If you’re running a small business in the UK and paying even one member of staff, you’ve already discovered that payroll is more involved than it looks. It’s not just calculating how much someone gets paid. It’s PAYE, National Insurance, pension auto-enrolment, RTI submissions to HMRC, statutory pay calculations, and keeping up with every rule change that comes along.
So the question most business owners eventually ask is: should I keep doing this myself, or is outsourcing payroll actually the smarter move?
The honest answer isn’t the same for every business.
What does running payroll in-house actually cost?
Most business owners underestimate the true cost of doing payroll themselves because they only think about the software subscription.
When you keep payroll in-house, you’re actually spending:
Your time. Payroll for small business in the UK typically takes anywhere from 2 to 6 hours per month depending on the size of your team, how complex your pay structure is, and whether you have variable hours, commission, or different pay rates to account for. If your time is worth £50 an hour, that’s £100 to £300 a month before you’ve paid for anything else.
Payroll software. Basic packages start from around £5 to £10 per month for very small teams, but anything with decent functionality – auto-enrolment management, payslip distribution, HMRC filing – tends to sit between £20 and £60 per month.
Training and staying current. Tax codes change. National minimum wage rates increase. Auto-enrolment rules evolve. Keeping on top of all of this is an ongoing time commitment that doesn’t appear on any invoice but absolutely has a cost.
The cost of errors. HMRC can fine you for late or incorrect RTI submissions. These costs are unpredictable and avoidable – but only if everything is done correctly.
What does outsourcing payroll cost in the UK?
Outsourcing payroll costs are more predictable than most people expect. For payroll for small business in the UK, a typical managed payroll service from a qualified accountancy practice charges per employee per month.
As a rough guide:
- 1 to 5 employees: £20 to £60 per month
- 6 to 20 employees: £50 to £150 per month
- 20+ employees: priced on complexity and frequency
What’s included in most outsourcing payroll services:
- Monthly payroll calculations for all employees
- Payslip generation and distribution
- RTI submissions to HMRC
- Pension auto-enrolment calculations and submissions
- Statutory pay calculations (SSP, SMP, SPP)
- P60s at year end
- Handling of PAYE queries and HMRC correspondence
When you compare that against the real in-house cost – your time, your software, and your liability exposure – the numbers often look very different from how they first appeared.
Outsourcing payroll pros and cons
It’s only fair to lay both sides out clearly.
Pros
You get your time back. This is the one that business owners consistently say matters most. Handing it over means that time goes back to you every single month.
You reduce compliance risk. Outsourcing payroll companies handle HMRC submissions, pension filings, and statutory calculations as part of what they do every day. Mistakes are rare, and when queries do come up, your provider deals with them.
Costs become predictable. Instead of a variable time drain with occasional penalty surprises, you have a fixed monthly fee you can plan around.
You’re covered when things change. Whether it’s a new tax year, a change to National Insurance thresholds, or an update to auto-enrolment rules, a good payroll provider picks this up automatically. You won’t need to research it, apply it, or worry whether you’ve got it right.
The cons of outsourcing payroll
You’re reliant on someone else. If your provider needs payroll information from you by a certain date and you don’t send it, things get delayed. Processes work best when both sides are organised.
There’s a handover period. Switching from in-house to outsourced payroll takes a few weeks to set up properly.
If you have a single employee on a straightforward salary with no variables, the time savings may be modest enough that it doesn’t change the calculation significantly.
So which is actually cheaper?
For most small businesses with three or more employees, outsourcing payroll is cheaper when you factor in the full picture – not just software costs, but your time, the risk of errors, and the ongoing effort of staying compliant.
For a business owner paying themselves and two or three employees, the maths usually works out like this. In-house payroll might cost £30 on software but 4 hours of your time. If even half that time could be spent on billable work or business development, the monthly value of those hours almost certainly outweighs an outsourced payroll fee of £40 to £80.
What outsourcing payroll also gives you that’s harder to put a number on: the confidence that it’s done correctly.
Frequently asked questions
Is outsourcing payroll worth it for a small business?
The combination of time saved, compliance assurance, and predictable costs typically outweighs the fee charged by outsourcing payroll companies.
What are the risks of doing payroll in-house?
The main risks are incorrect PAYE or NI calculations, late RTI submissions to HMRC, errors in statutory pay, and non-compliance with pension auto-enrolment rules.
Can I outsource payroll if I only have one employee?
You can, and some business owners do – particularly directors paying themselves a salary through their limited company. Whether it’s worth it depends on how much time you spend on it and how comfortable you are managing HMRC submissions yourself.
Will outsourcing payroll save me money overall?
For most business owners, yes – once you account for the full cost of doing it in-house. The savings aren’t always obvious on paper, but when you include your time, software, and the cost of any errors, outsourcing payroll cost is usually competitive.
What should I look for in outsourcing payroll companies?
Look for a provider that is qualified (ACCA or equivalent), includes RTI submissions and auto-enrolment in their fee, communicates clearly about deadlines, and gives you a fixed monthly price. Avoid anyone who charges extra for every small query or change.
Take payroll off your plate for good
If you’re spending hours every month on payroll that you’d rather be spending on your business, it’s time to look at what outsourcing actually costs – and what it’s actually worth.
At Accountant Required, we offer fully managed payroll for small business across the UK. Fixed monthly pricing. RTI submissions handled. Pension auto-enrolment included.
Stop doing payroll at 11pm on payday.
Get in touch today for a free, no-obligation quote for your business. You’ll know the exact cost upfront – no surprises, no hourly billing, no hidden extras.
Qualified accountants. Fixed prices. Payroll done properly.
