How Much Does Payroll Cost?

With the exception of sole traders, all UK business owners have to have a payroll service. Failure to get one can result in fees and legal action being taken against you, and it’s an essential part of everyday commercial life. It is possible to manage your payroll in-house, but for many people, outsourcing is the better option. Organising a payroll can be confusing and time-consuming, so passing it to a dedicated professional can take a lot of the pressure off and allow you to focus on other aspects of your business.

But how much does it cost? Outsourcing your payroll has advantages, but is it worth the expense? Here at Business Quotes, we can see the benefits of both sides. Some business owners like to be hands-on and prefer to keep things entirely in their control, but for everyone else, here’s our short overview of the price of outsourcing payroll.


The Base Figure

The average cost for outsourcing payroll in the UK is usually around £1 to £8 per employee, each month. This will fluctuate depending on which company you go with, what level of plan you choose and various other factors, but hopefully, this should give you a rough idea of what to expect. 

To expand on that, it’s worth looking at the two most well-known types of payroll. A fully managed payroll is when the service is handled entirely by a third party. They will liaise with HMRC on your behalf and handle any queries from your staff. If you don’t mind passing full control to an external business, this is a great option. It’s pricier, but it can be a real weight off your mind. It means you can focus on other aspects of your business and leave the payroll services completely in the hands of dedicated experts. 

The alternative is a part managed payroll service. This is less expensive, but there will be more responsibilities for you to complete as an employer. You’ll remain in control of the everyday processes while your payroll provider will handle the more complicated stuff. This is a good option if you’d prefer to retain some ownership of the payroll but still like to leave bigger tasks (e.g. ensuring your end-of-year reports are filed) to someone else. 

outsource payroll

The Price Difference

If you haven’t chosen which type of payroll service to go for, the price difference is often the deciding factor. The rough price of a fully managed payroll is typically £4 to £6 per employee per month, whereas a part managed one is lower at £2 to £3. It’s worth noting that the more staff you have, the lower those individual costs are.

That might not seem like a huge difference but it does add up. Let’s imagine you employ 35 staff: a fully managed payroll would be £2520 per year whereas a part managed one would only be half of that. However, the savings in the up-front cost are likely to be offset by the expense of running certain aspects of your payroll directly. 

Aside from that, there are a few additional fees to consider. Regardless of which type of payroll you go for, there’s likely to be a set-up fee of about £2 per employee. There are also pension-plan auto-enrolments (remember to let all new staff know they can opt out of this) which are about the same price. 

Depending on which company you go with, you may even be offered the chance to combine your payroll and HR into one fully integrated system. Depending on your point of view, this might be incredibly tempting. Simultaneously outsourcing your payroll and HR can potentially save you from hours of in-house work, but it comes with a price. You could pay up to £25 per employee per month for this level of support, so think carefully before committing to it. 

These things are all worth bearing in mind when budgeting for an outsourcing payroll. To make it a bit more straightforward, Business Quotes can help. Use our online price comparison tool below and within minutes, we’ll find a suitable match. We’re committed to helping you make the right decisions regarding payroll. 

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Categories: Accounting, Advice, Finance, General, Payroll

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