A complete guide to HR outsourcing costs in 2025

Human resources (HR) covers multiple functions and takes a lot of time, money, and stress to get right. Because of this, teams often choose to outsource HR. Budget options typically cost around £200 per month, while more bespoke packages can be as much as £800.

The series of new laws and legislation that have come into effect in the UK since April, off the back of the Employment Rights Bill, have made it harder than ever for UK employers to stay on top of their HR responsibilities. 

The increasing complexity of employment laws, in conjunction with ongoing economic volatility, has seen HR outsourcing growing in popularity. In this guide, we’ll explain the main elements that affect the cost of a third-party HR provider, as well as the types of outsourcing available, such as audit or support HR.

How much does it cost to outsource HR?

Pricing for outsourcing human resources typically works in one of two ways:

• As a fixed fee: around £20-£30 per month, per employee
• As a percentage of each employee’s monthly wage: approximately 2% to 10% of a worker’s monthly salary

However, I’ve never seen pricing lower than £160 a month, and you won’t necessarily save a lot of money if you are a sole trader or microbusiness. The exact cost depends on the level of support required, not your team size.

Some providers charge flexibly by the project, day, or hour. Others offer monthly packages with a set number of hours, known as a retainer.

For example, a small team of ten wanting two hours of support per month may pay £200 per month. But if they opt for a comprehensive package with 20 hours they could end up paying £2,000 per month.

Our video guide to HR outsourcing costs

Prefer to have someone talk you through outsourcing your HR costs? Watch our Deputy Editor take you through the key points in just 90 seconds:

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What factors influence HR outsourcing costs?

• Team size: often the biggest cost factor, the more staff you have, the greater your HR needs.
• HR functions: a simple function like fixed-fee payroll, for example, will cost far less than bringing in an experienced employment lawyer to represent your small business at tribunal.
• Overhead and operating costs: consultants need to factor in their own expenses (like software and travel), which can be passed on to clients.
• Industry: sector regulations and trends can impact costs. For example, tech firms often have a global workforce, which can complicate HR processes.

Pay-as-you-go vs retained HR costs

If you can’t decide whether or not to outsource HR long-term, a good option is to purchase a pay-as-you-go plan, rather than invest in a costly retainer.

• Retained consultancy = you’ll be charged a minimum service fee per month, so you’ll want to make use of a base level of HR support.
• Pay-as-you-go = you’ll be charged a set amount based on what services you require, and how long for.

Below, we’ve weighed up the pros and cons of retained and pay-as-you-go payment plans:

Which business is a retained model best suited for?

You should consider a retainer, if:

• You have ongoing HR needs
• You want proactive support from a trusted consultant
• You value smooth business continuity

Which business is a pay-as-you-go model best suited for?

You should opt for a pay-as-you-go model if:

• Your HR needs are sporadic, only needing infrequent support throughout the year
• You budget is tight, and you only want to pay for the services you use
• You prefer project-based flexibility, including who you choose as your HR consultant

Alternative HR services to consider

HR outsourcing providers offer custom services that you can choose from. Here are three of the most common services for small businesses:

1. HR audits

These are useful if you have HR services in-house, but need to clarify where changes should be made.

You should expect to pay around £700-£1,000 for an HR audit, but this will depend on your business size and how detailed the audit is. It can be in the thousands. Generally speaking, that will include:

• Recruitment practices
• Employee development and disciplinary
• Health and safety
• Payroll and benefits

2. Specialist HR consultants

For those owners not interested in becoming an HR manager themselves, you could also benefit from the hire of a specialist HR consultant for managing their day-to-day people tasks or projects.

Most of these will charge their own rates. Typically, you can expect to pay slightly less overall if you want your HR consultant on a retainer basis.

These are the estimated costs per hour or day, but keep in mind you may sometimes need to hire an HR consultant for weeks or months at a time:

3. HR support costs

HR support is a way of outsourcing the day-to-day running of your HR function, without fully handing over responsibilities.

Small businesses usually opt for HR support on a monthly fixed fee basis, making the cost of human resources easier to absorb. Common HR support services include support and advice during:

• Disciplinary and grievance procedures
• Redundancy
• Recruitment
• Health and safety
• Training and development
• Payroll
• Benefits

Can I just use HR software?

The obvious low-overhead option is to DIY your human resource tasks with HR software, as software licensing fees are cheaper than outsourcing.

For SMEs with a low headcount and who only have basic needs, using HR software in-house as opposed to paying through the nose for an external HR retainer will be the better option. For example, we know that Staffology by Iris’s prices start at £39 per month. 

However, some functions – like employment law and payroll services – require specialist skills to get right, so outsourcing these can make sense (like assistance with questions such as how you should pay yourself as a business owner). Without expert help you may find you’re spending more time on admin, and making errors that are costly to fix.

Remember, you can always start out by using HR software, and scale up to HR outsourcing if and when you need it.

If you’ve read the above and feel ready to select the perfect fit for your HR needs, our free cost comparison tool can help you to find the best deal.

In conclusion

A simple, budget solution to outsourcing your HR basics can be as cheap as £200 per month, while more comprehensive options can be as expensive as £800 per month.

The key services you should be receiving in return are payroll, benefits admin, staff training, recruitment, and compliance management. 

For some newer startups with a handful of employees, it will likely be cheaper to pay for HR and payroll software that will streamline these different tasks for you.