Payroll outsourcing involves the transfer of an organisation's payroll processing and compliance responsibilities to a third-party payroll provider. This solution is usually chosen by small businesses & enterprise organisations alike that lack the resources to manage their payroll in-house.
Beyond that, payroll outsourcing has many other benefits, including cost savings, increased efficiency, and peace of mind. But how much does payroll outsourcing cost? The answer depends on several factors, such as the size of your business, the services you require and the software you choose to implement.
So, in this blog post, we'll explore how much you can expect to pay when outsourcing payroll services in Australia.
What Does It Mean to Outsource Your Payroll Services?
When most business owners hear the term "outsourcing," they think of sending work to another country to save money on labour costs – but this is offshoring.
Outsourcing can simply refer to hiring another company to handle specific business functions within your own country.
One such function is payroll.
Outsourcing payroll can take many forms, but the basic idea is to hire third-party payroll service providers to handle all aspects of employee pay and benefits. This can include tasks such as processing payroll, paying employees, issuing payslips, calculating taxes, and managing employee entitlements and allowances as proposed by the applicable award or enterprise agreement.
Outsourcing to a payroll company can free up time and resources better spent on other areas of your business. In addition, you can avoid the hassle and expense of maintaining your own in-house payroll department.
When performed correctly, payroll outsourcing can be a cost-effective way to improve your bottom line.
What Can You Expect to Pay When You Outsource to Payroll Companies?
The cost of an outsourced payroll service depends on many factors, including the number of employees in your business, the pay frequency (weekly, bi-weekly, or monthly), and the exact services you require.
Generally speaking, outsourced payroll service firms will charge a monthly base rate in addition to a per-employee fee.
The base rate usually covers the cost of processing payroll and filing taxes, while the per-employee fee covers the cost of issuing payslips, for example. You can also add on other features, such as payroll software or time and attendance software.
After researching a range of payroll outsourcing solutions across Australia, the average price is anywhere between $5 and $10 per payslip per month to get started, all at different subscription frequencies.
This price range provides a good starting point for businesses to compare the costs of different services. It is, however, important to consider other factors when choosing a payroll processing solution, such as the features and flexibility of the service.
To give you an example, Pay Cat offers two packages for their outsourced payroll services:
- Standard Package: the fee structure works out to be $6.00 per payslip per month. It includes services such as wage and superannuation calculations, payroll tax reporting, workers compensation reporting (quarterly) and other external lodgements.
- Premium Package: the fee structure is fixed-pricing based on your workforce size, starting at $3,000 for 1-50 employees, including services such as those in the standard package, plus employee onboarding and terminations, bulk transactions and ad hoc pay runs, and direct employee support channels.
Find out more about our outsourced payroll pricing on the Pay Cat website.
Of course, there’s no one-size-fits-all approach, and the cost will differ among payroll companies, but this should help you consider your options.
Worked Example: Indy (Pty) Ltd
Indy (Pty) Ltd is a home decor company with 42 employees. Currently, one person is processing their payroll in-house, and they have a manual timesheet process coupled with accounting software with a built-in payroll function.
The company processes payrolls fortnightly, and the payroll officer’s weekly commitment to payroll processing is one day per week.
We’ll use Pay Cat’s standard package coupled with Employment Hero Payroll (online payroll software), which is an additional $6.50 per active employee per month.
Outsourcing Payroll to Pay Cat
Pay Cat standard outsourcing: 42 employees x $6.50 x 2 month payslips per month = $546/ month
Employment Hero Payroll Licence: $6.50 per month x 42 = $273/ month
= $819/month in total
In-House Payroll
$76,000 (estimated annual salary of a payroll officer) + 10.5% super/260 (business days per year) =
$323 (cost per day) * (1 day per week *4.37 weeks per month)
= $1411.51/ month
The payroll software (also Employment Hero Payroll) will cost roughly an additional $273.
Now, this example only included basic payroll outsourcing costs and doesn’t consider the cost of aspects like employee onboarding. Still, as you can see, the cost of running an in-house payroll department can be significant. When you factor in the cost of salaries, benefits, and overheads, the price tag can grow even higher.
In many cases, outsourcing your payroll can be a significantly cheaper option.
Pay Cat has a long history of providing high-quality payroll services to businesses of all sizes. As an industry leader, we have the experience and expertise to handle your most crucial reporting and processing tasks.
We will work with you to ensure that your pay cycles are on track and in line with your operations. Our expert payroll service providers also ensure absolute compliance across the board.
With Pay Cat, you can be confident that your payroll needs are in good hands at the most competitive payroll services cost.
Contact us today to learn more about our payroll services and how we can help you streamline your payroll process.
When you outsource your payroll and seek payroll tax assistance, you can save a considerable amount of money. In-house processing of payrolls requires a dedicated staff, expensive software, and other tailored resources. =
Dedicated payroll companies already have these resources in place, so they can pass on the savings to their clients. In addition, outsourcing to payroll companies can often uncover discounts for volume business, making them an even more cost-effective solution
When you factor in all the real costs associated with in-house payroll processing, it is clear that outsourcing is, in many cases, the best option for businesses of all sizes.
