How much does it cost to outsource payroll? Complete 2026 guide

Payroll is no longer just about paying UK employees. Things have changed. Teams are now spread across countries, time zones, and tax systems.  

You might have a developer in India and a sales lead in London - all on the same payroll. Sounds good. Until compliance enters the chat. Imagine local tax rules, statutory benefits, reporting requirements, and getting every payment right, every time!

Miss something, and it’s not just awkward - it can be expensive.

That’s where outsourced payroll services come in. But here’s the catch. The cost of outsourcing payroll services is not fixed. It varies based on how you hire, where your team sits, and how complex your setup is.

So, how much does it cost to outsource payroll in 2026? Let’s break it down properly.

Learn - What is payroll outsourcing?

How much does it cost to outsource payroll? (Quick answer)

If you just want a short answer, here it is. In the UK, payroll outsourcing is typically priced per employee per month (PEPM).

Typical range: £4–£25 per employee per month (PEPM)  

That’s the standard range most businesses will come across.

But here’s the thing - this is only part of the picture. The actual cost can vary depending on how your team is structured (local/remote/a mix of both), where your employees are based, and what level of support you need.

Understanding payroll costs today: Local vs remote teams

UK-only payroll (traditional)

If your team is fully based in the UK, you are dealing with one tax system, one currency, and one set of employment rules.

Most businesses either handle this in-house or use a basic outsourced payroll service to stay compliant with HMRC.

Remote/international payroll

The moment you hire outside the UK, you are suddenly dealing with multiple tax systems, local labour laws, and currency conversions - all at once.

Most businesses at this stage need either a payroll provider to manage multi-country compliance, or an Employer of Record (EOR) to legally employ staff on their behalf.

Payroll pricing models explained

Not all payroll providers charge in the same way. You need to understand the models, so the pricing makes sense.

1. Per employee per month (PEPM)

This is the most common model. You pay a fixed fee for each employee every month.

It works well because it is:

• Predictable  

• Easy to budget  

• Simple to scale as your team grows  

PEPM is ideal if you are building a steady, growing team. Whether your hires are in the UK or spread across countries, the structure stays clean and easy to manage.

2. Per payslip

Here, you pay for each payslip processed.

This model is often used when:

• Team sizes change frequently  

• You work with contractors or flexible roles  

• Payroll is not the same every month  

Per-payslip pricing can suit project-based setups nicely, as you only pay for what is actually processed.

Related read – Latest payroll industry trends

Average payroll outsourcing costs in the UK

Let’s get to the number everyone cares about. What does it actually cost?

In the UK, payroll outsourcing is usually priced per employee per month (PEPM). And while prices vary, there is a fairly reliable range you can work with.

Typical cost range:

• £4-£25 per employee per month (PEPM)  

• £3-£12 per payslip, depending on provider and complexity

Lower end → basic, no-frills payroll  

Higher end → more tailored or bundled services

If your business is UK-only, you will typically sit comfortably within the lower to mid-range.

If you hire remotely outside the UK, the pricing model will be different, too. But here’s the important bit - this does not mean “more expensive.” Many UK businesses are hiring in countries like India and saving up to 70% on costs – while having everything, such as recruitment, compliance, payroll, and HR handled by the service provider.  

We’ll explain this in detail later. Let’s first understand the bigger picture of costs involved.

The real cost of hiring employees (Beyond payroll)

When people ask, “how much does it cost to outsource payroll?”, they are often looking at just one piece of the puzzle. But payroll is only a small part of what you actually spend on an employee.

To see the full picture, you need to look at the entire cost stack.

UK employee cost

Hiring in the UK is familiar, but it still comes with layers of cost beyond salary.

You are typically paying for:

• Salary (the obvious one)  

• Employer National Insurance contributions  

• Payroll admin and compliance  

These costs are predictable, which is helpful. But they do add up quickly, especially as your team grows.

International employee cost

When you hire internationally, the structure looks a little different.

Instead of just payroll, you are accounting for:

• Legal entity setup (if you want to hire directly)  

• Local compliance with labour laws  

• Payroll processing and tax filings in the country  

Now, here’s the important bit. Most businesses don’t handle this themselves. They work with providers who take care of everything in one place, so the process feels just as smooth as hiring locally.

What does this mean?

Payroll is just one part of the cost stack.

The real question is not just “what does payroll cost?” but “what does it cost to hire, manage, and stay compliant?”

And once you look at it that way, outsourcing payroll becomes less of an expense - and more of a way to simplify the entire process.

Payroll outsourcing vs Employer of Record (EOR)

Both involve outsourcing payroll. But they solve very different problems.

Payroll outsourcing

Payroll outsourcing works when you already have a legal entity in place. You remain the employer, and the provider handles the payroll side of things.

That usually includes:

• Processing salaries  

• Generating payslips  

• Handling tax submissions  

• Keeping everything compliant

Think of this as support for your existing setup.

Employer of Record (EOR)

An Employer of Record is different. It is designed for when you want to hire in a country where you do not have a legal entity. The provider becomes the legal employer on paper, while your team works for you day to day.

They handle:

• Hiring and contracts  

• Payroll and payments  

• Local compliance and tax filings  

Think of this as a complete hiring + payroll solution.

If you are exploring remote hiring, you might also want to understand offshoring vs outsourcing vs employer of record (EOR).

Why UK SMEs choose Black Piano

Hiring has changed. Teams are no longer limited by geography. And payroll is no longer just about processing salaries.

Black Piano is built for this new, remote-first way of working. It brings everything together, so you are not juggling multiple providers or systems.

What makes Black Piano different

1. End-to-end EOR model – From recruitment to EOR to payroll to HR, everything is managed under one roof. You do not need to set up entities or worry about local laws.  

2. No upfront recruitment fees - Hiring is part of the service. You are not paying separate agencies or upfront recruitment costs.

3. Real people, not just software - This is not a DIY platform where you are left figuring things out. Real experts handle everything for you.

4. Access to top global talent - You are not limited to one market. Many UK businesses are quietly building high-performing teams in places like India - without the usual hiring friction.

5. Up to 70% cost savings - By hiring globally and streamlining operations, businesses often reduce overall employment costs significantly - without compromising on quality.

6. British-owned, built for UK businesses - You get a partner that understands UK expectations, compliance standards, and how SMEs operate.

7. Simple, transparent pricing – No hidden costs. No surprise fees. Explore our simple pricing model.

Real cost comparison: Traditional payroll outsourcing vs Black Piano EOR model

Imagine you are hiring a mid-level employee.

Scenario 1: Hiring in the UK using payroll outsourcing

Let’s say you offer a £45,000 salary. Sounds straightforward? It isn’t.

Your actual cost looks more like this:

• Salary: £45,000  

• Employer NI (15% from April 2025): ~£6,750  

• Pension contributions (3%): ~£1,350  

• Payroll outsourcing cost: ~£4-£6 PEPM (~£50-£70/year)  

Total real cost: ~£53,000-£54,000 per year

And that’s before you factor in:

• Office costs  

• Equipment  

• Hiring fees  

Scenario 2: Hiring remotely via Black Piano

Now, let’s hire a similar level of talent remotely in India through Black Piano.

Here’s what the cost could look like:

• Salary (local, competitive): £12,000/year  

• Provider fee (covers payroll, compliance, HR): £550 per month + TCOE  

• No entity setup needed  

• No separate payroll outsourcing cost  

Total real cost: ~£18,600 per year (plus local statutory costs)

What’s the difference?

• UK hire (with payroll outsourcing): ~£53,000–£54,000  

• Remote hire (EOR model): ~£18,600  

Potential savings: ~ 65%

What’s really happening here?

You are not cutting corners. You are simply:

• Hiring in a different market  

• Paying fair, local salaries  

• Replacing multiple cost layers with one managed service  

And this is the key shift.

How to choose the right solution for your business

Choose payroll outsourcing if:

• You hire only in the UK  

• You already have a legal entity set up  

• You just need help with payroll, payslips, and compliance

Choose an EOR if:

• You want to hire internationally  

• You do not want to set up a legal entity  

• You want to get started quickly without delays

Final thoughts

Payroll costs are predictable. You can plan for them. You can budget them. And in most cases, they stay fairly stable.

But hiring costs? That’s where things get less predictable. Once you factor in taxes, compliance, admin, and setup, the true cost of employment quickly adds up.

An Employer of Record is not just a payroll solution. It is a smarter way to scale, especially if you are hiring remotely. Everything is handled in one place, so you can grow your team without the usual friction.

If you are looking for a simpler, more cost-effective way to hire globally, Black Piano can help. Contact us today to discuss your requirements.

FAQs

1. What is included in a basic payroll outsourcing service?

A basic payroll outsourcing service includes payslip generation, salary calculations, tax deductions, HMRC submissions, and compliance reporting. It ensures employees are paid correctly and on time without manual admin.

2. Do I need payroll or EOR for remote hiring?

If you already have a legal entity in that country, payroll is enough. If not, you need an EOR to hire legally while they handle compliance, contracts, and payroll.

3. Can payroll providers handle international employees?

Some payroll providers support multi-country payroll. But you must already have legal entities. Without entities, you need an EOR to handle employment, compliance, and payroll in those countries.