How Much Does Payroll Software Cost? A Complete Guide

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The cost of reliable payroll software in the UK tends to vary according to how many employees you have and how many features you need. It can go from around £80 per month for small businesses to thousands for large enterprises with large HR teams.

Top payroll software solutions simplify and automate payroll processes that would otherwise take hours to complete, so while they may command a sizeable sign-up fee and significant monthly costs, most businesses quickly see the return on their investments.

In this article, we’ll give you some specific price points you can use to make the right decision for your business, as well as some information on the alternatives worth considering if it’s a little bit out of your budget.

Typical Payroll Software Costs

Payroll software costs are usually segmented into different plans based on the size of the business they’re meant for and the features they offer.

  • Payroll software for small businesses: £16 to £32 per month, plus £2 to £5 per employee that is paid through the software.
  • Payroll software for medium-sized businesses: £24 to £48 per month, plus £3 to £6 per employee.
  • Payroll software for enterprises: Starts around £48 per month plus £5 to £10 per employee, going up to £120 per month, plus £5 to £10 per employee. Some enterprise payroll software requires a minimum number of employees.

Because the standard payroll software pricing structure includes a flat monthly fee and a per-employee monthly fee, prices can vary significantly depending on the size of your business. Here are some rough estimates of how much you should budget.

  • Less than 10 employees: Up to £86 per month.
  • Less than 50 employees: Up to £275 per month.
  • Less than 100 employees: Up to £640 per month.
  • 500+ employees: From £2,500 or more per month.

If you want to go a little deeper into the specifics, keep reading.

Payroll Software Pricing Models

Not all payroll software charges its users in the same way. Understanding the four main pricing models will allow you to select the most cost-effective option for your business.

SaaS Subscription With Seats

This is the most common pricing model. You’re charged a monthly base rate for use of the software in general, and then an additional monthly rate for each employee getting paid. This model works well for all business sizes.

Base fees can range from £16 to £120 per month, with additional employee costs coming in around £2 to £10 per employee.

Fixed Monthly Fee

This is the most straightforward pricing model. You pay a fixed amount every month, regardless of how many employees need to get paid via the software. This structure is ideal for businesses with stable employee counts.

Prices typically range from £40 to £160+ per month.

One-Off Purchase

With this model, you pay only once for a payroll software license and then install the software directly on your servers. This is best for large businesses wanting control over their data and long-term cost savings.

Since these types of payroll software are often highly customizable, price estimates are rough. Think anywhere from £800 to well over £8,000, based on company size and needed features.


The free payroll model typically provides super basic payroll software with only the core features. It’s ideal for very small businesses or startups. However, you may end up paying if you need additional features or services.

Additional Payroll Software Costs

There’s often more than meets the eye with payroll software costs. Whether you go with a free plan or an enterprise suite, hidden costs tend to sneak in. Here are some common hidden costs to include when making your budget.

Setup Fees

Whether you’re starting from scratch or switching from a different payroll software provider, the setup process can be complicated. A service rep is often needed to install and configure the software and migrate data from your previous systems. Unless free setup is specifically mentioned on your provider’s website, you should be ready to pay for this service. Usually, the larger your business, the higher the setup fees.

Bolt-On Services

These are additional add-on features that provide enhanced functionality beyond what’s normally offered in your selected plan. Features include advanced reporting and automation, HR management, and even custom integrations for enterprises with heavy existing software infrastructure. Bolt-on services are either one-off fees or extra monthly charges.

Enhanced Customer Support

Most payroll software comes with standard customer support—but that might not be enough for complex businesses. For an additional monthly subscription, you can add things like 24/7 assistance, dedicated account managers, or in-depth employee training sessions.

Payroll Software Alternatives

If payroll software is too expensive, not powerful enough to meet your needs, or too powerful for your needs, there are other ways to tackle the payroll problem.

Manual Payroll Processing

You could use the old-school method of doing everything manually. This involves keeping track of all payroll data—including bonuses, promotions, and tax requirements—on an Excel spreadsheet.

Though it’s cheap, we don’t recommend this method, since it’s prone to errors and could result in penalties for incorrect information. That’s one of the key advantages of payroll software – it helps ensure compliance without you really having to think about it.

Outsourced Payroll Services

For some businesses, running payroll in-house simply isn’t worth the trouble. But by using a specialised, third-party payroll service provider, you can cleanly outsource setup, regular payroll processing, tax filings, and anything else payroll-related.

Monthly costs are obviously much higher with a full service than with an in-house payroll software.

Contractor Payments

Benefits, tax withholdings, and worker protections don’t apply to contractors—only employees. Hiring primarily contractors instead of employees can greatly simplify the payroll process, allowing you to cut out payroll software from the equation, or at least use a lower-tier, less expensive payroll software plan.

Next Steps

Just like other kinds software, payroll solutions will vary in cost depending on the size of the business and the features needed. However, it’s worth remembering that be a lot cheaper to manage these processes in-house rather than requesting some sort of external service.

Small businesses might pay £16-£32 monthly plus £2-£5 per employee, while enterprises could spend up to £2,500 per month or more. Prices also change based on the specific pricing model you choose and the costs for any additional features you need.

As we just alluded to, some businesses choose to bypass payroll software costs entirely, outsourcing payroll to a third-party firm. If you think you want to go this route, check out our article on outsourced payroll costs.

Payroll Cost FAQs

Should I use payroll software?
We recommend payroll software for most businesses since it greatly reduces errors and manual work time. If you’re struggling to pay your employees on time and find you’re constantly making errors, it’s probably time to implement payroll software in your business.
Which software is best for payroll?
Payroll software providers have their strengths and weaknesses. The most important thing is to check whether a solution meets your business’s needs. Some of our favourite payroll solutions are Iris Staffology, ADP, MHR, and Frontier, all of which are cloud based.
Is Excel a payroll software?
While Excel can be used for manual payroll processing, it isn’t payroll software. Payroll software is an all-encompassing solution with the explicit purpose of simplifying and automating your business’s payroll.
Written by:
Robbie holds a BSc in Accounting and Finance from Centenary University, New Jersey. He’s worked as a staff accountant at Unity Bank and Kering (Gucci, Balenciaga), focusing on financial reporting, account reconciliation, and complex accrual analysis. In addition to banks and private companies, Robbie also has experience working in the luxury hospitality and construction sectors, giving him a well-rounded understanding of each sector’s unique needs.