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Payroll Outsourcing Cost: The Complete Guide

The most crucial responsibility being a business owner is payroll. Payroll that is accurate and timely increases employee satisfaction while maintaining compliance. Whether you’re a small business with a few workers or a huge organization, payroll may quickly become complicated as you grow. If this sounds like you and you’re thinking about outsourcing payroll, you’re undoubtedly wondering how much it costs.

The short answer is that it is really affordable. While costs vary based on a number of factors, you should budget between $200 and $250 per employee every year. Here is the breakdown of what is needed to decide the payroll:

  • Approaches to payroll pricing
  • Factors that cause increasing payroll costs
  • How to save money on outsourcing

What is the Structure of Payroll Pricing?

While there are many various methods for top payroll outsourcing companies in India to charge clients for their services, you’ll most likely encounter three of them. Most fee structures just cover payroll processing; extra services that may be beneficial to business owners are a separate expense that we’ll discuss later.

1. Per Frequency of Paying

The most frequent way payroll businesses charge for their services is by charging per pay frequency. That implies you’ll be charged for the amount of employees you pay each pay period, regardless of how often you pay them (weekly, bi-weekly, semi-monthly, or monthly). The costs are usually made up of a basic price plus a charge for each salaried staff.

This procedure works great for the organizations that possess consistent payrolls with some minor modifications or extra payroll runs. If this sounds like you, individual employee rates will range from $1.50 to $5 per employee, with basic fees every pay period ranging from $20 to $70. So, based on a $3 per check cost and a $35 basic fee, you’d be paying around $140 per month.

2. Based on Per Employee Per Month (PEPM)

This pricing system is gaining popularity since it frequently saves company’s money. Instead of paying costs for each payroll, PEPM allows you to conduct an infinite number of payrolls for a single monthly base charge plus a fixed rate for the number of employees you pay each month.

PEPM is a suitable solution for businesses that may need to do additional payroll runs for bonuses or commissions. A PEPM pricing solution also makes planning for the outsourced payroll cost relatively straightforward for organizations with a consistent number of employees paid each month.
With this option, you’d pay a basic price of approximately $75 and around $6 per employee, for a total monthly charge of nearly $135.

3. In Case of  Fixed Pricing

In certain cases, particularly with Do-It-Yourself (DIY) online solutions, a payroll firm will offer a monthly fixed rate that covers a specific number of employees or a range of employees, such as $65 for 1-9 employees, $125 for 10-20 employees, and so on.

No matter how frequently you pay your employees each month, you’ll only be charged that one cost for payroll processing. Be aware that certain organizations may limit the amount of employees for whom you may conduct payroll, so this may not be a viable solution for many businesses. However, if your company is small and your staff count is consistent, outsourcing payroll might be a simpler and less expensive option.


What Factors Influence the Payroll Cost?

payroll outsourcing cost

When calculating the payroll outsourcing cost for your company, it’s critical to know exactly what’s included. This helps you to conduct realistic comparisons across firms and get a good idea of how much you’ll pay.
In many circumstances, the reported expenses are only for payroll processing. Any extra items or services you desire may incur a fee. Consider it similar to a restaurant’s a la carte menu. This is how things become complicated.

The following are some examples of services that firms may add or consider “extras” with payroll:

  • Tax filing (which might get expensive depending on how many states you operate in)
  • Interface for general ledger
  • Pay alternatives for employees include direct deposit, pay cards, and paper checks.
  • Charges for courier and delivery
  • Examine the filling and sealing
  • 01(k) and workers’ compensation file transfers that are customized
  • Reporting at the quarter and year-end

2. Affordable Care Act (ACA) Reporting

One or more of these services may be included in the base charge of some payroll businesses. For example, as part of normal base charge, Complete Payroll Solutions includes per-pay period and quarterly tax filing, employee pay choices, and check filling and sealing. However, most add-ons require a separate cost or the purchase of a package that combines multiple popular services.

These extras can add up to hundreds of dollars and boost your total expenditures, depending on which services you choose to outsource and which you manage yourself. To avoid any unpleasant surprises, inquire what is and is not included in the price quotation.

You may also pay extra if you opt to use other services that payroll providers frequently offer to improve the effectiveness of your HR responsibilities, such as:

  • Regularity and attendance
  • Human resource Information System
  • Tracking of the applicant and recruitment
  • Enrollment Perks
  • Overall Performance management
  • Onboarding

In most cases, you’ll pay a distinct pricing structure for each of these options in addition to your payroll processing expenses.


Is it Possible to Reduce Payroll Outsourcing Costs?

Given the wide range of price, you might be asking if there are any strategies to save payroll expenditures. Do-it-yourself (DIY) online payroll software has grown in popularity as people look for less priced choices. On a PEPM basis, these DIY solutions can save you up to 50%.

As an employer your responsibilities come in the processing of payroll—payroll detail entry, personnel management, and report generation. You also need to save on these elements. These solutions are also paperless, so you save money on check delivery by paying your staff via alternative ways like direct deposit.

If you’re comfortable with web- or mobile-based systems and minimum engagement with your provider, the DIY option can be a great way to save money for many firms. It’s also useful if your payroll company’s hours of operation make dealing with them during regular business hours difficult, and you’d rather do payroll before or after they open.

It’s also crucial to realize that this technique will need you to give up some items.

Many software solutions, for example, do not provide support or help as part of the service. So, if you desire a connection with your vendor or the possibility of call in/call out service, a payroll firm that enables you to just record your employees’ hours & a better  fit is that the payroll service providers handle the rest of the things. 
Check to discover whether a payroll provider offers bundled alternatives or packages to save money on your total payroll expenditures. As previously mentioned, several suppliers offer additional services to assist you manage your staff, such as benefits and HR advice. When you use your supplier for various services, you’ll often get a discount.


How Much Will My Total Cost Be?

Now you can see that a variety of factors put an impact on the payroll outsourcing cost. While the basic rule of thumb is that it will cost roughly $200-$250 per employee each year, your overall cost will be determined by the breadth of your vendor’s participation.

When compared to the hazards of doing it yourself, such as mistakes, late payments, or compliance difficulties, this is a minor amount to pay. In reality, the cost of payroll outsourcing is likely to be less per pay run than the expense of correcting errors or paying fines for a compliance violation.

There are several things to consider when outsourcing your payroll, and cost is just one of them. Before choosing the international payroll management services provider, get to in-depthly about the services of the payroll service  provider first and then pick the best one.

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