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How much does outsourced payroll cost?

Time needed: 2 days, 3 hours and 30 minutes.

As a Payroll Bureau, a very common question we get asked is “How much does outsourced payroll cost?”. This generally gets asked during the sales process as potential clients want some type of price indication.
So, the best person to answer this question is our very own Sales Manager, Mr Dave Williams. View Dave’s response below:
This question is often one of the first questions potential customers ask. I always mention to clients that there’s a few factors to consider before a bespoke quotation can be provided. These are the factors or steps I discuss with potential clients:

  1. Step 1: Identify the number of employees

    We need to know how many employees are being paid per payrun in order to gauge how complex your payroll could be. Some companies could have 1 to 10 employees with few complexities while others have hundreds of employees who all have different rates of pay and accompanying schemes. We apply a discount scheme for companies that are growing. Therefore, the more employees the smaller the cost per employee.

    Number of employees

  2. Step 2: Identify the complexity of your payroll

    We must discuss the current complexity of your payroll in order to see what we can improve. Establishing the outsourced payroll cost depends on this factor. In our experience, companies can either have a straightforward or a very complex payroll. A straightforward payroll, for example, could consist of a few static Directors who’s pay never changes. A complex payroll, for example, could consist of lots of departments and cost codes, who are hourly paid, that need payment on different days throughout the month.
    Each business is different. Therefore, it’s important to understand each company, their rules and current schemes to comfortably run their payroll. We must also establish the best way for clients to collate this information because payroll data must be securely transferred every month between the client and payroll provider. In other words, the complexity of your payroll will have an impact on the cost.

    two people working out the complexity of your payroll on a laptop

  3. Step 3: What will the frequency of pay be?

    Determining the frequency of pay is critical when providing a cost because it’ll determine whether we run 12, 24 or 52 pay runs per year. Typically, staff that are paid weekly tend to have hourly pay rates. Companies can ask for a very quick turnaround on their payroll in order to get staff paid promptly. For instance, clients may need a 1-hour payroll turnaround on a Friday afternoon so that staff get paid in the same week that they’ve worked. There’s a big workload difference between running payroll 12 or 52 times a year and pricing would be affected.
      12 24 56 times per year, Frequency of pay

  4. Step 4: How are payroll changes being provided?

    We must ascertain the quickest, most secure and efficient way of getting payroll changes. For example, hours worked, starters, leavers, bonuses, salary adjustments and absence information must be sent by the client to us. The most efficient way to retrieve, as well as deliver, this information is by using software that can produce a spreadsheet. This is the quickest way to get accurate information transferred from the client to the payroll provider.
    man submitting Payroll changes on software

  5. Step 5: Value added services

    Auto enrolment is a value added service which ensures you are compliant with the Pension Regulator. In addition, I investigate what bespoke management reports are required. Reports such as Nominal Journals or General Ledgers are generally requested however there are many alternative options available. These reports can also be imported straight into the client’s accounting or finance software. Processing of P11D’s, if you have any taxable expenses that need processing and reporting, is also part of the value added services.
    Man looking at bespoke reporting on cellphone and laptop

In conclusion, your outsourced payroll cost will differ depending on your business requirements. In a bespoke quotation, there’s no set fee however the steps highlighted above will help you understand how your payroll cost is calculated.

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