Payroll outsourcing: How much does it cost?

Payroll is undoubtedly one of the key business processes that define the success and growth of a business. Accountants and businesses need support so that they can add value to their client’s businesses. And when you are busy expanding your clientele, your payroll gets increasingly complex. Payroll Outsourcing is the best option.

Without a proper payroll function, your business may find itself on the wrong side of the law. Having an unreliable payroll system also finds yourself losing employees suddenly as a result of late fees and untimely payroll. 

A good payroll system should possess the following features:

• It should be cloud-based
• It should be fully managed by the provider
• Helpdesk support should be available for customers
• It should have automated compliance built into it. 

When your business is looking for payroll outsourcing services, the question that often comes to mind is, “How much does a  payroll outsourcing cost?’

Different companies have different pay cycles for their employees. A majority of companies pay their employees fortnightly. In Calculating the average cost of payslips, The Australian Payroll Association includes salary cost, technical cost, and other costs. 

Salary costs include payroll staff wages and salaries. It also includes superannuation for these payroll staff. The technical costs comprise employee self-service software, time and attendance, and service costs. The other costs include payroll training costs, payroll recruitment costs, payroll conference costs, travel, payroll stationery cost, and payroll consulting cost. 

The award-winning Australian Payroll Association conducts an annual Payroll Benchmarking report which is exclusive to Australian employers.

Why outsource payroll?

Managing payroll in-house can be a complicated and tedious process. Additionally, there are legal requirements that mean there are chances of getting things wrong. For this reason, many businesses leave the job in the hands of experts. It gives them more time to focus on the core objectives of the business and provides peace of mind. Payroll providers are able to perform the payroll process is a relatively low cost as they use software to automate many of the tasks involved.  

Outsourcing payroll process can help you with the following:

• Payroll reporting
• Internal payroll audit
• Payment management
• New joiners and leavers
• Payroll calculation and processing
• Communication and processing the required documentation 

Following are the costs associated with payroll outsourcing:

When it comes to payroll outsourcing, a couple of factors determine the payroll costs:

• Payroll service:

The main cost is associated with payroll service itself that includes distributing paychecks, keeping financial records, recording an employee’s total earnings within the fiscal year. 

• Setup:

There is also set up costs associated that accounts for the cost required to set up your companies payroll system

• Pension plan auto-enrolment:

Sometimes, auto-enrolment for pension plans is rolled into the cost of outsourcing payroll service which leads to higher fees. 

• HR integration:

There may be a cost for HR integration as well. 

Payroll outsourcing cost is different for different companies. Outsourcing payroll can save you both time and money. Payroll is a time-consuming and complicated task especially when you have several employees working for you. Hence, many businesses choose to outsource payroll services to a third-party provider. 

What is payroll outsourcing?

Payroll outsourcing refers to managing your payroll by the hands of expert professionals. Payroll providers can do everything from deducting and calculating pay to transferring money into your employee’s bank account and filing payroll taxes. They provide customized services based on individual business needs. 

What’s the average cost for payroll outsourcing?

The average cost for payroll outsourcing is categorized into different company sizes based on The Australian Payroll Association (APA) report:

Companies with Less Than 200 Employees

Companies in this category had an average salary cost of $31.58, an average technical cost of $2.68, an average cost of others of $2.05 making the total cost of payroll per payslip $36.30. The top performer in this category had an average cost of $15.39, less than half of the category average.

Companies with Between 200 and 499 Employees

The average salary cost was $13.37, the average technical cost was $2.20, and the average cost of others was $0.61, making the total cost of a payslip in this category $16.18.The top performer in the category spent $6.65 on average per payslip.

Companies with between 500 and 1,999 Employees

The average salary cost was $7.92, the average technical cost was $1.37, and the average cost of others was $0.55, totaling $9.83. The lowest cost per payslip in this category was $4.22.

Companies with Between 2,000 and 9,999 Employees

The average salary cost was $4.46, the average technical cost was $1.34, and the average cost of others was $0.51. This made the total cost per payslip for this category $6.31. The best-performing company in this category spent $2.79 per payslip.

Companies with More Than 10,000 Employees

The average salary cost was $3.55, the average technical cost was $0.23, and the average cost of others was $0.03, making the total $3.80. The best-performing company in this category spent only 0.09 per payslip.

As a result, the bigger the size of the company, the cheaper will be the outsourcing payroll process. Payroll outsourcing is better and cheaper compared to in-house payroll processes.