How much does outsourcing payroll cost?
UK pricing in 2026/27: what fully managed and part-managed services charge per employee, the add-ons that inflate the headline rate, and when outsourcing beats doing it yourself.
The headline numbers
Most UK businesses pay between £4.00 and £10.00 per employee per month for a fully managed payroll service, or around £2.00 to £3.00 for a part-managed bureau service where you keep some of the work. Quotes are also expressed per payslip (£3.00 to £8.00 each) – which matters enormously if you pay weekly, since 52 payslips a year cost far more to process than 12.
| Headcount | Fully managed (monthly pay) | Per year, approx. |
|---|---|---|
| 5 employees | £20 – £50 /month | £240 – £600 |
| 10 employees | £40 – £100 /month | £480 – £1,200 |
| 25 employees | £100 – £250 /month | £1,200 – £3,000 |
| 50 employees | £200 – £500 /month | £2,400 – £6,000 |
Per-head rates fall as headcount rises, and very small payrolls often pay a fixed monthly minimum instead, which pushes the cost per head up. Weekly pay runs typically add 30 to 50 percent.
The add-ons to budget for
- Setup / onboarding: £100 to £1,000 one-off, depending on size and data quality (often waived in negotiation).
- Auto-enrolment pension administration: £1.50 to £2.50 per employee per month, plus a setup fee of £100 to £250.
- Starters and leavers: some providers charge £5 to £15 per movement – painful for high-turnover sectors like hospitality and recruitment.
- Year-end processing: often an extra fee of roughly one month’s service charge for P60s and final submissions.
- P11Ds: typically £10 to £25 per employee with simple benefits.
- CIS subcontractor processing: around £10 to £25 per subcontractor per month – see construction payroll.
- Off-cycle re-runs: £50 or more when a correction is needed after the deadline.
Outsourcing vs in-house: the real comparison
The alternative is payroll software plus someone’s time. A UK payroll administrator’s salary averages around £37,000 (more in London), so dedicated in-house payroll only makes sense at scale. For a 10-person business, even £1,200 a year of fully managed service is a fraction of the cost of the staff hours, software, training and error risk it replaces – especially after April 2026’s day-one SSP and minimum wage changes raised the compliance stakes. Model your own numbers in the payroll cost calculator.