Key Highlights
- Outsourcing payroll in the UK typically costs between £5 to £10 per payslip for a fully managed service.
- The overall payroll costs are influenced by your number of employees, pay frequency, and required services.
- A part-managed outsourced payroll service can be a cheaper alternative, averaging £3 to £5 per payslip.
- Managing payroll in-house requires investment in software and a specialist employee, costing £20,000 to £45,000 annually.
- Getting personalized payroll service pricing quotes helps you compare options from a payroll provider.
Handling payroll can be a challenging task for any business. With complex regulations and constant changes, ensuring your team is paid correctly and on time is crucial.
This is where a reliable payroll service provider can make a huge difference. Whether you opt for fully managed payroll services for small business or specialized payroll software, understanding the costs is the first step.
This guide will help you navigate the world of payroll management, breaking down pricing so you can decide if it’s a worthwhile investment for you.
What is the Average Payroll Service Pricing in the UK for 2025?
Determining the exact cost of payroll services can be tricky, as prices vary among payroll companies. However, you can get a general idea. For a small business with five employees paid monthly, a fully managed service might cost between £25 and £50 per month. A part-managed service, where you handle some tasks in-house, could be lower, from £15 to £25 per month. Most providers charge a fee per payslip, so your total payroll costs will depend heavily on your team’s size and how often you pay them.
To get the most accurate estimate, it’s always best to get personalized payroll service pricing quotes. The price from a payroll provider often depends on whether you need a fully or part-managed service. Here’s a quick look at the average costs for a company with five employees on a monthly pay schedule.
| Payroll Service Type | Average Cost Per Payslip | Average Monthly Cost (5 Employees) |
| Fully Managed Payroll | £5 – £10 | £25 – £50 |
| Part-Managed Payroll | £3 – £5 | £15 – £25 |
What Are Payroll Changes to Watch Out For in the 2025/2026 Tax Year?
The 2025/2026 tax year introduces several important payroll changes that you need to be aware of. Keeping up with new HR laws and tax adjustments is essential for compliant payroll management. These updates can directly affect your costs and the complexity of your payroll tasks.
Key changes include increases to National Insurance contributions and the National Minimum Wage. Understanding these shifts is vital for accurate budgeting and ensuring your business avoids potential fines. Let’s look at some of these changes in more detail.
Employer National Insurance Contributions (NICs) increase
A significant change for the new tax year is the increase in employer National Insurance contributions (NICs). As of April 2025, employers are required to contribute 15% on employee salaries that are above £5,000. This adjustment directly impacts your overall cost of employing staff.
National Minimum Wage (NMW) and National Living Wage (NLW) increase
In April 2025, the rates for both the National Minimum Wage (NMW) and the National Living Wage (NLW) increased for all age groups. This change means you must adjust the pay for your eligible employees to meet the new legal requirements. Failing to do so can lead to significant penalties.
Income tax changes for 2028
Looking ahead, the government has announced upcoming changes that will affect payroll. One key change is the mandatory payrolling of Benefits in Kind (BiKs), which will take effect from April 2026. This means employers will need to report and pay Income Tax and Class 1A NICs on most benefits in real-time.
What’s Included in Basic Payroll Service Packages?
When you partner with a payroll service provider, their basic packages typically cover the essential payroll tasks needed to pay your employees accurately and on time. These services are designed to take the core responsibilities of payroll processing off your plate, allowing you to focus on other areas of your business. While packages vary, most include a standard set of features.
Using a combination of expertise and payroll software, a provider will handle the fundamental calculations and administrative work. Here are some of the services you can generally expect in a basic package:
- Calculating employee wages and deductions.
- Processing payments to employees, often via BACS.
- Generating and distributing payslips.
- Managing year-end documents like P60s.
- Ensuring compliance with HMRC reporting requirements.
- Handling calculations for sick pay and student loans.
What Factors Impact Payroll Services Cost in the UK?
When you request payroll service pricing quotes, you’ll notice that the final price is influenced by several key factors. The payroll costs you pay are not one-size-fits-all; they are tailored to the specific needs of your business. A good payroll provider will assess these needs before giving you a final price.
1. Number of Employees and Payroll Complexity
One of the biggest factors determining your payroll costs is the number of employees you have. Most payroll providers use a “per-employee-per-month” (PEPM) pricing model. Naturally, a business with 100 employees will pay more than one with 10. The more people on your payroll, the more work is required, which is reflected in the price.
However, some providers offer discounts for larger companies, reducing the per-employee rate as your team grows. The complexity of your payroll processes also matters. If your payroll involves various pay rates, bonuses, commissions, or different types of employment (full-time, part-time, contractor), the payroll complexity increases, which can lead to higher costs.
Effective payroll management means finding a service that can handle your specific level of complexity without overcharging. It’s important to discuss these details with potential providers to get an accurate quote that reflects your unique business needs.
2. Frequency of Payroll Runs (Weekly, Biweekly, Monthly)
How often you pay your employees has a direct impact on your payroll costs. Since most providers charge per payslip, a higher payroll frequency means more payslips to process each month, leading to a higher bill. For example, if you run payroll weekly, your costs will be roughly four times higher than if you run it monthly.
Choosing a payment schedule is a balance between your employees’ preferences and your budget. While weekly pay can be beneficial for some workers, it is the most expensive option for your business when outsourcing payroll. Monthly payroll is the most cost-effective choice from a processing standpoint.
When discussing options with a payroll service provider, be clear about your desired payroll frequency. A good payroll provider can help you understand the cost implications of each option, allowing you to make an informed decision that works for both your team and your bottom line.
3. Additional Services Like Tax Filing and Pension Management
Basic payroll packages cover the essentials, but many businesses need more. These additional services often come with extra costs, so it’s important to know what you need and what you’ll pay for it. Services like managing your company’s pension plan or handling complex tax deductions are common add-ons.
For instance, auto-enrolment for a pension plan is a crucial part of payroll management, but not all providers include it in their standard fee. Some may charge around £2 per employee, per month for this service. Similarly, integrating HR functions or advanced tax filing can increase your overall cost.
Always clarify which services are included and which are considered extras. Common add-ons that may carry an additional fee include:
- Pension plan auto-enrolment and management
- Integration with HR and accounting software
- Tax planning and optimization advice
- Management of employee benefits administration
What Are the Types of Payroll Services and Their Price Differences?
When exploring payroll companies, you’ll find they generally offer a few different types of service. The payroll fee you pay will vary significantly depending on the level of support you choose. Your decision will depend on your budget, your in-house expertise, and how much of the payroll process you want to handle yourself.
The main options are typically fully managed, part-managed, and online payroll solutions. Each type of service comes with a different price range and level of involvement from you and your team. Understanding these differences is key to selecting the right payroll provider for your business.
1. Fully Managed Payroll Services: Features and Pricing
A fully managed service means your payroll provider handles every aspect of your payroll. This is the most hands-off option, taking all the pressure and responsibility of complex payroll tasks off your shoulders. Prices for this service average between £5 to £10 per payslip each month, though many providers have a minimum monthly fee of around £15 to £20.
When you get payroll service pricing quotes for a fully managed service, you might also see a setup fee, which can be up to £2 per employee. However, this comprehensive approach ensures full compliance and gives you access to dedicated specialists who understand the UK’s tax landscape.
With this service, you can expect your payroll provider to manage everything from start to finish. Key features often include:
- Processing of all employee payments via BACS.
- A full breakdown of tax deductions on every payslip.
- Filing of year-end payroll with HMRC.
- Providing annual P60s for all employees.
- Advice from professionals on tax and compliance.
2. Part-Managed Payroll Services: Features and Pricing
A part-managed service offers a more flexible approach to payroll. With this model, you split the payroll responsibilities with your provider. Typically, businesses choose to outsource the more complex and time-consuming processes, like year-end filing or HMRC reporting, while handling simpler day-to-day tasks in-house. This gives you more control while still benefiting from expert support where you need it most.
The payroll costs for a part-managed service are generally lower than for a fully managed one, ranging from £2 to £3 per payslip per month. For very small businesses, it can be as low as £1 per payslip.
However, remember to factor in the costs of managing some processes internally, which may involve purchasing payroll software or dedicating staff time to the work.
The key difference compared to a fully managed service is the division of labor. This option is ideal if you have some payroll expertise on your team but want to streamline certain processes or get support with compliance. It combines in-house control with the expertise of the wider payroll industry.
3. Online Payroll Solutions Versus Traditional Providers
In today’s digital world, online payroll solutions have become a popular alternative to traditional providers. Online payroll is typically managed through payroll software, which automates many processes and can often be accessed via a mobile app. This option gives you a wider choice of providers, as you are not limited by location.
Prices for online solutions can differ significantly from traditional service providers. Payroll software often starts at less than £10 per user, per month, making it a very affordable option. However, this approach is more hands-on, as you are responsible for running the payroll yourself using the software. A traditional service provider, in contrast, does the work for you.
When choosing an online payroll provider, it’s crucial to ensure they understand UK regulations. Look for a reputable service provider with a strong track record. Benefits of online solutions often include:
- Greater convenience and remote management.
- Automation of payroll calculations.
- Direct access to support if issues arise.
- Cost-effectiveness for businesses with simple needs.
- Integration capabilities with other business software.
Outsourcing Payroll vs. Managing In-House: Cost Comparison
Outsourcing payroll can often be more economical than managing it in-house, especially for small teams. By using a trusted payroll provider, you can avoid the daunting task of handling payroll processes manually.
While in-house management might seem cost-effective at first, the setup fees and time spent on tax deductions, employee records, and sick pay can add up quickly.
In contrast, many reputable payroll service providers offer fixed monthly rates and even free payroll software options, ensuring you get the peace of mind you deserve while keeping payroll costs in check.
What Are the Benefits of Outsourcing Payroll?
Choosing an outsourced payroll service offers significant advantages beyond just processing paychecks. You are handing over one of the most complex areas of business administration to a team of experts.
This frees up valuable time for you and your team to focus on core business activities instead of getting bogged down by red tape and complex calculations. The UK tax system is intricate and constantly changing, and a mistake can lead to hefty fines.
A reliable payroll provider ensures compliance with regulations like Real Time Information (RTI) and pensions auto-enrolment, giving you peace of mind. This improved accuracy and reliability in payroll management also contributes to a better employee experience, as staff can trust they will be paid correctly and on time.
Key benefits include:
- Access to a team of experts with up-to-date knowledge.
- Significant time savings for you and your staff.
- Ensured compliance with complex UK tax laws.
- Reduced risk of costly errors and fines.
- Scalability as your business grows.
- Peace of mind knowing payroll is handled professionally.
How to Evaluate and Choose the Right Payroll Service Provider?
Selecting a reliable payroll service provider from the many payroll companies available is a critical decision. The right partner will save you time and ensure compliance, while the wrong one can create more problems. Start by assessing your business needs. Are you looking for a fully managed service or just software? Do you need help with pensions or HR integration? Knowing what you need will help you narrow down your options.
When evaluating top payroll service providers, don’t just focus on the price. A low-cost service might be suitable if your needs are simple, but it might lack the support or features a more complex business requires. It’s wise to get quotes from several providers and compare their offerings.
Here are a few steps to help you choose:
- Clearly define your payroll and HR needs.
- Research the reputation and reviews of potential providers.
- Request and compare personalized quotes.
- Clarify all fees, including any for setup or additional services.
- Ask about their security measures for protecting your data.
- Ensure they have experience with UK tax laws and compliance.
Conclusion
In summary, investing in payroll services can significantly streamline your business operations while ensuring compliance with ever-changing regulations. Understanding the various pricing structures and what each package offers is crucial for making an informed decision that suits your business needs. Whether you opt for fully managed, part-managed, or online solutions, the benefits of outsourcing payroll often outweigh the costs, especially when you factor in the time savings and reduced risk of errors. Prioritize choosing a provider that aligns with your specific requirements and budget. For personalized advice on the best payroll service options for your business, don’t hesitate to reach out and get a free consultation today!
Frequently Asked Questions
What is the average monthly cost of payroll services for a small business in the UK?
For small teams in the UK, the average monthly payroll fee can range from £20 to £50. This payroll cost depends on the payroll service provider and the level of service required. To get an accurate figure, it’s best to request personalized payroll service pricing quotes based on your specific needs.
Are there any hidden costs in payroll services pricing?
Yes, there can be hidden costs. Some providers charge an extra cost for services like pension auto-enrolment or a one-time setup fee. When getting payroll service pricing quotes, always ask your potential service provider for a full breakdown of all fees to avoid surprises on your bill.
How do I know if low cost payroll services are right for my business?
Low-cost payroll services may be right if your needs are simple and your business is small. To determine the best payroll service for you, compare what the best payroll service providers offer. Consider the size of your business and provide basic details to see if a low-cost option covers all your requirements.
Why should I outsource payroll?
You should outsource payroll to save time, ensure compliance, and gain peace of mind. An outsourced payroll service gives you access to a team of experts who handle complex payroll management tasks, freeing you to focus on growing your business while they ensure accuracy and adherence to regulations.
What is the cheapest way to manage payroll?
The cheapest way to manage payroll is often by using payroll software, and some free payroll software options are available for very small businesses. This approach to payroll management requires more hands-on effort than outsourcing to payroll companies, but it avoids a higher fixed monthly rate for a managed service.
What is the cheapest payroll service option for startups in 2025?
The most affordable payroll services for startups in 2025 are cloud-based platforms offering basic plans from $20-$40 monthly, ideal for small teams needing automated tax filing and direct deposit features.
How do prices differ between top payroll service providers in 2025?
In 2025, leading payroll providers vary widely, with entry plans averaging $30-$60 monthly plus $5–$10 per employee. Premium options offering HR tools, analytics, and compliance features cost significantly more.
How much do accountants usually charge for running payroll for small firms?
Accountants typically charge $150–$300 monthly for small business payroll, depending on employee count, frequency, and complexity. Some offer per-pay-run pricing, averaging $25–$50 per cycle for smaller firms.
