bennett - who stopped by to visit Morrissey and Jake at home - observed that something was amiss:
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