search
Most accounting firms are re-imagining how they deliver payroll in 2025. It’s a complex, high-effort service with a relatively low return on investment. Between chasing deadlines, managing compliance updates, and fielding client queries, payroll consumes significant time and resources without adding much to the bottom line.
Yet many firms still rely on in-house teams to run it. That means taking on the full cost of recruitment, salaries, training, software, hardware, holiday cover, and compliance risk, all for a service that often just breaks even.
This blog unpacks the real cost of running payroll internally in 2025. We’ll break down every major expense involved, from hiring and infrastructure to hidden operational overheads, using current UK salary and recruitment data. Then, we’ll assess how outsourced payroll compares, both in terms of cost and capacity, giving you a clear view of what it’s really costing to keep payroll in-house.
If you’re still running payroll the traditional way, this comparison might make you reconsider.
Keeping payroll delivery in-house gives you control but it comes at a significant cost. And when you break down the numbers, it’s easy to see why more firms are choosing to outsource. Here’s what you’re really paying to keep payroll internal in 2025.
According to Indeed (June 2025):
If your firm handles high-volume or complex payrolls, you’ll likely need someone experienced, pushing that figure closer to £40,000–£45,000.
Most firms turn to recruitment agencies to find payroll staff, and that’s not cheap:
And that’s per hire. If someone leaves within 12–18 months (as many payroll professionals do), you’re simply repeating this cost.
Salary isn’t the only cost. You also pay:
All in, these add roughly 30–35% to the base salary.
Total cost of employment for a £38,000 specialist:
£38,000 + £13,300 (35%) = £51,300 per year
Let’s round it out:
£5,000+ per year per payroll team member
Payroll can’t wait if your in-house staff are away:
None of this is billable, but it’s all coming out of your pocket.
| Cost Component | Estimated Annual Cost |
|---|---|
| Base salary | £38,000 |
| Employer NI, pension, benefits | £13,300 |
| Recruitment fees (spread across 2 years) | £4,000 |
| Software, IT, and training | £5,000 |
| Total | £60,300 |
Multiply this by 2–3 team members, and you’re spending well over £120,000–£180,000/year to keep payroll in-house – and that’s assuming zero turnover and no urgent hiring needs.
Outsourced payroll providers typically offer fixed per‑employee or per‑payrun fees with inflation/indexation built-in. Crucially, they absorb all recruitment, training, infrastructure, absence, and compliance burden, letting your firm streamline operations.
Let’s say your firm handles 50 payroll clients with 20 employees each (1,000 payslips/month):
That’s for 1,000 payslips. The same workload that might require 2–3 full-time payroll staff in-house.
| Component | In-House (2 FTEs) | Outsourced Provider |
|---|---|---|
| Total Annual Cost | £120,000+ | £90,000 |
| Staff Management | Yes | No |
| Recruitment/Turnover Risk | High | None |
| Training/Software | Ongoing expense | Included |
| Cover for Absences | Your responsibility | Provider handles |
| Scalability | Costly | Flexible |
The numbers don’t lie: retaining payroll in-house is an expensive, inflexible model. Outsourcing, on the other hand, eliminates hidden costs, reduces risk, and positions your firm to thrive in 2025 and beyond.
This isn’t theory; it’s where the industry is headed. The real cost of not outsourcing is not just budget drain, but opportunity cost. The stronger your payroll offering, the more you can invest in growing advisory and strategic services, delivering greater value to clients and future-proofing your firm.
Ready to save costs and grow your payroll function at the same time? Call us at + 44 208 146 0808 or email us at [email protected]. We also provide a no-obligation trial to help you assess our service risk-free before making any commitments.
Mitul is a highly experienced UK Payroll professional with over 14 years of expertise in payroll processing, compliance, client management, and team leadership. He is recognised for ensuring seamless compliance with UK payroll regulations and building strong client relationships through the delivery of accurate, high-quality payroll services.
Unauthorized copying or plagiarism of our content is a violation of intellectual property rights. We take such matters seriously and will pursue legal action to protect our original work. Anyone found engaging in such activities will be held accountable under applicable laws.
Explore outsourcing solutions, request a free trial or discuss your practice’s needs with our expert consultants.
Book a Virtual Meeting 
Book an In-person Meeting