If you’re a UK employer, it’s important to be aware of the various costs associated with running a payroll. There are a range of expenses to consider, from software and services costs, to National Insurance contributions and Employers’ Liability Insurance
In this guide, we’ll provide an overview of the different types of payroll costs you might encounter, as well as tips on how to reduce them. So whether you’re just starting out, or you’re looking for ways to cut your payroll budget, read on for helpful advice.
What are employer costs for payroll?
When it comes to payroll, there are a few different types of costs that employers need to be aware of. These include:
|Type of cost||What is it?||Average cost|
|The cost of employing someone||This includes their salary, as well as any other benefits they might receive (such as pension contributions or private healthcare)||Salary + Benefits costs|
|The cost of payroll software||If you choose to run your payroll in-house, you’ll need to purchase specialised payroll software. This can be a significant upfront cost, although there are some free and open-source options available||£30 – £2000 per month depending on number of employees|
|The cost of outsourced payroll services||Many businesses choose to outsource their payroll function to a specialist provider. This can be a more cost-effective option than running payroll in-house, but you’ll need to factor in the cost of the service itself||£30 – £2000 per month depending on number of employees|
|Employer’s National Insurance costs||Every UK employer needs to pay National Insurance contributions on their employees’ behalf. The amount you’ll need to pay will depend on each employee’s salary||Percentage of salary, use our calculator|
|Cost of Employer’s Insurance||This is a legal requirement for all UK businesses, and protects you in the event that an employee is injured or becomes ill as a result of their work||£10 – £500 per month depending on number of employees|
|Cost of employing payroll staff to run your payroll||If you decide to run your payroll in-house, you’ll need to employ someone specifically to do this. This will add to your overall payroll costs||Around £20,000 per year for a junior employee|
Other hidden costs
In addition to the direct costs mentioned above, there are also a number of indirect costs associated with running a payroll. These can include things like:
- The cost of complying with employment legislation: this includes complying with things like the National Minimum Wage, as well as any specific industry regulations.
- The cost of employee training: if you need to train your employees on how to use payroll software, or on any new employment legislation, this will add to your costs.
- The cost of processing payroll data: if you choose to run your payroll in-house, you’ll need to invest in some sort of data storage solution (such as a server or cloud-based storage). This will add to your overall costs.
How to reduce payroll costs
There are a few different ways you can reduce your payroll costs. These include:
|Consideration||Good to know…|
|Automating your payroll||If you use payroll software, you can set it up to run automatically, which will save you time and money|
|Outsourcing your payroll||As we mentioned above, this can be a more cost-effective option than running payroll in-house|
|Reducing the number of employees||If you’re able to reduce the number of employees on your payroll, this will obviously have a direct impact on your costs|
Additional options include:
- Offering salary sacrifice schemes
- Asking employees to work overtime during busy periods
- Reducing the number of hours worked by employees
How to budget payroll costs
The best way to budget for payroll costs is to track your expenses over time. This will help you to see where your money is going, and identify any areas where you could make savings. You can do this by setting up a simple spreadsheet, or by using specialised software such as Xero or QuickBooks.
This will depend on the size of your business and the number of employees you have. Generally, you can expect to pay between £100 and £300 per month for outsourced payroll services.
Payroll costs are any costs related to the administration of your payroll, including salaries, benefits, and National Insurance contributions.
This will depend on the size and complexity of your business. Generally speaking, you can expect to pay between £50 and £2000 per month in payroll costs.
Generally speaking, the costs of running payroll can be broken down into four main categories: software, staff, insurance, and taxes.
Payroll software can range in price from a few hundred pounds to a few thousand, depending on the features you need. If you have a small business with only a handful of employees, you may be able to get by with a less expensive option.
There are a number of factors that will affect how much you pay for payroll services. The size of your business, the number of employees you have, and the frequency of your payroll will all play a role in determining the cost. Per employee, you should budget anywhere from £30 to £60 per month for payroll services. For a small business with only a handful of employees, this can add up to a significant expense.
This will depend on the size and complexity of your business. Generally speaking, you can expect to pay between £50 and £2000 per month in payroll costs. However, there are a number of providers that offer discounts for small businesses. You can also find free payroll software solutions, which may be a good option for very small businesses.
Payroll software can be a significant cost for UK employers, particularly small businesses. The cost of payroll software will vary depending on the number of employees you have and the features you need. However, expect to pay at least £500 per year for a basic payroll package.
The cost of putting someone on payroll includes the cost of the employee’s salary, any taxes and deductions, and the employer’s costs for National Insurance and pension contributions. Employers also have to pay for payroll software or services, and there may be other hidden costs. An average cost to put a person onto payroll is about £30-£40 per month.
As you can see, there are a number of factors that will impact the cost of running a payroll. The best way to get an accurate picture of your costs is to track your expenses over time, and to compare quotes from different providers. This will help you to find the most cost-effective solution for your business.