Payroll Outsourcing Services in the UK: How Much Do They Cost?

Payroll outsourcing gained immense momentum in the UK accounting sector in the aftermath of the global coronavirus pandemic. In lieu of the furlough scheme, the need for expert third-party professionals to handle and execute end-to-end payroll grew enormously, thus putting payroll outsourcing services in huge demand.

As more and more accountancy practices in the UK turn to outsourcing their payroll, accountants have one question at the very top of their minds: How much do UK payroll outsourcing services cost?

There are a number of outsourcing providers in the market providing payroll services for accountants and small businesses. However, most of them do not display fixed pricing on their website as it is customised for each client based on their specific requirements.

Let’s look at the factors that determine and affect the costs of payroll outsourcing services in the UK.

Payroll Outsourcing Models

The prices for payroll vary depending on the type of client payroll you are outsourcing. Generally, there are two pricing models:

1. Same Salary Model

This is appropriate for simple payroll with the same salary details/amount every month.

2. Variable Salary Model

This is designed for more complex payroll requirements, such as where your client has different types of employees (part-time/full-time), changing pay frequency (for example, weekly/fortnightly), or variable pay amounts.

Besides, some outsourcing providers also charge based on an FTE or per-payslip requirement.

1. FTE Model

You get a dedicated full-time employee working exclusively on your payroll needs. This model is particularly suitable for a long-term association.

2. Per-Payslip Model

In this model, the outsourcing company charges you for each payslip that they process. This model qualifies for a volume-based discount and is suitable for a temporary/short-term requirement.

Before you decide to go for payroll outsourcing services and begin looking for a service provider, understand your client’s payroll requirements thoroughly. If you have been handling their payroll for some time now, you must already know their needs. If you have landed a new client or recently added payroll as an add-on service to your portfolio, speak to your client to understand their exact requirements in detail.

Cost of Payroll Outsourcing Services

To make it easy for you to understand the overall payroll outsourcing costs, we have listed individual elements below:

Setup Cost

The fee for setting up payroll with a supplier will vary according to your accounting firm’s size and requirements. For a new company set-up, typical charges start at £10.00 per company as a one-off cost.

Running Payroll / Per Payslip Costs

Another important factor determining the final pricing of payroll outsourcing services is the per-payslip cost. This cost varies depending on the number of payslips your accounting firm processes. Typically, you could expect to pay between £4 to £6 per payslip. Many outsourcing companies generally offer a discount when there are more payslips to process each month.

Auto-Enrolment

Several accountants providing payroll services to clients also offer Auto-Enrolment services. If you are not one of them, this is an excellent opportunity to start offering it with minimal overhead investment. Outsourcing Auto-Enrolment costs are made up of three components:

• Initial review stage – This generally ranges from £15 to £25 per client
• Registration stage – You could expect this to range from £25 to £35 per client up to a maximum of 10 employees
• Compliance – On an average, you could be paying £0.75 per pay run per employee

Year-End Filing

An important component of UK payroll outsourcing is year-end filing. HMRC has made the year-end filings very simple for each time payroll is processed. However, the primary concern is to ensure you submit your final FPS and/or EPS on time. You could expect to pay £20.00 per EYU (£10.00 for client set-up and £10.00 for processing).

How Can You Determine if Payroll Outsourcing is Appropriate for Your Accountancy Practice?

It may not always be easy to determine whether to outsource your payroll needs. But here are some statistics to help.

In 2021, QXAS surveyed over 16 accounting firm owners to understand the trends in payroll outsourcing. The survey titled Payroll Outsourcing Trends 2021 brought some interesting facts to light. Of the total firms surveyed, 87% of the respondents confirmed that they outsource payroll for its financial as well as strategic benefits.

In addition, 81% of the firms that outsourced payroll saw a spike in their profit margins ranging between 5% to 40%.

Here is a quick checklist to help determine if your firm needs to outsource its payroll.

Compliance

• Do you constantly monitor evolving payroll legislation and adjust your processes to ensure compliance?
• Are you up to date with all payroll-related legislation, such as auto-enrolment?

Administration

• Do you always process payroll on time with 100% accuracy to avoid costly financial penalties for errors or non-compliance?
• Are you always able to answer payroll-related enquiries from your clients immediately and accurately?
• Are you putting valuable, strategic practice goals on hold to complete repetitive administrative tasks?
• Do you have the time to invest your skills and talents fully in your practice’s strategic goals?

If any of the above questions left you worrying about your firm’s development in the right direction, it might be time to begin looking for a firm providing payroll services for accountants.

QXAS is a leading payroll outsourcing provider in the UK with a vast experience of 15+ years and a dedicated team of trained payroll specialists. To help accountants evaluate our payroll services risk-free, we offer a free trial and complete data protection guarantee. We usually provide the following reports: payslips, FPS, P30, and P32.

To learn more about the free trial or explore our services in further detail, please get in touch with us and one of our team members will be happy to call you back.

Profitable Payroll

To make the maximum profits from payroll in the post-pandemic world, moving to an outsourced model is essential. It is a straightforward way to turn a low-margin service into something that churns a profit while also minimising the time you spend on it and the investment you need in terms of software and hiring specialist staff. Learn how to make payroll profitable for your practice using the free guide below.