Cost of Payroll Outsourcing Services in the UK: Is It Worth It?

Payroll is one of the most vital functions in any business. Employees must be paid correctly, on time, and in compliance with HMRC legislation. However, handling payroll in-house can be complex, time-consuming, and expensive—especially with the constant updates to tax laws, National Insurance thresholds, pension rules, and employment regulations.

This is why many businesses in the UK are turning to payroll outsourcing services. But the big question remains: What do payroll outsourcing services actually cost—and is it worth it?

In this article, we will explore the typical costs involved, what affects pricing, the benefits compared to in-house payroll, and whether outsourcing delivers a strong return on investment. We will also explain how professional providers like The Infinity Group support UK businesses with reliable, compliant, and cost-effective payroll solutions.

What Are Payroll Outsourcing Services?

Payroll outsourcing refers to handing over the management of payroll processes to a specialist provider. This can include:

• Calculating employee pay
• Handling tax deductions and National Insurance
• Managing CIS payroll (for construction)
• Processing pensions and auto-enrolment
• Producing payslips and reports
• Submitting RTI (Real Time Information) to HMRC
• Ensuring compliance with legislation

Rather than hiring an internal payroll team or using generic software, businesses rely on experts to manage the entire payroll cycle.

How Much Do Payroll Outsourcing Services Cost in the UK?

Payroll outsourcing costs can vary depending on business size and requirements. However, most UK providers follow similar pricing structures.

1. Per Employee Per Month

This is the most common pricing model.

• Small businesses (1–20 employees): £4–£8 per employee per month
• Medium businesses (21–100 employees): £3–£6 per employee per month
• Large businesses (100+ employees): Custom pricing, often £2–£5 per employee

2. Base Monthly Fee

Some providers charge a flat monthly base fee plus a per-employee cost.
Example: £20–£50 per month + £3 per employee

3. One-Off Setup Fee

This covers initial data migration and system setup. Setup fees can range from £50 to £300, depending on complexity.

4. Additional Services

Some services may incur extra costs, such as:

Factors That Influence the Cost of Payroll Outsourcing

Several variables affect how much you will pay:

1. Number of Employees

More employees = lower price per head (economies of scale).

2. Payroll Frequency

Weekly payroll is more expensive than monthly because it requires more processing.

3. Industry Requirements

Sectors like construction that require CIS payroll add complexity and cost.

4. Level of Service Needed

Basic payroll vs. fully managed services with HR, compliance support, and reporting.

5. Technology Integration

If payroll is integrated with time tracking or accounting software, it may increase the price—but improves efficiency.

Cost of In-House Payroll vs Outsourcing Payroll

To decide if outsourcing is worth it, compare the REAL cost of managing payroll internally.

In-House Payroll Costs Include:

• Payroll software licence (£200–£1,000 per year)
• Staff salary or payroll administrator (£25,000–£35,000+ per year)
• Training on changing regulations
• Time spent on manual tasks
• Risk of costly mistakes or fines

Even for small businesses, in-house payroll can easily cost thousands per year, not including errors or compliance risks.

Outsourced Payroll Cost Example:

Let’s say you have 20 employees.

• £5 per employee per month = £100/month
• That’s £1,200 per year, plus minor extras.

This is a fraction of the cost of hiring a payroll specialist or purchasing advanced software.

Hidden Costs of In-House Payroll That Outsourcing Eliminates

Even if software seems affordable, in-house payroll has hidden costs:

Time lost to payroll tasks
Dealing with HMRC queries
Keeping up with tax law changes
Correcting errors
Penalties for non-compliance (e.g., late RTI filings)

Outsourcing eliminates these risks by placing payroll in the hands of trained professionals.

Benefits of Outsourcing Payroll Services

Cost savings are just one advantage. Outsourcing also offers several strategic benefits:

1. Accurate and Compliant Payroll

Providers stay updated with HMRC laws, tax thresholds, CIS rules, and pension regulations. This reduces the risk of errors and fines.

2. Saves Time and Resources

Business owners and managers spend less time on admin and more time on growth.

3. Access to Payroll Experts

Instead of relying on one internal employee, you gain access to a full team of payroll professionals.

4. Scalable for Growth

As your business expands, the payroll service can grow with you—without needing new software or staff.

5. Enhanced Data Security

Reputable providers use secure, encrypted systems to protect sensitive payroll data.

6. Supports Remote and Hybrid Work

Modern payroll providers offer cloud-based access, making payroll easy from anywhere.

When Might In-House Payroll Still Work?

In-house payroll may be manageable if:

• You have fewer than 5 employees
• You use simple payroll software
• Your payroll is monthly
• You have no CIS or complex deductions
• You understand HMRC rules

But once the business grows or legislation becomes more complex, outsourcing becomes more cost-effective and less risky.

Is Outsourcing Payroll Worth It Financially?

Let’s evaluate the value:

Conclusion: For small and medium UK businesses, outsourcing payroll typically saves both money and time—and dramatically reduces risk.

How The Infinity Group Helps UK Businesses Save Money on Payroll

The Infinity Group specialises in payroll outsourcing services tailored to UK businesses, with a strong focus on CIS payroll, construction payroll, umbrella payroll, and HMRC compliance.

Here’s why many companies choose The Infinity Group:

Transparent and competitive pricing
CIS and construction payroll expertise
Full compliance with HMRC and RTI
Seamless setup and support
Scalable solutions for growing businesses
Dedicated payroll specialists
Accurate and timely processing every pay cycle

Whether you’re a small contractor or a large organisation, The Infinity Group helps reduce administrative costs, eliminate payroll stress, and ensure full compliance.

How to Decide If Payroll Outsourcing Is Right for Your Business

Ask yourself the following questions:

• Do you spend too much time on payroll?
• Are you unsure about compliance or CIS rules?
• Have you ever received HMRC penalties?
• Do you plan to grow your business?
• Do you want predictable costs?
• Would you prefer experts to manage payroll?

If you answered “yes” to most of these, outsourcing payroll will likely save you money and improve efficiency.

Final Verdict: Is It Worth It?

Yes—payroll outsourcing is worth it for most UK businesses.
When you compare the real cost of time, software, staff, and compliance risk, outsourcing offers a more reliable, efficient, and affordable solution.

It is especially valuable for industries with complex payroll requirements, such as construction and CIS. With professional support from trusted providers like The Infinity Group, businesses can focus on growth while payroll is handled accurately and compliantly.

Ready to Outsource Payroll?

If you want to reduce costs, avoid errors, and streamline your payroll processes, now is the perfect time to explore outsourcing.

The Infinity Group can provide a tailored payroll solution that fits your business size, industry, and budget—while ensuring full HMRC compliance.