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Payroll Services Cost For Small Business

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  • 03-11-2021
Payroll Services Cost For Small Business

Are you considering payroll services? We look at how much do payroll services cost for a small business in the UK. Find out if you could benefit.

What costs are associated with payroll?

Your business will make several budgeting decisions when it comes to payroll outsourcing. If you're wondering, "how much does payroll processing cost?" here are some important aspects you must consider first:

Payroll service: You will need to pay a company to distribute paychecks, keep financial records, and record your employee's earnings within the fiscal year. Reputable, top payroll providers will cost more but will make fewer mistakes and will overall offer a smoother experience for your business.

Setup:For larger companies, the setup can be an important budgeting decision. For example, if your company has 250 employees, it will be a complex task migrating the data for all of them.

Pension plan auto-enrolment: Your payroll processor maybe include auto-enrolment for pension plans, which often leads to higher fees.

HR integration: Similar to the setup, HR integration may be complex and require a lot of work initially.

Typical Payroll service prices

The cost of payroll management services depends largely on your business's size. 

For a small business (one with around five employees), you can expect to pay around £4 per employee a month. As your business grows, the pricing can increase up to around £12 per employee per month.

In addition, payroll costs will also depend on the type of payroll processing service you require. 

TYPICAL PAYROLL SERVICE PRICES

An important budgeting option for your business is how hands-on you wish to be with managing your company's payroll. The cost of a payroll service is typically calculated per employee and is paid either weekly or monthly. 

For business owners that pay a regular and consistent double-figures salary to several employees, you'll likely qualify as a medium-sized business and will be able to negotiate a rate with your payroll provider.  

If your wage structure is unconventional, such as one based on commissions and overtime, the monthly salary for your employees likely differ month to month. With the added complexity of your business's payroll, you may be expected to pay a premium.  

Your business can save if you compare payroll service prices and types to determine which is most suitable for your business needs. 

Here are some basic examples to outline the differences in different payroll types:

Basic payroll

Basic payrolls are suitable for small businesses. They will only include the necessities, and your business won't be paying extra for any advanced features. The cost for a basic payroll is £5 per employee, paid weekly or monthly.

Mid-level payroll 

As your business grows, you may require some extra features to accommodate the more advanced wage structure. Mid-level payrolls are suitable for medium-sized businesses that don't have a dedicated team for payroll processing. 

Your business can expect to pay £8 per employee (weekly or monthly) for this payroll type.

Advanced payroll

Large businesses will require advanced payroll solutions to deal with the high number of employees as well as the intricacies involved in the wage structure.

Advanced payroll is the best payroll option for large businesses as the solutions will include valuable features to automate and manage your workforce's payslips more effectively.

An advanced payroll will typically cost £12 per employee, paid monthly.

What are the different types of payroll services?

Fully outsourced

If you fully outsource your payroll, an external company will take over and manage all aspects of it. They will keep track of salaries, submit information to HMRC and will send out payslips. They may also do your end of year accounts, depending on your plan.

Partially managed 

By having your payroll partially managed, you will be outsourcing most of your day-to-day obligations whilst still maintaining a certain level of control. The payroll company will deal with areas such as BACs and enrolment, whilst you deal with your aspects like gross to net calculations.  

Software

If you are looking to keep full control over your payroll, you may want to invest in professional payroll software. Payroll software is useful as it removes much of the administrative burden. For example, you can set up auto-enrolment, send information to HMRC automatically, and send out employee payslips with minimal effort. 

Payroll software is typically less expensive than outsourcing your payroll processing, as your company is still doing the manual work involved. However, this means you take full responsibility for your tax filings, and you must stay up to date with changing legislation and regulations.

Payroll prices based on service

Fully-managed payroll prices

Fully managed payroll services are advantageous for medium to large businesses as they come with the most features and provide the highest level of customer support online. Despite being expensive, full payroll processing is certainly cost-effective. 

The outsourced payroll processor will offer regular helpdesk support, so they can quickly and effectively answer any questions you might have. Their dedicated payroll team will offer the utmost highest quality of advice to customers relating to the ever-changing UK tax landscape, and they will ensure you face no implications involving HMRC. 

They will offer complete transparency with their operations so you can easily see what your money is being spent on, giving you peace of mind. You can expect to pay £10-£12 per employee a month for fully-managed outsourced payroll.

How Much Do Payroll Services Cost For Small Business? UK

Part-managed payroll prices

Some businesses will already have some form of HR or financial infrastructure, so a fully managed service may not be necessary. Instead, your business can have some aspects of the payroll processing handled in-house and more tedious or complicated aspects taken care of externally. 

For example, a business may have an irregular, ever-changing wage pattern due to commissions and bonuses, and as such, would like to handle employee salaries in-house whilst the outsourced team handles everything else. Part-managed payroll services will usually cost only £5 per employee a month.

Pay-as-you-go payroll prices  

Businesses may face huge troughs and peaks in the size of their workforce, so a pay-as-you-go system would be suitable for them. An example of a business that may require this system is a construction company, as they might have to expand their workforce for a few months to complete a project in time. 

Despite complications, your employees must be paid accurately and in time during this period, and HMRC is not likely to be patient and sympathetic when it comes to financial contract inaccuracies caused by complicated circumstances.

Could I manage payroll in-house?

Some businesses decide to handle their payroll processing in-house. For smaller businesses, this isn't a bad idea as with fewer employees, the job isn't too complex. However, an account manager at the business will have to spend hours doing this work and ensuring it has no mistakes, which can not only be time-consuming but can become overwhelming and stressful. 

By hiring someone to do your payroll in-house, it solves some of the problems but not all. If your payroll head is ill or has to spend a significant amount of time away from your business for whatever reason, you will have no payroll service, and your business may struggle to organise a solution in time. 

What are the different types of payroll services?

One of the main benefits of an in-house payroll is that your business has complete control over it. However, it is typically more expensive and more time-consuming. Furthermore, the job requires payroll expertise, as the person handling it must be wary of recent changes to legislation and regulations.

If your in-house payroll head is not well experienced, they are likely to make errors that will get you in trouble with HMRC and can interrupt regular employee payslip schedules.


Are you looking for  small business payroll services in Redcar, Middlesbrough And North Yorkshire? Contact our team for help and advice with accounting and finance.