Written by Rob Binns Reviewed by Heleana Neil Updated on 21 September 2023 On this page What do payroll costs include? 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? Why should I outsource payroll? Could I manage payroll in-house? Important payroll dates recap Next steps Outsourced payroll FAQs 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. The cost of outsourcing payroll will typically range from £2 to £25 per employee, per month. You'll also pay a bit more if you opt for additional payroll services like integrated HR and pension plan auto-enrolment. Outsourcing payroll costs: Fully managed: around £4 – £25 per employee, per monthPart managed: around £2 – £3 per employee, per monthClicking either of the links above will allow you to compare quotes to find the right payroll service for your business.As most major players in the payroll industry work with bespoke pricing, it's wise to compare quotes. This is the best way for you to get an accurate price and make sure you choose the best deal. Our free comparison tool can match you with trusted providers, who'll assess your needs and provide quotes that have been tailored to your business, which makes comparing payroll costs easy.In the midst of a cost of living crisis, it's important to understand your potential outgoings and protect your reputation by paying your team on time. Read on to learn more about what you'll pay for outsourcing payroll services.All prices correct as of September 2023. Which payroll solution do you require? Outsourced services Payroll software Both Unsure Get Tailored Quotes What do payroll costs include?Payroll costs include all of the costs involved with paying your employees. This is made up of employee salaries, payroll taxes, and administration fees.When outsourcing to a payroll provider, you're paying them to pay your employees on time, file the relevant taxes, and keep your business compliant. This will set you back around £2 – £8 per employee, per month. What are the types of outsourced payroll?To understand how much outsourcing payroll will cost your business, you need to first figure out what type of outsourcing is best for you. To find the correct service for your business, check out our guide to the best payroll companies in the UK to find one that's suited to your payroll needs.There are two major types of outsourced payroll service: fully managed and part managed.As the name suggests, a fully managed payroll service involves the complete outsourcing of your 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. A part-managed payroll service lets you outsource certain parts of your 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 is split into four areas, each of which come with a cost. These are:Payroll service£4 – £6 per employee, per monthSetup costs£2 per employee, per monthPension plan auto-enrolment£1.50 – £2 per employee, per monthHR integration£10 – £25 per employee, per monthOutsourced managed payroll services are typically priced on a monthly basis, 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. Note 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 Minimises the risk of fines for failing to report information to HMRC Cons Outsourcing leaves you vulnerable to doing business with a less reputable firm Remember, the cost of outsourcing your payroll services will always be tailored to the size of your business and how often you pay your staff. For example, it’ll cost more to manage your payroll when you pay your staff weekly rather than monthly. These prices are close estimates, so you’ll need to enquire with a provider to get a specific idea of costs. Here’s where we can help. Simply complete our quick quote-finding form – it takes less than a minute, and you’ll receive tailored quotes from top managed payroll service suppliers in the UK. How much does a part-managed payroll service cost?Part-managed payroll service costs are even harder to pin down. This is because the fees here are also dependent on which services you want to outsource, and which ones you’re happy to handle in-house.As a general rule, though, you should pay around £2 – £3 per employee, per month for the managed service. However, you’ll still 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. The pros and cons of part-managed payroll services Pros Flexibility 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?Payroll services can look daunting. Luckily, there are no hidden fees when it comes to using them. 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 charge differ from the agreed further down the line, you can always query them. Why should I outsource payroll?Outsourcing your business’ payroll will save you time and effort, but it will also afford you greater flexibility than if you keep it totally in-house. This is because you can either select a fully managed payroll service, or just the parts of the service that suit you. It also greatly reduces payroll fraud, and removes the risk of fines for failing to report your key figures. Did You Know? 61% of British companies outsource their payroll to some degree. Could I manage payroll in-house?Yes, you could. However, you’ll want dedicated staff with experience in payroll, or you'll at least need to have some expertise yourself. If you don’t have either, and employ more than five people, it’s likely you’ll quickly find in-house payroll management to be an overwhelming task. Plus, hiring someone to do your payroll in-house is a less reliable solution than outsourcing. If your payroll head calls in sick, or goes on leave, then your payroll services stop with them.An alternative but similar option is to use a cloud-based payroll software solution. This way you won't need in-house expertise but instead can rely on online tools and software to process your payroll and ensure you stay compliant. Pros Complete control over your own payroll Cons More expensive More time-consuming Requires payroll expertise Less reliable Who is in-house payroll management for?In-house payroll management is usually favoured by very small businesses, such as those with fewer than four or five employees. That said, in-house payroll management is also well-suited to businesses at the other end of the scale. Big businesses that can afford to maintain a fully functioning accountancy department may choose to keep payroll in-house, too.If your business is at neither end of the spectrum, you’re better off outsourcing your payroll. Or, if you're a very small business or startup and don't have a big budget right now, you could try your hand at free payroll software. How much does in-house payroll management cost?In-house payroll usually comes in the form of a software package from a provider like Moneysoft or Iris. These can be free, or they're 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.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 amount of employees will set you back between £100 – £200 per month.Is in-house payroll management worth it?The short answer is no, it’s not. Managing payroll in-house is not only a less efficient, time-consuming way of doing things, but it leaves you at greater risk of penalties and fines. It’s a less secure, less legally compliant way of paying your staff – and it’s more financially costly, too. ▶ Read more: Best Payroll Solutions for Your Small Business Important payroll dates recapKey deadlines occur throughout the year and 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 2023/24 payroll dates:6 April– New 2023/24 tax year begins.6 April – Your employee payroll must be up to date for the new tax year. 6 July– Deadline for expenses and benefits report to the HRMC.– Deadline for P11D and P11D(b) forms submission.19 July– Deadline for Class 1A National Insurance contributions on benefits in kind payment (if you're not using digital systems to do so).22 July– Deadline for Class 1A National Insurance contributions on benefits in kind payment (if you're using digital systems to do so). Next stepsIt’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. It’s that easy! Outsourced payroll FAQs Should you outsource your payroll? Unless your company is either very small or a behemoth, you should think about outsourcing payroll. Outsourcing your business’ payroll saves you times, effort, and it reduces payroll fraud considerably. How does outsourcing payroll work? Outsourcing payroll means you'll be entrusting payroll duties to a third-party. It functions in two modes: a part-managed payroll will see you split the duties with a third-party, whereas fully managed payroll is undertaken entirely by the third party. How much does a payroll service cost in the UK? Payroll services usually cost £2 to £8 per employee, per month. Any additional services, such as integrated HR and pension plan auto-enrolment, will cost extra. What's included in a payroll system? Payroll systems normally include payroll processing and reporting, tax withholding and filing, compliance upkeeping, and an employee self-service functionality. Is it cheaper to outsource payroll? Outsourcing costs are predictable, which can end up saving you money. Written by: Rob Binns Services Expert Rob writes mainly about the payments industry, but also brings to the table industry-specific knowledge of CRM software, business loans, fulfilment, and invoice finance. When not exasperating his editor with bad puns, he can be found relaxing in a sunny (socially-distanced) corner, with a beer and a battered copy of Dostoevsky. Reviewed by: Heleana Neil Business Services Editor Heleana Neil specialises in Business Services, managing the strategy and production of content for SMBs, helping businesses with the challenges and opportunities they face today. Covering everything from payroll to payment processing, Heleana uses her expertise to help business owners make better, informed decisions and grow their companies.