Payroll service prices: How much does outsourcing your payroll cost?

Whether you have one employee or 50, having your business’s payroll managed professionally can make things much easier. But how much will it cost you? Find out all about the cost of payroll outsourcing here.

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The cost of payroll services can vary wildly but, on average, a company can expect to pay £10-£25 per month depending on the level of service they need.

Finding a payroll service provider with transparent pricing is near impossible. Rather than wasting time requesting quotes by filling out forms and enduring tedious phone calls with sales reps, why not use our free comparison tool? It pairs you with payroll services most suited to your business needs and offers you bespoke, personalised payroll service quotes from each of them – saving you time and money. The service is free, takes just minutes, and there is zero obligation on your part.

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The exact cost of payroll services is hard to determine, as there are so many factors that affect the price.

In this payroll pricing guide, we'll consider all these factors and delve deeper into the costs of fully managed and part-managed payroll. We’ll also consider whether it’s cost effective to manage your payroll in-house.

Average payroll outsourcing cost

The total cost of your outsourced payroll will depend on whether you need fully managed payroll or part-managed payroll.

The price of each service will differ, but on average, the costs for a company with five employees will be:

Fully managed payroll£4-£6 per payslip or £20-£25 per month

Part-managed payroll£2-£3 per payslip or £10-£15 per month

To learn more about the factors that affect this cost, and the difference between fully managed and part-managed payroll, just read on.

The factors impacting payroll service costs

As we highlighted earlier, determining exact payroll service costs is a complicated business. It isn’t as simple as picking a product off the shelf or purchasing specific payroll software.

There are several factors that will affect the price you pay, whether you are using a fully managed or part-managed payroll service.

Here are some of the key factors that will play a part:

Business size

The bigger your business, the more employees you have – and they all need to be paid accurately and compliantly. Each employee payslip incurs a cost, so if you have 100 employees compared to 50, you’ll be paying twice the cost to outsource your payroll regardless of whether the service is fully or part-managed. However, big organisations can actually benefit from having a larger workforce as some providers offer discounts to companies with over 250 employees.


The features you require from your payroll service will affect the price you pay. For example, some providers charge extra if you want them to manage and auto-enrol employee pension plans.


Some providers will charge you a fee to set up the service.


You may want to add on and integrate other managed services and functions to your payroll service. These include HR management and accounting, and they will increase the overall managed payroll cost.

Type of service

As mentioned in the intro, fully managed and part-managed payroll have cost differences because the level of service offered is different between them. On paper, part-managed payroll may seem like the cheaper option, but it could actually end up costing you more. Here’s why…

Fully managed and part-managed payroll – what’s the difference?

For some payroll maestros, answering this question is as simple as adding two and two together. But for most everyday folk, understanding the difference between these two services is a little less straightforward.

Fortunately, at Startups we’ve been helping small businesses find the perfect payroll provider for over 20 years, and during this time we’ve learned a thing or two about the different payroll services on offer.

Fully managed payroll summarised:

In order for your payroll to be fully managed, you must outsource every single aspect of it to your selected provider. The provider will manage everything from employee BACS payments to P60s.

All administrative payroll tasks and legislative procedures are the responsibility of your fully managed payroll provider. Some providers let you assign an employee to double check pay runs before they are submitted, but this is about as much involvement as you’ll have.

Part-managed payroll summarised:

A part-managed payroll service involves a mixed, somewhat 50/50 approach to handling your payroll. More complex, time-consuming processes like end of year filing, HMRC reporting and (if applicable) pension scheme auto-enrolment are outsourced to payroll service providers. Smaller, simpler day-to-day administrative tasks like updating employee records and submitting pay-runs are actioned in-house.

Which service is the cheaper option?

Typically, you’ll find that part-managed payroll is the cheaper option. This is because your payroll provider will only be charging a fraction of the price compared to its fully managed service.

However, if you’re using a part-managed payroll service, you’ll need to factor in the costs of employing a company payroll specialist to manage everything in-house. The average salary of a payroll specialist in the UK ranges from £20,000-£45,000 per year, so be sure to keep this in mind.

But what about the specific costs and benefits associated with both services? Let’s delve into these next.

Fully managed payroll prices and benefits

Payroll Service£4-£6 per employee, per month
Setup£0-£2 per employee
Pension plan auto-enrolment£0-£2 per employee, per month
Integrations (HR & Accounting)£10-£25 per employee, per month

Completely outsourcing your payroll can be the most expensive option for your business, costing an average of £4-£6 per payslip (employee) each month. However, it can also be the most effective and time-efficient option, as it takes all of the pressure and responsibility of managing payroll off your shoulders, allowing you and your employees to focus on other elements of the business.

Some providers will charge a setup fee of up to £2 per employee, whilst others won’t charge you anything at all – be sure to check this out when receiving personalised quotes from our free, no-obligation payroll price comparison tool.

Pension plan auto-enrolment is included as standard in some providers’ fully managed payroll services, including some featured in our top five best payroll service providers list. However for others there is a charge attached, which is usually capped at £2 per employee per month.

In terms of integrations, most are optional, so you don’t necessarily have to factor them into your budget – particularly if you already have a fully functioning HR and accounting department. But if not, it might be worth taking a look at the additional HR management services offered by some payroll service providers, particularly IRIS. Just keep in mind this will come with additional costs of up to £25 per employee, per month in some cases.

The benefits of fully managed payroll include:
  • Regular support from dedicated payroll specialists, ensuring that any questions you or your staff have regarding salaries are answered quickly and efficiently.
  • Advice from professionals with a clear understanding of the ever-changing tax landscape in the UK, ensuring full compliance when your year-end payroll is filed with HMRC by your payroll provider.
  • Complete transparency on all matters pertaining to payroll, so you can see exactly where every penny is being spent.
  • A full and comprehensive breakdown of any deductions from an employee's gross salary, and any calculation amendments that may be necessary, all detailed on their payslip.
  • Additional documentation that an employee may need to present to a government body, including their annual P60.
  • The processing of payments directly to employees via BACS payments.
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This is where we come in. Our free comparison tool will match you with the right provider for your company’s needs, providing you with direct payroll service provider quotes that you can easily compare.

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Part-managed payroll prices and benefits

Payroll service £2-£3 per payslip, per month
Pension plan auto-enrolmentVaries
Integrations (HR and accounting)Varies

The main issue with estimating part-managed payroll costs is that there are so many variables. The price really depends on which payroll processes you want to manage in-house and which ones you want to outsource to your payroll provider, something that is difficult to estimate.

What is certain however is that you will be charged monthly for using a payroll service, and this cost typically ranges from £2-£3 per payslip per month. However, it can cost as little as £1 per payslip for micro businesses with up to five employees.

It is arguably the cheaper of the two service options, but remember you’ll need to factor in the costs of managing elements of payroll in-house, which will involve purchasing payroll software and paying your payroll specialist £20,000-£45,000 per year.

The benefits of part-managed payroll include:
  • Flexibility to pick and choose the processes you want your payroll provider to manage. Whether you’d prefer to manage the smaller, simpler admin tasks in-house, or even the bigger tasks, it is entirely up to you and your preferences.
  • Versatility to prioritise other payroll tasks and projects whilst your payroll provider deals with time-consuming admin processes, freeing up your payroll team’s time and cutting down on payroll processing costs.
  • Streamlined communication with your payroll provider so you can get help if your payroll team requires assistance or additional support.

Can I manage my payroll in-house, and how much will it cost?

The short answer is yes, but we would definitely suggest you consider the cost implications before setting up in-house payroll.

In order to manage your payroll team entirely in-house, you’ll need to employ at least two to four payroll specialists, and an additional payroll administrator depending on the size of your business.

This can prove incredibly costly, and it will be far cheaper to either outsource your payroll entirely or partly and employ one payroll specialist to manage things in-house.

Of course, another option – which will greatly reduce in-house payroll management costs and solve the issue of needing a large payroll team – is using fully automated payroll software.

What does payroll software do?

Payroll software is an application that assists you in organising, managing and automating employee payments. It can either be an on-premises or cloud-based solution, but is typically cloud based.

The role of payroll software is to ensure you remain compliant with tax regulations and the requirements set out by HMRC. It also streamlines and automates payroll processes, so you can save time and reduce the cost of employing a large team of payroll professionals and administrators.

If payroll software sounds like the ideal solution for your business, check out our guide to the UK's top five payroll software providers.

Next steps: compare payroll service costs

As we mentioned earlier, identifying the cheapest, most affordable payroll service isn’t easy. Most, if not all, of the providers in the UK keep their payroll service costs hidden, and requesting quotes individually is a waste of your valuable time.

This is why using our payroll service costs comparison tool is the best way forward. We've partnered with some of the best payroll service providers to help you get the best service for your business, including the likes of IRIS, Moorepay and Pecunia.

Simply provide us with a few basic details, and providers will be in touch with personalised quotes for you to compare, along with further details about why the service they offer would best suit the needs of your business. is reader-supported. If you make a purchase through the links on our site, we may earn a commission from the retailers of the products we have reviewed. This helps to provide free advice and reviews for our readers. It has no additional cost to you, and never affects the editorial independence of our reviews.

Ross has been writing for Startups since 2021, specialising in telephone systems, digital marketing, payroll, and sustainable business. He also runs the successful entrepreneur section of the website.

Having graduated with a Masters in Journalism, Ross went on to write for Conde Nast Traveller and the NME, before moving in to the world of business journalism.

Ross has been involved in startups from a young age, and has a keen eye for exciting, innovative new businesses. Follow him on his Twitter - @startupsross for helpful business tips.

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