Crunching the Numbers: Understanding Payroll Outsourcing Costs

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Understanding Payroll Outsourcing Costs

Outsourcing payroll management is a popular option for businesses of all sizes, as it can help to save time, reduce the risk of errors, and ensure compliance with tax regulations. However, one of the main concerns for businesses considering payroll services is the cost involved. 

In this blog post, we will explore the average costs of payroll outsourcing, how pricing is structured, and the factors that can increase the price.

Industry Average Costs for Payroll Outsourcing

The cost of online payroll services varies depending on the size of the business, the complexity of the payroll, and the services required. However, as a general rule, the industry average for payroll outsourcing costs ranges from $50 to $200 monthly for small businesses and can go up to $5,000 or more per month for large corporations. 

It’s important to note that these are approximate figures and can differ based on various factors, such as the provider, location, and specific requirements of the business. In Guhroo, price ranges from $99 per month for simple payroll, timekeeping, and tax filing services to $99 per employee per month (PEPM), encompassing HR audit, exclusive 401k, and health benefits, as well as a dedicated HR business partner and online training modules. 

Payroll Pricing Structure

Payroll service providers typically offer different pricing structures, which could include the following:

  • Per-employee pricing: In this model, the cost is based on the number of employees in the organization. The more employees you have, the higher the cost will be. This pricing structure is usually more suitable for small businesses.
  • Flat-fee pricing: Some providers charge a flat fee for their services, regardless of the number of employees or the complexity of the payroll. This can be beneficial for businesses with a stable workforce and predictable payroll needs.
  • Tiered pricing: With tiered pricing, payroll outsourcing costs are based on different service levels. Basic services, such as payroll processing and tax filing, will be available at a lower cost, while additional services, such as HR support and employee benefits administration, will be available at higher price tiers.
  • Customized pricing: Some payroll providers offer customized pricing based on the specific needs of the business. This can be a good option for companies with unique payroll requirements or those that need a tailored solution.
  • Bundled pricing: Other payroll providers offer packages that include additional services, such as HR management, time and attendance tracking, and benefits administration. This can be a cost-effective solution for businesses looking for an all-in-one solution, but it’s essential to ensure you’re not paying for services you don’t need.

Factors That Lead to Price Increases

Several factors can contribute to higher payroll outsourcing costs, including:

  • Number of employees: As mentioned earlier, many payroll providers charge based on the number of employees. As your workforce grows, so will the cost of outsourcing your payroll.
  • Complexity of payroll: If your business has a complex payroll with multiple pay rates, bonuses, commissions, or overtime calculations, the cost of outsourcing may be higher, as it requires more time and effort to process.
  • Frequency of payroll processing: The more frequently you need to process payroll (e.g., weekly vs. monthly), the higher the cost of outsourcing, as it requires more work from the payroll provider.
  • Additional services: If you require other services beyond basic payroll processing and tax filing, such as HR support, employee benefits administration, or time and attendance tracking, the cost will be higher.
  • Compliance requirements: Businesses operating in highly regulated industries or with complex tax requirements may incur higher costs for payroll outsourcing, as the provider will need to spend more time ensuring compliance.
  • Provider experience and reputation: Higher-quality payroll providers with a strong reputation and extensive experience may charge more for their services. While this may result in higher upfront costs, it can often lead to long-term savings due to reduced errors and improved compliance.


Outsourced payroll services can be cost-effective for businesses looking to save time and ensure compliance with labor laws. Understanding the industry averages, pricing structures, and factors affecting the price will help you decide when selecting a payroll outsourcing provider. 

It’s essential to compare different online payroll providers and consider the specific services and level of support your business requires to find the best fit for your needs.

Are you in search of a reliable HR payroll management system for your company? guHRoo is here to help. We provide the necessary services to cater to all your HR requirements. If you need expert payroll assistance, contact us now for a free demo!


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