If you run a small business, you’ll know that there’s more to payroll than just making sure your employees get paid — quite a lot more, actually.
From calculating deductions, and reporting to HMRC, to managing pensions and employee benefits, the list goes on and on. And one thing’s for sure, running payroll goes far beyond simply transferring money at the end of the month.
You might already be thinking about outsourcing payroll to avoid the complexities and costs of managing it in-house. But if you’re torn between in-house payroll or payroll outsourcing you’ve come to the right place.
Let’s take a look at the average cost of payroll services for small business, so you can decide where to go from there.
Start by asking yourself what type of payroll service you’re looking for
You have a couple of options to choose from: fully managed payroll and part managed payroll. And that’s right, you’ve guessed it, the choice between the two will depend on your specific needs, structure and budget.
Now, if you’re a business owner with limited time or expertise in payroll, a full-managed service might be the best option. This means the payroll provider will handle all aspects of your payroll, from calculating employee pay to dealing with HMRC. It’s like having a dedicated payroll professional on your team — without having to hire an in-house specialist.
On the other hand, if you have some experience with payroll and want more control over the process, a part-managed service might be a good fit. This allows you to handle certain tasks, such as data entry or attendance tracking, while the provider takes care of the more complex aspects like tax calculations.
Is it a good idea to keep your small business payroll in-house?
While there’s nothing stopping you from keeping your payroll in-house, it can prove more costly than outsourcing.
Generally speaking, outsourcing your small business payroll is more cost-effective than hiring a dedicated payroll employee(s), especially if you have a headcount which is below 200.
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What’s the average cost of payroll services for small business in the UK?
The average cost of payroll services for small business typically ranges from £4 to £10 per employee, per month, for basic payroll processing. But realistically, how much you’ll spend will depend on multiple factors:
The size of your business
The size of your business definitely plays a role in how much you’ll spend on payroll services. It’s a bit like buying in bulk: the more you buy, the cheaper the unit price becomes. This is known as economies of scale.
The same goes for payroll. Generally, companies with more employees get better deals on per-employee payslips. So, if you have a bigger team, you might be able to negotiate a lower cost per head.
The structure of your business
If you keep things simple with a small team, your payroll costs will likely stay lower and more manageable. But if you have a mix of full-time, part-time, and freelance workers – each having different payroll requirements – your monthly costs will add up fast.
Which services are included
If you’re just looking for basic payroll processing, the cost will be on the lower end. But if you want extra services, such as providing P45 and P60 reports, or calculating pensionable earnings, the price will go up.
You’ll find that some providers even offer HR services or help with recruitment, which can be convenient, but inevitably come at an extra cost.
The type of service
When you first look at it, part-managed payroll might seem like the cheaper choice because you’re doing some of the work yourself, but it can actually end up costing more in the long run. That’s because you still have to spend time and resources handling certain tasks (like data entry), and mistakes can lead to penalties or extra fees.
On the other hand, fully managed payroll may come with a slightly higher price tag, but at least it’s completely out of your hands.
Are there typically any hidden costs?
Yes, that’s why it’s important to ask your potential payroll provider upfront whether additional costs could pop up.
Some examples include:
- Employee training: some providers may charge a fee for training your employees on how to use their payroll software.
- Customer support: while this is usually included, there might be additional charges for premium support services.
- Integration with other systems: if you need to integrate the payroll software with other systems, such as your accounting software or HR system, there may be additional integration fees.
Are you looking for fully managed or co-managed payroll?
Our payroll solutions are flexible and customisable, so we can build a service that works for your small business.
You can learn more about our payroll and HR services for small businesses, or if you already know what you want, book a demo with one of our payroll experts today.
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