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.
Costs
- 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.
- Personnel Costs: Employing staff to manage payroll can be costly. Salaries, benefits, and training must be considered.
- 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.
- Miscellaneous Costs: These include paper, printing, and other office supplies.
Benefits
- Control and Customisation: Managing payroll in-house provides greater control and allows for tailored solutions to meet specific business needs.
- Data Security: Keeping data within the organisation can enhance security, provided that proper measures are implemented.
- 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.
Costs
- 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.
- Set-up Costs: There may be initial costs for integrating the service with the existing business systems.
- Additional Charges: Providers might charge extra for bespoke reports, year-end processing, or addressing specific compliance issues.
Benefits
- Expertise and Compliance: Outsourcing firms have the expertise to ensure compliance with all legal obligations, reducing the risk of fines or penalties.
- Time Savings: Outsourcing can free up internal resources, allowing employees to focus on core business functions.
- 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
- 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.
- Complexity of Payroll: Businesses with complex payroll requirements, such as various employee benefits or international operations, might find outsourcing more suitable.
- Budget Constraints: Carefully consider the budget and assess the potential return on investment for both options.
- Data Security Concerns: Evaluate the data security measures of both in-house systems and potential outsourcing providers.
- 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
| Company | Service | Payroll prices |
|---|---|---|
| ADP | Comprehensive payroll and HR solutions | Starts from £50 per month |
| Moorepay | Tailored payroll solutions | From £10 per employee per month |
| Sage Payroll | User-friendly software | Basic plan starts from £7 per month |
| Payescape | Online payroll services | Starts from £2 per employee per month |
| BrightPay | Range of payroll services, including auto-enrolment | Annual license starts at £99 for up to 15 employees |
| IRIS Payroll Solutions | Software and managed services | Starts from £360 per year |
| Ceridian | Comprehensive payroll services, including global solutions | Custom pricing starting at around £50 per month |
| Moneysoft | Affordable and straightforward solutions | Payroll Manager starts at £60 per year |
ADP
- Service: Comprehensive payroll and HR solutions
- Pricing: Starts from £50 per month for basic payroll services for small businesses
- Website: https://uk.adp.com
Moorepay
- Service: Offers tailored payroll solutions for different business sizes
- Pricing: From £10 per employee per month for their cloud-based payroll system
- Website: https://www.moorepay.co.uk
Sage Payroll
- Service: Known for their user-friendly software suitable for both small and large businesses
- Pricing: Their basic plan starts from £7 per month for up to 5 employees
- Website: https://www.sage.com/en-gb/sage-business-cloud/payroll/
Payescape
- 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: https://www.payescape.com
BrightPay
- Service: Provides a range of payroll services, including auto-enrolment
- Pricing: An annual license starts at £99 for up to 15 employees
- Website: https://www.brightpay.co.uk
IRIS Payroll Solutions
- Service: Offers software and managed payroll services
- Pricing: Their bureau software starts from £360 per year
- Website: https://www.iris.co.uk/payroll/
Ceridian
- Service: Comprehensive payroll services including global solutions
- Pricing: Custom pricing based on business needs, starting at around £50 per month
- Website: https://www.ceridian.com/uk
Moneysoft
- Service: Known for affordability and straightforward solutions
- Pricing: Payroll Manager starts at £60 per year for unlimited employees
- Website: https://moneysoft.co.uk
UK payroll software prices
| Software | Payroll prices | Features |
|---|---|---|
| Sage Payroll Software | Starts from £7 per month for up to 5 employees | Cloud-based payroll, auto-enrolment, integration |
| Xero Payroll | Starting from £10 per month | Online payroll with integration into Xero’s accounting software |
| QuickBooks Payroll | Starts at £4 per month plus £1 per employee per month | Full payroll features, including pensions and taxes |
| BrightPay software | Annual license starts at £99 for up to 15 employees | Includes auto-enrolment, CIS submissions |
| IRIS Payroll Business | Starts from £360 per year | Suitable for small to medium-sized businesses |
| Moneysoft Payroll Manager | Starts at £60 per year | Affordable and easy to use |
| Zoho Payroll | Starts at £0.80 per employee per month | Cloud-based with integration to Zoho Books |
| KashFlow Payroll | Starts from £6.50 per month for up to 5 employees | Includes auto-enrolment, pension reporting |
| PayFit | Generally starts at around £30 per month | Automation, real-time calculations |
| FreeAgent | Starts from £14.50 per month | Suitable for freelancers and small businesses |
Sage Payroll Software
- Pricing: Starts from £7 per month for up to 5 employees
- Features: Offers cloud-based payroll, auto-enrolment, and integration with other Sage products
- Website: https://www.sage.com/en-gb/size/small-business/
Xero Payroll
- Pricing: Included with Xero subscriptions, starting from £10 per month
- Features: Online payroll with integration into Xero’s accounting software
- Website: https://www.xero.com/uk/accounting-software/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: https://quickbooks.intuit.com/uk/payroll/
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: https://www.brightpay.co.uk/features/
IRIS Payroll Business
- Pricing: Starts from £360 per year
- Features: Designed for small to medium-sized businesses, offering RTI submissions and pension integration
- Website: https://www.iris.co.uk/shop/iris-payroll-business/
Moneysoft Payroll Manager
- Pricing: Starts at £60 per year for unlimited employees
- Features: Known for affordability and ease of use, suitable for small businesses
- Website: https://moneysoft.co.uk/payroll-manager-overview/
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: https://www.zoho.com/us/payroll/
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: https://www.kashflow.com/payroll/
PayFit
- Pricing: Custom pricing, generally starts at around £30 per month
- Features: Offers automation, real-time calculations, and scalability for growth
- Website: https://payfit.com
FreeAgent
- 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: https://www.freeagent.com/features/payroll/
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
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.
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.
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.
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.
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.
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.
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.
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.
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.
The time saved by outsourcing payroll depends on the existing in-house process. Some businesses report saving several hours per payroll cycle by outsourcing.
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.
Features to consider include tax calculations, auto-enrolment, reporting capabilities, integration with existing systems, user-friendliness, and customer support.
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.
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).
Yes, some payroll providers specialise in specific industries, such as construction or hospitality, and offer features tailored to those sectors.
Check the provider’s security certifications, understand their data handling and storage practices, and ensure they comply with relevant regulations such as GDPR.
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.
Changes in legislation can affect compliance requirements, leading to potential increases in software, training, or consultation costs.
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.
Payroll providers typically calculate tax deductions based on current HMRC guidelines and handle submissions through Real Time Information (RTI) as required by UK law.