Payroll is a huge element in any organisation’s daily life. There’s lots of different ways to ‘do’ payroll, but more and more organisations are looking at payroll outsourcing. And for good reason.
It provides you with a smart cloud-based portal for storing and managing all your data and access to a dedicated team of payroll professionals who do the difficult work for you. And one of the biggest questions is: how much does payroll outsourcing cost? Let’s find out!
How much does payroll outsourcing cost?
The simple answer is that there’s no definitive cost associated to payroll outsourcing. There will be a variety of different costs associated with payroll services, and these will vary from provider to provider—including those that might seem ‘hidden’ from the offset!
But we can help you with what to look out for so you can make an informed decision when choosing a new payroll partner. So, let’s cover the most common payroll cost structures and any additional costs you need to be aware of.
Price per payslip or PEPM
Payroll outsourcing costs largely depend on the size of your organisation, as most payroll services work on a price per payslip basis. But there are economies of scale involved. So, the bigger your organisation, the greater your discounted rate.
Let’s look at a little example of how that could work. Say £6 is the average charge per payslip for a company with 1-25 employees (not forgetting a minimum charge is often in play, mostly effecting smaller organisations). This could potentially drop to £4.25 for a 501-1000 strong workforce. Or even as little as £3 if you employ over 1000 people.
There’s an acronym that you might see crop up as you research the costs of payroll services, and that’s PEPM (pronounced pep-M). It stands for ‘Per Employee Per Month’.
Everything revolves around numbers of employees and which actions are required for each of these employees, each month. Simply put, the more employees, the lower the PEPM cost.
If you pay employees weekly you’ll likely pay considerably more because instead of economies of scale, you’re literally scaling up your payroll needs —from one pay run per month to four or five.
Some small organisations opt for a fixed price per month. Which is great when things stay the same month to month. But if you’re on- and off- boarding, dealing with bonuses, or complex pay structures including commissions, this just won’t work.
Additional payroll outsourcing costs
There are some additional services which will come at an extra charge.
- Self-service: Lots of companies now choose an employee self-service option. This in itself might carry an extra cost depending on your provider, but it means that employees can see their digital payslips and payroll documents, along with updating their personal information and requesting leave.
- Additional service bolt-ons: Bolt-ons like timesheet management, expenses and employee payments can all incur extra payroll costs. The good news is that they’ll generally be charged using the same economies of scale.
- Pensions: Auto-enrolment may or may not be included in your PEPM fee, so make sure you have total clarity here.
Set up costs
Now let’s talk about implementing your new payroll service. That can also carry a cost. You’ll also need to consider parallel processing as you embed your new system, as well as paying for any training you’ll need to get to grips with the ins and outs of your new payroll process.
Some providers charge their set-up costs on a per employee basis. For example, if you have 50 employees at a signing on fee of £10 per head, that’s £500.
When you choose to outsource, ask your provider. It’s a one-off fee, but you want to know what you’re looking at up-front.
Finally, while you’re in the process of making changes, you might want to think about integrating your payroll and HR solutions—which might also come at an extra cost.
While it adds to your payroll outsourcing costs, it will save time and free you up to focus on the parts of the job you love. There’s an initial outlay, but the long-term results are worth their weight in integration costs.
What are the costs of keeping payroll in-house?
While payroll outsourcing isn’t free, it’s essential to consider in-house payroll costs. Let’s take a look at the main two in-house payroll costs:
- Cost of skilled in-house payroll team: Maintaining an in-house payroll team requires recruiting, training, and retaining skilled professionals. This can be a costly process, including salaries, benefits, and ongoing training and development expenses.
- Mistakes and errors: In-house payroll processing is susceptible to human errors. These errors can include mistakes in payroll calculations, late or incorrect payments to employees, and errors in reporting to HMRC. Such mistakes can lead to compliance issues, employee dissatisfaction, and penalties.
So, payroll outsourcing costs aren’t as significant as they might seem at first glance. By choosing to outsource, you can actually reduce the costs associated with your payroll:
- Dedicated outsourced team: Outsourcing payroll services means having access to a dedicated team of experts who specialise in payroll processing. They are less likely to make errors and can provide more accurate and timely payroll services.
- Cost-efficiency: Outsourcing can be more cost-efficient as it eliminates the overhead costs of maintaining an in-house team. With outsourcing, you typically pay a fixed fee or cost per payslip, making it easier to budget for payroll expenses.
- Reduced risk: By outsourcing, you reduce the risk associated with in-house payroll processing. When mistakes occur, the responsibility often falls on the outsourcing provider rather than your organisation, which can protect you from costly liabilities.
If you want a full refresher of what’s involved in payroll outsourcing services, check out: The Ultimate Guide to Payroll Outsourcing.
The payroll outsourcing costs are worth it
So, now you know what to look for in your payroll outsourcing costs, are you ready for the next stage of your search? We’d love to hear about your payroll needs.
In recent years we’ve invested over 3 million pounds into Cintra Cloud, our cloud-based payroll portal. We constantly evaluate and innovate, and this has delivered one of the most evolved systems available.
We also work hard to make sure that we have an incredible team of payroll experts working with our clients to ensure that every payroll is effective, efficient and fully compliant.
One thing we love to do is talk about how we can help. Why not book a demo to see Cintra Cloud and what it can do for your team?
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