Two payroll quotes can look almost identical on paper and differ by more than 300% over a year. The reason is nearly always pay frequency — and whether the provider charges per employee per month or per payslip.
UK payroll bureaux use one of two headline pricing models. Neither is dishonest. But they are not directly comparable, and a quote in one model cannot be judged against a quote in the other without doing the arithmetic yourself.
The two pricing models
| Per employee per month | Per payslip | |
|---|---|---|
| What triggers the charge | Each active employee on the scheme in a month | Each payslip produced |
| Effect of weekly pay | None — the price is per employee | Roughly 4.3× the monthly cost |
| Effect of a mid-month leaver | Usually a full month’s charge | Charged for the payslips actually issued |
| Predictability | High — headcount × rate | Varies with pay runs, bonuses, corrections |
| Typical presentation | “From £X per employee per month” | “From £X per payslip” |
SmartFiling’s published payroll price is from £15 per employee per month, including auto-enrolment, payslips, P60s and year-end returns. When you compare that against any other quote, check first whether the other figure is per employee or per payslip, and whether it includes VAT.
Why per-payslip pricing punishes weekly payroll
This is the single arithmetic that most cost comparisons miss. Take ten employees and change nothing except how often you pay them.
| Pay frequency | Pay runs a year | Payslips a year (10 staff) |
|---|---|---|
| Monthly | 12 | 120 |
| 4-weekly | 13 | 130 |
| Fortnightly | 26 | 260 |
| Weekly | 52 | 520 |
At an illustrative £4 per payslip, that is £480 a year on monthly pay and £2,080 a year on weekly pay — for exactly the same ten people doing exactly the same jobs. The rate did not change. The volume did.
Construction, hospitality, care and agency businesses run weekly payroll far more often than average. If that is you, a per-payslip quote needs multiplying by 52 before you compare it to anything.
The reverse also applies. A business with ten monthly-paid staff and very stable headcount may well find per-payslip pricing cheaper than a per-employee-per-month rate. The point is not that one model wins. It is that you cannot know which wins for you until you count payslips.
What is usually not in the headline price
The headline rate covers the pay run. A lot of payroll work is not the pay run. Ask about every line below before you sign — these are the items that turn a cheap quote into an expensive one.
| Add-on | Why it costs extra |
|---|---|
| Scheme setup and migration | Loading year-to-date figures mid-year is manual work |
| Auto-enrolment assessment and pension file upload | A separate submission to a separate provider each pay period |
| Pension scheme setup | One-off, if you do not already have a qualifying scheme |
| Starters and leavers | P45s, starter checklists, final pay calculations |
| Statutory pay | SMP, SPP, SSP and the recovery claim through the EPS |
| Year-end | Final FPS, P60s by 31 May |
| P11D and P11D(b) | Benefits reporting by 6 July, Class 1A by 22 July |
| CIS monthly returns | A separate return by the 19th, on top of payroll |
| Re-runs and corrections | Caused by late information, not by the bureau |
| Director-only schemes | Sometimes priced as a flat annual fee rather than per employee |
A quote that bundles auto-enrolment, payslips, P60s and year-end returns into the per-employee rate is doing more work for the money than one that does not. That is the comparison worth making, not the headline number.
Never compare an inclusive price with an exclusive one
Most UK accountancy and payroll providers quote plus VAT. A minority quote inclusive. A £15 + VAT price is £18 with VAT at 20%; a £15 inclusive price is £12.50 before VAT. That is a 44% gap between two quotes that both say “£15”.
If your business is VAT registered you will recover the VAT anyway, so the ex-VAT figure is your real cost. If you are not VAT registered — plenty of small employers are not — the inclusive figure is what leaves your bank account. Establish which basis every quote is on before you build a comparison.
What actually drives your price
- Headcount. The main variable in every model.
- Pay frequency. The main variable in per-payslip models, and often ignored.
- Auto-enrolment. Assessment, postponement, opt-outs, re-enrolment every three years and a pension file every pay period.
- Statutory pay. Maternity, paternity and sick pay each require calculation, and recovery has to be claimed through an Employer Payment Summary.
- Benefits in kind. P11D and P11D(b), or payrolled benefits reported every period.
- CIS. A construction business needs monthly CIS returns and subcontractor verification alongside payroll.
- Churn. High-turnover sectors generate starter and leaver work continuously.
The DIY comparison nobody runs properly
Running payroll yourself is not free, and the cheap part is the software. Accounting packages start from £16 a month excluding VAT for Xero and £33 a month excluding VAT for FreeAgent — and FreeAgent is free for NatWest, RBS and Ulster Bank business account holders. HMRC’s Basic PAYE Tools is free but limited.
The expensive part is getting it wrong. HMRC charges a monthly penalty for late Real Time Information filing, scaled by employer size:
| Number of employees | Monthly penalty |
|---|---|
| 1 to 9 | £100 |
| 10 to 49 | £200 |
| 50 to 249 | £300 |
| 250 or more | £400 |
Penalty notices are issued quarterly. There are three let-offs worth knowing: HMRC will not charge a penalty where the Full Payment Submission is late but every payment on it is within three days of payday, where you are a new employer and sent your first FPS within 30 days of paying an employee, or for your first failure in the tax year. That last concession does not apply to annual schemes.
The penalty is flat within each band while an outsourced fee is per head, so the smaller the payroll the harder the penalty bites relative to the fee. A single missed month on a one-director scheme is £100 — nearly seven months of fees at £15 per employee per month. On fifteen employees the same missed month is £200 against £225 of monthly fees, so the penalty on its own no longer covers the cost of outsourcing. That is the honest comparison: not software cost against bureau cost, but software cost plus your time plus your error risk against bureau cost.
How to compare quotes properly
- Count your payslips a year, not your employees.
- Convert every quote to the same VAT basis.
- Convert every quote to an annual figure.
- List the add-ons each quote includes rather than charges for.
- Ask what happens in a month where someone joins, leaves and goes on maternity leave at once.
Do that and the cheap quote is often not the cheap one.
Frequently asked questions
How much does payroll outsourcing cost in the UK?
It depends on the pricing model and your pay frequency. Providers charge either per employee per month or per payslip. SmartFiling publishes RTI payroll from £15 per employee per month, including auto-enrolment, payslips, P60s and year-end returns. Always check whether a competing quote is per employee or per payslip, and whether it includes VAT.
Is per-payslip or per-employee-per-month pricing cheaper?
Per-employee-per-month pricing is usually cheaper for weekly or fortnightly payrolls, because the charge does not multiply with pay runs. Ten employees paid weekly generate 520 payslips a year against 120 on monthly pay. Per-payslip pricing can be cheaper for a small, stable, monthly-paid team.
What is usually charged as an extra on top of the payroll price?
Common extras are scheme setup, pension scheme setup and auto-enrolment file uploads, starters and leavers, statutory maternity and sick pay calculations, year-end P60s, P11D and P11D(b) benefits reporting, CIS monthly returns, and re-runs caused by late information.
Is it cheaper to run payroll myself?
Only if you never miss a deadline. Accounting software starts from £16 a month excluding VAT, and HMRC’s Basic PAYE Tools is free. But HMRC’s late filing penalty is monthly and scales by employer size: £100 for 1 to 9 employees, £200 for 10 to 49, £300 for 50 to 249 and £400 for 250 or more.
Do I have to run payroll if I am the only director?
If you pay yourself a salary at or above £96 a week, or you receive expenses and benefits, or you have had another job in the tax year, you must register for PAYE and report through Real Time Information — even if there is no tax to pay. A single-director company can register as an annual scheme if the salary is paid once a year.
Getting a straight answer on price
The useful question is not “what do you charge” but “what will this cost me over twelve months, on my pay frequency, with my headcount, including everything I actually need”.
SmartFiling runs RTI payroll from £15 per employee per month, including auto-enrolment, payslips, P60s and year-end returns. Fixed fee, entirely online, reviewed by an ICAEW Chartered Accountant.
