Written by Matt Reed Reviewed by Tatiana Lebreton Updated on 5 August 2025 On this page How Much Does Outsourcing Payroll Cost? What Factors Influence Payroll Outsourcing Costs? What Are the Types of Outsourced Payroll? How Much Does a Fully-Managed Payroll Service Cost? How Much Does a Part-Managed Payroll Service Cost? Are There Any Hidden Fees in Outsourced Payroll? What Are the Benefits of Outsourcing Payroll? Is It Possible to Manage Payroll In-House? Should I Manage Payroll In-House? Legislation Changes to Watch Out For in the 2025/2026 Tax Year Important Upcoming Payroll Dates Next steps Expand Our site is reader-supported – by clicking our links, we can match you with a potential supplier, and we may earn a small commission for this referral. Outsourcing payroll to a payroll services company costs between £2 and £25 per employee, per month.Prices vary widely depending on the type of outsourced payroll service (fully-managed or part-managed), your number of employees (the more you have, the cheaper the cost per employee will be) and whether you’re paying for additional payroll services, like integrated HR and pension plan auto-enrolment.Since most providers offer quote-based, custom pricing for outsourced payroll, it can be hard to work out your budget. Our guide should help you understand how much you can expect to pay for outsourcing payroll in the UK, as well as the benefits and downsides of different payroll services. Employment Hero retails from £12 per employee, per month Our sponsored provider is one of the few payroll companies that publicly states its pricing, which is handy for businesses requiring clear costings. Learn More Moorepay is our best recommended all-round payroll company in the UK Try it and request your bespoke pricing package today. Learn More For rolling month-to-month contracts, PayEscape is our suggested pick Small businesses will appreciate PayEscape’s more flexible agreements, including the use of a bespoke pricing model. Learn More If you’d like help finding a provider within your budget, our free quote-matching tool can pair you with trusted providers who’ll assess your needs and provide quotes tailored to your business’s requirements. Cost of Outsourcing Payroll: Key Takeaways Outsourcing payroll costs between £2 and £25 per employee per month on average.Costs vary depending on your company’s size, the frequency of your payroll runs and the services you’re outsourcing.Other fees to consider when outsourcing payroll include setup fees (£100-£1,000), pension auto-enrolment (£1.50-£2 per employee) and add-on services, such as HR.The cost of a fully-managed service starts at £4 to £6 per employee, per month, while a part-managed service costs £2 to £3 per employee, per month.Outsourcing payroll will generally save you time and money compared with running it in-house, and reduces the risk of errors, payroll fraud and late submissions.It’s possible to run payroll in-house with the help of payroll software, but we only recommend this option for very small businesses (under 50 employees) or large enterprises. How Much Does Outsourcing Payroll Cost?Most businesses can expect to pay £2-£25 per employee, per month, to outsource payroll, depending on the type of contract and the responsibilities they’re outsourcing.What exactly are you paying for? At its most basic, when outsourcing to a payroll provider, you’re paying them to:Pay your employees on timeFile the relevant taxesKeep your business compliantMost payroll service providers charge per employee, per month, for a basic payroll package, but businesses should also factor in employee salaries, payroll taxes, administration fees and the cost of additional services when calculating their total payroll outgoings.What other costs are associated with outsourcing payroll?Other costs you can expect when outsourcing payroll include:Setup costs (£100-£1,000): Not all providers charge setup fees but, if they’re involved in helping you switch from your old payroll system, expect to pay a one-time fee between £100 and £1,000, depending on the number of employees (more employees means more data to be transferred).Fixed monthly rate (variable): Some providers charge a fixed monthly rate either on top of or instead of per-employee-per-month fees. Providers that charge a fixed monthly rate instead of pricing their services per employee will generally only do this for small businesses with stable employee counts. Rates will vary greatly based on chosen services and employee numbers.Auto-enrolment (£1.50-£2/employee): While some payroll companies lump auto-enrolment into their monthly per employee charges, others add it on as an additional charge. In this case, auto-enrolment will generally cost £1.50-£2 per employee.Additional services (from £25/month): A lot of payroll providers offer additional services and software, such as HR and recruitment. Prices vary depending on the type of add-on service and the size of your company, but expect to pay at least an extra £25 per month for additional services. How much does payroll software cost? Payroll software costs between £30 and £80 per month, on average.Running payroll in-house with the help of payroll software can be cheaper than outsourcing it for very small businesses (ones with fewer than 50 employees). It’s also a great option for enterprise-level companies that want full oversight over their payroll processing.For the average business, however, outsourcing payroll is more worthwhile, as it’ll save you not only money but time. What Factors Influence Payroll Outsourcing Costs?These three factors will affect the cost of outsourcing payroll, regardless of whether you opt for a full or part-managed service:Company size/number of employees: The number of employees impacts the cost of outsourcing payroll to a payroll service. Larger companies typically incur higher costs due to the increased complexity of payroll.Frequency of payroll: The frequency of payroll runs (e.g. weekly, bi-weekly, monthly) can also affect pricing. It’ll usually cost more with a greater frequency of payment. For instance, it’ll cost more to manage your payroll when you pay your staff weekly rather than monthly.Services included: Different payroll service providers will offer different levels of service, from basic payroll processing to tax filing, employee pension plans, HR integration, compliance with industry regulations, and more. We’ll detail what those costs could look like shortly.The prices we list on this page are close estimates, so you’ll need to enquire with a provider to get a specific idea of costs. You can do this easily with our free quote-finding form. It takes less than a minute, and you’ll receive tailored quotes from the UK’s top-ranked managed payroll service suppliers. What Are the Types of Outsourced Payroll?There are two major types of outsourced payroll services:Fully-managed: The complete outsourcing of payroll to a third-party payroll provider. The provider liaises with HMRC on your behalf while responding directly to any payroll queries from your staff. Part-managed: A partial outsourcing of payroll. Businesses outsource certain parts of their payroll while keeping other bits in-house. It’s a pick-and-mix approach that offers more versatility than a fully-managed service. Part-managed payroll solutions are usually cheaper because you’re not paying for the full service. With this option, you’ll remain in control of the straightforward day-to-day processes, such as maintaining employee records and updating wage information. However, your payroll services provider will take care of the trickier stuff, such as keeping you HMRC compliant and filing your year-end reports.Not every payroll company provides both so, by all means, double-check the services available when choosing your provider. To help you, we’ll look at the costs of each. Are you looking to outsource your payroll? With our free quote comparison tool, we can match you with trusted suppliers suited to the needs of your business. With a few brief details, payroll companies will contact you with quotes so you can compare and save. Get Free Quotes How Much Does a Fully-Managed Payroll Service Cost?Outsourcing to a fully-managed payroll service costs £4–£6 per employee for a basic service package.However, you’ll likely pay more, as there are other costs to consider. Here’s a full summary of fully-managed payroll costs:Payroll service£4 – £6/employee/monthSetup costs£2/employee/monthPension plan auto-enrolment£1.50 – £2/employee/monthHR integration£10 – £25/employee/monthOutsourced managed payroll services are typically priced every month, with pricing based on the number of staff you employ. Payroll service costs also depend on the frequency with which you pay your staff.1. Payroll serviceA fully-managed payroll service will cost around £4–£6 per employee, per month if you employ between one and 10 people. The larger your workforce, the lower this individual cost becomes, and organisations with over 250 employees can pay as little as £3.50 per employee, per month.2. Setup costsSetup costs may also apply, although these are typically nominal – about £2 per employee. 3. Pension plan auto-enrolmentAuto-enrolment of your staff into pension plans will also incur a fee, although it shouldn’t exceed £1.50–£2 per employee. If it does, you should be asking some questions, as this is an area where some payroll providers tend to overcharge.4. HR integrationIf you want integrated HR and payroll management rolled into one service, you can expect to pay more – anywhere between £10 and £25 per employee, per month. Remember your legal requirements If you employ 250 or more employees, you’re legally required to provide HMRC with your ‘gender pay gap’ data. Outsourcing your payroll ensures your reports stay up to date and that you steer clear of hefty fines.The pros and cons of fully-managed payroll services Pros Completely hands-off approach to payroll, saving time and reducing difficulty Minimises the risk of costly fines for failing to report information to HMRC by using payroll experts Cons Payroll services can be more expensive than using payroll software in-house Outsourcing leaves you vulnerable to doing business with a less reputable firm, potentially risking data breaches Less direct control over an important part of your business, with potential delays How Much Does a Part-Managed Payroll Service Cost?As a general rule, you should pay around £2–£3 per employee, per month, for a part-managed service. Part-managed payroll service costs are even harder to pin down than fully-managed ones because they are dependent on which services you want to outsource, and which ones you’re happy to handle in-house.You’ll also need to consider the costs of keeping other services in-house. These include wages and payroll software to help keep you (or your accountant) on top of all the admin.Providers that offer part-managed payroll packages include IRIS and ADP Payroll. However, both providers operate on quote-based pricing, so you’ll have to contact them for an estimate.The pros and cons of part-managed payroll services Pros Flexibility to choose which services to manage in-house and which to outsource Can be less expensive than a fully-managed service Customer support available from experienced payroll professionals Cons You’ll still need some degree of expertise to handle the in-house parts of the job Save by comparing payroll services quotes from leading suppliers Have you used payroll services before? Yes No It only takes a minute Are There Any Hidden Fees in Outsourced Payroll?There are no hidden fees when it comes to outsourcing payroll. The main reason for this is that most companies in this field work with bespoke pricing, so they effectively list all of their charges to you.All of this will be documented, so if any charges differ from those agreed upon, further down the line, you can always query them. What Are the Benefits of Outsourcing Payroll?Outsourcing your business’s payroll will:Save you time and effortAfford you greater flexibility than if you keep it fully in-house (choose a fully-managed payroll service or just the parts of the service that suit you)Reduce the risk of payroll fraudRemove the risk of fines for failing to report your key figuresThese are just some of the benefits of outsourcing payroll. For a more detailed explanation, see our guide. Did You Know? 61% of British companies outsource their payroll to some degree. Is It Possible to Manage Payroll In-House?Yes, you can manage payroll yourself in-house.What you need to do this is a cloud-based payroll software solution, and dedicated staff (yourself, an in-house payroll expert or a full team, depending on your needs).Payroll software is essential for running in-house payroll, especially if you’re doing it yourself without hiring an in-house expert. It’ll calculate and process payroll for you, and ensure you stay compliant.If you’re interested in giving payroll software a go, we recommend Rippling. Its customisable features and reports, and compliance measures impressed our software researchers during our latest round of testing. Starting at £7 per user, per month, it’s affordable, too.What are the pros and cons of running payroll in-house?Here’s a quick summary of the pros and cons of running payroll in-house: Pros Complete control over your own payroll Can be cheaper to use payroll software (assuming everything is done correctly) All payroll data remains private Cons Requires payroll expertise Can risk fines if you fail to report correct/all information More time-consuming How much does in-house payroll management cost?In-house payroll software costs start at around £25-£50 per month for businesses with between one and 15 employees. Businesses with over 50 employees can expect a monthly cost of around £80, while software for an unlimited number of employees will set you back between £100-£200 per month.In-house payroll usually comes in the form of a software package from a provider like Moneysoft or IRIS. These can be free or available on a paid subscription plan. In-house payroll services costs will vary and this is dependent on the number of staff you employ and the level of features you require. Should I Manage Payroll In-House?We generally only recommend in-house payroll management to very small businesses, such as those with fewer than 50 employees, or large enterprise-level businesses.That’s because managing payroll in-house with payroll software is relatively cheap and won’t take up too much time each month if you’ve got a small number of employees. If you’re a very small business or startup and don’t have a big budget right now, you could try your hand at a free payroll software solution like IRIS Payroll Basics, which has a user limit of 10.At the other end of the spectrum, big businesses can typically afford to maintain a fully functioning in-house payroll department. They also typically prefer to do so since it gives them full control and oversight over sensitive payroll data.If your business is at neither end of the spectrum, you’re better off outsourcing your payroll. ▶ Read more: Best Payroll Solutions for Your Small BusinessTips for Payroll Compliance Legislation Changes to Watch Out For in the 2025/2026 Tax YearThe government has instituted a few changes – effective from the start of the 2025/2026 tax year – that affect payroll. Here’s what businesses need to know.Employer National Insurance Contributions (NICs) increaseThere are three major changes to NICs for businesses. From April 2025, the NIC rate for employers has risen from 13.8% to 15%, meaning employers will pay more.There is also a change to ranges: the secondary threshold has dropped from £9,100 to £5,000. This means employers will start having to pay NCIs on earnings starting at £5,000.Another more positive change affects Employment Allowance. Previously, only businesses with an NIC bill of £100,000 or less were able to take £5,000 off their employer NIC bill, thanks to the Employment Allowance. However, from April 2025, this has increased from £5,000 to £10,500 and is available to more businesses since the government has removed the £100,000 limit.National Minimum Wage (NMW) and National Living Wage (NLW) increaseFrom April 2025, the National Minimum Wage (NMW) for employees aged between 18 and 20 years has increased from £8.60 an hour to £10 an hour. For employees aged between 16 and 17 years, the NMW has increased from £6.40 an hour to £7.55 an hour.The separate rate that exists for eligible apprentices under 19 years old has also increased from £6.40 up to £7.55 an hour.The National Living Wage (NLW), applicable to employees 21 and over, has increased from £11.44 an hour to £12.21 an hour.If you currently have employees on the NMW or NLW, you must make sure you’ve increased their salaries to reflect the April 2025 changes to legislation. Not doing so breaks employer law and can result in fines of up to £20,000 for each affected employee. Carers can work more hours From 7 April 2025, the earnings limit for carers has risen from £151 to £196 a week, which means that carers are able to work a few more hours while remaining eligible for the Carer’s Allowance benefit. Businesses that hire employees who qualify for this benefit might need to make adjustments.Income tax changes for 2028From 2028, the government intends to raise income tax thresholds in line with inflation. This means adjusted pension tax relief for employees who are high earners. Important Payroll Dates for 2025The new 2025/2026 tax year has just begun, and important dates for payroll are on the horizon. It pays to keep on top of them to avoid HMRC’s hefty fines – especially if you opt for a part-managed payroll system, which means you’ll still be responsible for some payroll duties.To help you out, here’s a brief recap of the most important upcoming 2025/26 payroll dates:6 April 2025The new 2025/26 tax year began.Your employee payroll must be up to date for the new tax year.31 May 2025Deadline for giving employees a P60 form, which shows how much taxable salary they were paid in the previous tax year (2024/25).6 July 2025Deadline for expenses and benefits report to the HRMC.Deadline for P11D and P11D(b) forms submission.19 July 2025Deadline for Class 1A National Insurance contributions on benefits in kind payment (if you’re not using digital systems to do so – i.e. via cheque).22 July 2025Deadline for Class 1A National Insurance contributions on benefits in kind payment (if you’re using digital systems to do so).19 October 2025Deadline for businesses with a PAYE Settlement Agreement to pay all tax and Class 1B National Insurance owed (if you’re not using digital systems to do so – i.e. via cheque).22 October 2025Deadline for businesses with a PAYE Settlement Agreement to pay all tax and Class 1B National Insurance owed (if you’re using digital systems to do so).6 April 2026-Start of the new tax year 2026/27. Next Steps It’s important to remember that the costs of outsourcing payroll can vary wildly. What you’ll pay depends on the type of service you need, the size of your business, how often you pay your staff and the payroll service provider you choose. To get the best idea of the exact costs you can expect to pay to outsource your payroll, take advantage of our free quote-finding form. Take a minute, enter a few details about your business and you’ll receive tailored quotes from top payroll service providers that can cater to your unique needs. Written by: Matt Reed Senior Communications and Logistics Expert Matt Reed is a Senior Communications and Logistics Expert at Expert Market. Adept at evaluating products, he focuses mainly on assessing fleet management and business communication software. Matt began his career in technology publishing with Expert Reviews, where he spent several years putting the latest audio-related products and releases through their paces, revealing his findings in transparent, in-depth articles and guides. Holding a Master’s degree in Journalism from City, University of London, Matt is no stranger to diving into challenging topics and summarising them into practical, helpful information. Reviewed by: Tatiana Lebreton Senior Grow Online & Business Software Expert Tatiana is Expert Market's resident payments and online growth expert, specialising in (E)POS and merchant accounts, as well as website builders.