The useful starting point
Compare like-for-like responsibilities and total cost. A smaller headline price can still leave substantial work with your team.
1. Start with your current internal effort
Identify everyone who spends time on payroll, including HR, finance and managers who collect or approve inputs. Estimate the proportion of their time devoted to preparation, chasing information, review and resolving queries.
Use a consistent time period for the estimate. If a team member does other work, allocate only the relevant share of their cost. This avoids treating an entire salary as a cost that would disappear if payroll were outsourced.
Put it into practice
- List the recurring payroll activities and people involved.
- Estimate payroll time rather than assuming full-time allocation.
- Separate work that will remain in-house under any service model.
2. Add systems, specialist support and rework
Include relevant software subscriptions, support arrangements and specialist work that belongs in your comparison. Keep one-off transition or implementation costs separate from recurring annual costs.
Record correction or rework costs only where you have a reasonable basis for the estimate. Avoid double counting an activity already included in your team’s time. The purpose is to understand your process, not inflate an expected saving.
Put it into practice
- Use annual values for subscriptions and external support.
- Separate one-time setup costs from recurring charges.
- Document assumptions and remove duplicated costs.
3. Compare the service scope behind each proposal
Ask what the recurring fee covers: payroll preparation, input coordination, reports, employee queries, statutory preparation, filings and year-end work may be priced differently. Confirm any headcount minimums, location assumptions and charges for out-of-cycle runs.
Clarify taxes, payment terms and the way fees change as your headcount grows. A useful quotation should make responsibilities and exclusions visible so you can compare it with your actual internal process.
Put it into practice
- Confirm included outputs and approval responsibilities.
- Ask about setup, extra runs, historical corrections and exit support.
- Check pricing assumptions for headcount, entities and locations.
4. Use a consistent calculation
For a simple baseline, add allocated annual team cost, annual payroll systems cost, external support and evidenced rework cost. Divide this total by 12 and by an appropriate employee count to estimate cost per employee per month.
Our website calculator uses that simple arithmetic. Its team-cost input assumes the number of people entered are allocated full-time to payroll; adjust that number to reflect your actual allocation. The result is an internal estimate, not a Payroll Advisor quote or a promise of savings.
Put it into practice
- Keep all cost inputs on the same annual basis.
- Use a representative headcount and note seasonal changes.
- Review retained internal costs when comparing an outsourcing proposal.
5. Assess the working relationship too
Price does not show how quickly an exception will be explained or how clearly a report will support approval. Discuss the proposed calendar, named contacts, escalation routes and change-handling process alongside the fee.
Ask for a quotation based on your own headcount, locations, inputs and desired outputs. That creates a more useful decision than comparing generic per-employee figures that assume different responsibilities.
Put it into practice
- Agree what a completed monthly service looks like.
- Confirm how exceptions and scope changes will be handled.
- Compare scope, retained work and total cost together.
This is general process guidance for business planning. Applicable obligations depend on your organisation, employees and locations. Confirm current requirements with your responsible payroll, tax or legal professional. The final service agreement defines Payroll Advisor’s scope and responsibilities.
What would a clearer cycle look like for you?
Tell us about your team, locations and current payroll arrangement. You do not need to share employee records to request a quotation.
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