Payroll prices explained – understanding the costs of UK payroll

For any UK business, payroll is a vital function that ensures employees are paid correctly and on time, and the prices paid are important. With the complexities associated with taxes, pension contributions, and compliance with legal requirements, managing payroll costs can be a daunting task.

There are two main approaches that businesses in the UK can choose from: in-house payroll processing and outsourcing. This article will explore both options, helping you to understand the costs and benefits associated with each.

In-house payroll costs – An overview

In-house payroll involves managing all aspects of payroll processing within the organisation. This includes calculating wages, handling tax deductions, and ensuring compliance with various legal obligations.


  1. Software Costs: There are several payroll software options available in the market, and the price can range from a few hundred to several thousand pounds annually, depending on the number of employees and features required.
  2. Personnel Costs: Employing staff to manage payroll can be costly. Salaries, benefits, and training must be considered.
  3. Compliance Costs: Keeping abreast of legal requirements and changes in legislation can lead to unexpected expenses, such as legal consultations or fines for non-compliance.
  4. Miscellaneous Costs: These include paper, printing, and other office supplies.


  1. Control and Customisation: Managing payroll in-house provides greater control and allows for tailored solutions to meet specific business needs.
  2. Data Security: Keeping data within the organisation can enhance security, provided that proper measures are implemented.
  3. Potential Cost Savings: If managed effectively, in-house payroll can be more cost-effective than outsourcing.

Outsourced payroll costs – An overview

Outsourcing involves hiring an external provider to manage all or part of the payroll function. It can be an appealing option for businesses looking to streamline operations.


  1. Service Fees: Outsourcing providers typically charge either a flat fee or a per-employee fee. Prices can range widely, depending on the level of service required.
  2. Set-up Costs: There may be initial costs for integrating the service with the existing business systems.
  3. Additional Charges: Providers might charge extra for bespoke reports, year-end processing, or addressing specific compliance issues.


  1. Expertise and Compliance: Outsourcing firms have the expertise to ensure compliance with all legal obligations, reducing the risk of fines or penalties.
  2. Time Savings: Outsourcing can free up internal resources, allowing employees to focus on core business functions.
  3. Scalability: Outsourcing firms can quickly adapt to changes in the business, such as growth or downsizing.

Factors to consider when choosing between in-house and outsourced payroll

  1. Size of Business: Smaller businesses may find in-house payroll more cost-effective, while larger organisations may benefit from the expertise and scalability offered by outsourcing.
  2. Complexity of Payroll: Businesses with complex payroll requirements, such as various employee benefits or international operations, might find outsourcing more suitable.
  3. Budget Constraints: Carefully consider the budget and assess the potential return on investment for both options.
  4. Data Security Concerns: Evaluate the data security measures of both in-house systems and potential outsourcing providers.
  5. Strategic Goals: Align the choice with the strategic goals of the business, considering aspects like growth plans, focus on core competencies, and desired level of control over processes.

UK payroll companies prices

CompanyServicePayroll prices
ADPComprehensive payroll and HR solutionsStarts from £50 per month
MoorepayTailored payroll solutionsFrom £10 per employee per month
Sage PayrollUser-friendly softwareBasic plan starts from £7 per month
PayescapeOnline payroll servicesStarts from £2 per employee per month
BrightPayRange of payroll services, including auto-enrolmentAnnual license starts at £99 for up to 15 employees
IRIS Payroll SolutionsSoftware and managed servicesStarts from £360 per year
CeridianComprehensive payroll services, including global solutionsCustom pricing starting at around £50 per month
MoneysoftAffordable and straightforward solutionsPayroll Manager starts at £60 per year
Cost of outsourced payroll services from UK providers


  • Service: Comprehensive payroll and HR solutions
  • Pricing: Starts from £50 per month for basic payroll services for small businesses
  • Website:


  • Service: Offers tailored payroll solutions for different business sizes
  • Pricing: From £10 per employee per month for their cloud-based payroll system
  • Website:

Sage Payroll


  • Service: Offers online payroll services with a focus on flexibility
  • Pricing: Prices start from £2 per employee per month, depending on the level of service
  • Website:


  • Service: Provides a range of payroll services, including auto-enrolment
  • Pricing: An annual license starts at £99 for up to 15 employees
  • Website:

IRIS Payroll Solutions


  • Service: Comprehensive payroll services including global solutions
  • Pricing: Custom pricing based on business needs, starting at around £50 per month
  • Website:


  • Service: Known for affordability and straightforward solutions
  • Pricing: Payroll Manager starts at £60 per year for unlimited employees
  • Website:

UK payroll software prices

SoftwarePayroll pricesFeatures
Sage Payroll SoftwareStarts from £7 per month for up to 5 employeesCloud-based payroll, auto-enrolment, integration
Xero PayrollStarting from £10 per monthOnline payroll with integration into Xero’s accounting software
QuickBooks PayrollStarts at £4 per month plus £1 per employee per monthFull payroll features, including pensions and taxes
BrightPay softwareAnnual license starts at £99 for up to 15 employeesIncludes auto-enrolment, CIS submissions
IRIS Payroll BusinessStarts from £360 per yearSuitable for small to medium-sized businesses
Moneysoft Payroll ManagerStarts at £60 per yearAffordable and easy to use
Zoho PayrollStarts at £0.80 per employee per monthCloud-based with integration to Zoho Books
KashFlow PayrollStarts from £6.50 per month for up to 5 employeesIncludes auto-enrolment, pension reporting
PayFitGenerally starts at around £30 per monthAutomation, real-time calculations
FreeAgentStarts from £14.50 per monthSuitable for freelancers and small businesses
Prices for payroll software in the UK

Sage Payroll Software

Xero Payroll

QuickBooks Payroll

  • Pricing: Payroll option starts at £4 per month plus £1 per employee per month
  • Features: Offers full payroll features, including pensions, tax calculations, and integration with QuickBooks accounting
  • Website:

BrightPay software

  • Pricing: Annual license starts at £99 for up to 15 employees
  • Features: Includes auto-enrolment, CIS submissions, and employee self-service portals
  • Website:

IRIS Payroll Business

Moneysoft Payroll Manager

Zoho Payroll

  • Pricing: Starts at £0.80 per employee per month
  • Features: Cloud-based software with integration to Zoho Books and time-tracking capabilities
  • Website:

KashFlow Payroll

  • Pricing: Starts from £6.50 per month for up to 5 employees
  • Features: Includes auto-enrolment, pension reporting, and online payslip access
  • Website:


  • Pricing: Custom pricing, generally starts at around £30 per month
  • Features: Offers automation, real-time calculations, and scalability for growth
  • Website:


  • Pricing: Payroll feature included with accounting subscriptions, starting from £14.50 per month
  • Features: Suitable for freelancers and small businesses, with integrated accounting and payroll functions
  • Website:

Conclusion – Payroll prices

Whether to manage payroll in-house or outsource is a significant decision for any UK business. By understanding the various payroll prices and benefits of each option, companies can make an informed choice that aligns with their needs, budget, and strategic goals.

Both paths offer unique advantages, and the right choice will depend on individual business characteristics and requirements. The investment in careful consideration and planning will ensure that the payroll process supports not just the employees but the broader business objectives.

Payroll prices FAQ

What are the average costs of running payroll in-house?

The average costs of running payroll in-house can vary widely based on factors such as the number of employees, complexity of payroll, and software used. Costs may include software licensing (around £7 to £50 per month), employee salaries (often £20,000 to £40,000 per annum for a payroll specialist), and miscellaneous costs like printing.

How much does it typically cost to outsource payroll?

Outsourcing payroll in the UK typically starts from £2 per employee per month to £10 or more, depending on the services required. There might also be setup costs and additional charges for bespoke services.

Are there any hidden costs in payroll outsourcing?

Hidden costs might include charges for additional reports, adjustments to previous payroll periods, year-end processing, or addressing specific compliance issues. It’s advisable to review contracts carefully and discuss potential extra charges with the provider.

Is it more cost-effective to manage payroll in-house or outsource it?

It depends on the size and complexity of the business. Small businesses with straightforward payroll needs might find in-house management more cost-effective, while larger businesses or those with complex requirements might benefit from outsourcing.

Can I manage payroll myself without software?

While it is possible to manage payroll manually, it can be time-consuming and prone to errors. Utilising software can streamline the process, ensure accuracy, and help with compliance.

What are the ongoing costs of payroll software?

Ongoing costs for payroll software can include annual or monthly subscription fees, support charges, and update or upgrade costs. Prices range widely, starting as low as £7 per month.

Are there any free payroll software options in the UK?

Some providers offer free versions of their payroll software, especially for very small businesses. However, these may have limitations and may not include features such as auto-enrolment for pensions.

What are the costs associated with non-compliance in payroll?

Non-compliance can lead to fines, penalties, and legal fees. Costs can vary depending on the nature and severity of the non-compliance but can run into thousands of pounds.

Can I change my payroll provider or switch from in-house to outsourced? What are the costs?

Yes, you can change providers or switch between in-house and outsourced. Costs might include termination fees with the current provider, setup costs with the new provider, and potential training costs for staff.

How much time can be saved by outsourcing payroll?

The time saved by outsourcing payroll depends on the existing in-house process. Some businesses report saving several hours per payroll cycle by outsourcing.

How are payroll prices affected by the number of employees?

Many payroll providers and software base their pricing on the number of employees. More employees generally mean higher costs, but some providers may offer volume discounts.

What features should I look for in payroll software?

Features to consider include tax calculations, auto-enrolment, reporting capabilities, integration with existing systems, user-friendliness, and customer support.

Do all payroll providers offer pension auto-enrolment?

Most payroll providers and software in the UK offer pension auto-enrolment features, but it’s wise to confirm this based on your specific needs.

How do I budget for payroll costs?

Budgeting for payroll costs involves understanding both fixed costs (such as software subscriptions or salaries for payroll staff) and variable costs (like additional reporting or seasonal variations in staffing).

Are there industry-specific payroll providers in the UK?

Yes, some payroll providers specialise in specific industries, such as construction or hospitality, and offer features tailored to those sectors.

How do I ensure data security with an outsourced payroll provider?

Check the provider’s security certifications, understand their data handling and storage practices, and ensure they comply with relevant regulations such as GDPR.

Can payroll software integrate with my existing accounting or HR systems?

Many payroll software options offer integration with popular accounting or HR systems. It’s essential to verify this with the specific software you are considering.

How do changes in legislation affect payroll costs?

Changes in legislation can affect compliance requirements, leading to potential increases in software, training, or consultation costs.

How quickly can I implement a new payroll system?

Implementation times vary based on the complexity of the system and business needs but generally range from a few days for simple software to a few months for comprehensive outsourcing solutions.

How do payroll providers handle tax calculations and submissions?

Payroll providers typically calculate tax deductions based on current HMRC guidelines and handle submissions through Real Time Information (RTI) as required by UK law.