Payroll companies guide – prices, risks, and how to choose a payroll provider

Last checked and updated on 20 May 2022

A payroll company will provide clients with a number of different services related to their payroll needs.

This can include making sure your workers are paid correctly and on time, cutting checks, directly depositing funds, and processing employee hours.

This can help you to unlock much greater efficiency at your business while ensuring compliance and employee satisfaction.

With that being said, continue reading to discover our complete guide on hiring a payroll company and why they could do much more than simply pay your employees.

Payroll outsourcing companies vs. payroll software companies

Payroll processing is a vital function for all companies, and so it is vital that you locate the best channel for handling your payroll. One of the key decisions you need to make is whether to hire a payroll service or implement payroll software.

When you use the services of a payroll company, they will use their own payroll system software and personnel to handle all things related to your payroll and you could even integrate HR solutions with some.

You’ll likely be able to tailor the service to your business’ needs too. However, if you simply use payroll software, you still have control and you can integrate this with HR software too. However, you will need to make sure you use the software effectively.

To help you get a better understanding, let’s take a look at the pros and cons for both options:

Payroll Services – ProsPayroll Services – ConsPayroll Software – ProsPayroll Software – Cons
Enhanced assistanceMore expensiveLong-term vendor relationshipsDIY responsibility for mistakes
More accuracyFinding the right provider could be a hassleEasy accessThe learning curve
Can be personalised to your business More internal control such as pensions auto enrolment and more 
 Queries dealt with Easier to make changes 

When it comes to deciding between the two for UK payroll requirements, you need to think about your business’ needs. If you have a team in-house that feels competent handling the payroll and using such software, you may only need to go down the software route.

However, if you want to take the entire weight off your shoulders, it makes sense to look for a third-party provider who can provide you with payroll services and who has payroll experts to cover everything you need.

Local payroll companies

When you are looking for a payroll company that offer fully managed payroll services, one thing you need to consider is whether or not you should go for a local payroll company. A local payroll company is simply a third-party that is based in your local area, for example, the same city or the same county.

While it is not a necessity to go down this route, it can be beneficial. We’ll talk you through the pros and cons so you can get a better understanding. Firstly, a lot of people want to know whether local payroll companies are cheaper than national ones. There does not tend to be much differentiation in cost, aside from the fact that when you go nationwide, you have a bigger collection of companies to choose from and so you can look for the most cost-efficient solution.

Local payroll company vs. national payroll company
So, what are some of the benefits of going for a local payroll company over a national one? Well, the main reason to consider this option is that the business is going to be based in close proximity and so it will be easy for you to meet up with your contact and discuss things relating to your payroll if need be. This can make you feel a lot more secure.

However, when you go for a nationwide company, it means you have a much bigger selection at your disposal. Therefore, you can find the best company for your needs based on the industry you work in, the size of your company, and the budget that you have available.

A final option to consider is a payroll provider that is based fully online. This is becoming more of the norm for companies today. This sort of service can often be cheaper because the company faces fewer costs. However, make sure you do some digging and find out where the company is actually based and what sort of qualifications the personnel have so you can make sure the business is credible.

Payroll companies for small business

Do some payroll companies specialise in small business payroll? Yes, there are specialist payroll providers across different industries and business sizes.

You may be wondering what’s different about the payroll needs of a small business compared to a large one. Well, the more employees your business has, the more complex payroll can be. Therefore, if you only have a small business, you do not want to end up paying over the odds by choosing a business that specialises in providing its services to large companies.

Instead, it makes sense to go for a company that specialises in helping small businesses. They could also help you deal with the complexities of post-furlough payroll issues. Some managed services offer assistance with human resources, and you can get a dedicated account manager who can provide cost-effective assistance when you need it.

It also makes sense to look for a company that offers payroll administration that is based in the UK. by doing this, you know that they understand all of the rules and regulations that are in place in the UK and that they are best placed to provide you with the service you need and ensure compliance.

Payroll companies list – how to create your shortlist

We recommend that you put together a shortlist of payroll companies so that you can find the best one for you. So, how do you go about doing this?

How to choose a payroll company

  1. Ask people you trust for recommendations

    The first step that we recommend is getting in touch with friends, family members or fellow business owners and ask if they can make any recommendations.

  2. Spend some time looking online at different payroll companies

    You can add to the recommendations that you have gotten above by doing a little bit of digging online. Spend some time searching on Google for payroll companies in the UK and check out their credentials.It’ll be worth the effort.

  3. Make some specific searches

    Make specific searches relating to your business, for example, payroll companies for education, or payroll companies for SMEs. This can help you to nail down your search to make sure that your list is as relevant as possible.

  4. Compare the different features provided by the companies you have short-listed

    To narrow down your list, start comparing the different services offered by the payroll providers. You can then cross out any of the businesses that do not fully tailor to your requirements.

  5. Get quotes

    It is also a good idea to get quotes from all of the different payroll providers you are interested in so that you can figure out which ones fit into your budget.

  6. Read reviews that have been left by others

    A final way to narrow down your shortlist is to read reviews that have been left by people who have used the payroll provider in question before so you can see whether or not they have been happy with the service they have received.

Best payroll companies in the UK

There are lots of great payroll companies in the UK, and we are going to take a look at some of the best so that you can get a better understanding.

RankCompanyOur verdict
1CintraCintra provides a number of different payroll solutions to suit your business needs. This includes outsourced payroll, which is a flexible solution handled by an expert team that will manage your complete payroll cycle. Alternatively, you may want to consider using their HR and payroll fully integrated software solution so that you can continue to manage this area of your business in-house. The software comes with a demo so you can easily determine whether or not this is the right business for you.
2MHRMHR is a good choice because it is backed by iTrent, which is one of the most advanced hosted payroll software programs you will find in the industry. You are also going to have a single point of contact who will manage your account and assist with any queries you may have.
3Sussex Payroll ServicesIf you want a small company that offers a no-frills approach to payroll, you may want to consider going down this route. This is ideal for those seeking a more personal service that only comes from small providers.
4PayescapePayescape is best known for its transparent prices when it comes to payroll. The company is based in London and they charge a base rate of £50 per month for their package. You would then need to pay £3 for each employee. Their cloud-based software program can help you streamline your payroll activities.
51st Contact1st Contact is a company based in London that specialises in outsourced business services for contractor companies. You can either purchase their payroll service as a standalone package. Alternatively, you can buy it as part of a broader accounting services package.
6MoorepayWith more than 10,000 customers in the UK and over 55 years of experience, Moorepay is a great choice. They offer HR solutions, online payroll services, and fully manage payroll. They also take security very seriously, helping to prevent payroll fraud and giving you full peace of mind. (Read our Moorepay review)
7Payroll OptionsPayroll Options is considered one of the top payroll providers in the UK for small companies specifically. Simplicity is the name of the game here. If you are looking for something that is reasonably priced and does exactly what it says on the tin without any fancy extras, this is the choice for you.
8BuzzacottAnother company that is based in the heart of London is Buzzacott. From hedge fund managers to nunneries; this company has an eclectic client base, to say the least. Therefore, no matter what industry you operate in, you can be sure that they will be able to help you.
9PayplusWhen it comes to customer service, this is a company that really excels. In fact, the company even offer a money-back promise. If your staff experience a loss of earnings because of a mistake, the money will be personally reimbursed by Payplus themselves and they will email the employee to apologise and take responsibility.
10ADP PayrollFinally, we have ADP Payroll, which is a great choice if you are looking for a provider to offer fully managed payroll outsourcing. From P45s to recruitment, they can help you with all of your business needs and take the weight off your shoulders. (Read our ADP Payroll review)
Best payroll companies UK

How to choose a payroll company

There are a lot of factors that you need to consider when looking for the best payroll company for your business.

Firstly, you need to make sure that the company is registered, licensed, and has plenty of experience. Take the time to read reviews that have been left by people who have used the service before so you can be sure that the business is reputable. What sort of accreditations does the company have? This can give you peace of mind when looking for a payroll provider.

In addition to this, you also need to consider the services provided. Some payroll providers will split their offerings into different packages, from basic to advanced. There are then some that will put together a bespoke quote and package based on your specific needs.

Security is another factor that you need to consider carefully. After all, this business is going to be holding confidential data about your company and your employees. Therefore, it is critical that they use the highest level of protection when handling your data. Do not merely assume that this is the case. Enquire about what steps they take to make sure that your data does not end up being compromised.

Furthermore, find out how the service works in terms of communication and how you can contact the company.

How do you know which providers are right for you?

When looking at all of the different payroll providers that are out there, it can be a little bit overwhelming. After all, you want to make sure that you go for a company that is reputable and will provide you with a reliable and high-quality service.

Some of the questions that you should ask are as follows:

  • What sort of experience do you have?
  • What clients have you worked with?
  • What services do you provide?
  • How does billing work?
  • How can I contact you when I have a query?
  • How much will it cost to use your service?
  • What security measures do you have in place?
  • Where are you based?
  • Do you have a UK-based team or do you outsource to people overseas?

These are critical questions to ask, as there are a number of risks that could manifest if you do not choose a company with care. For example, if you were to select a company that cut corners and did not protect your data properly, you could end up being the victim of a data breach. This could result in thousands and thousands of pounds lost, which can be very difficult for any sort of business to come back from.

A good payroll company, on the other hand, will make sure that they provide a quality service and do everything in their power to ensure that all data is protected. They will be easy to get in touch with and they will ensure that all payroll is handled on time and accurately so that you have nothing to worry about.

Payroll companies prices and costs

There are a number of different factors that impact how much you pay for payroll, for example, the number of employees you have. After all, payroll is typically billed per employee. In addition to this, the sort of package you choose also matters. Some companies will offer a basic service and then you can pay for add-ons, so do keep this in mind. Before you agree to work with a particular company, read the terms and conditions to make sure that there are not any added expenses.

The average cost of outsourcing payroll is between £2 and £6 per month, per employee. However, if you opt for extra services, such as pension plan auto-enrolment and integrated HR, you can expect to pay more than this. The best thing to do is compare quotes from a number of suppliers so you can make sure that you are getting a fair deal.

So there you have it: everything that you need to know about using a payroll company! We hope that this has helped you to get a full understanding of the different options available to you.

Payroll companies FAQ

Below, we will answer some of the most commonly asked questions we receive about working with a payroll provider.

What is a payroll company?

A payroll company is a business that provides clients with a wide range of services related to payroll. This can include the processing of employee hours, directly depositing money, cutting checks, and making certain that employees are paid the correct amount and on time.

How do I set up payroll for my company?

There are a number of different steps that are in place when it comes to setting up payroll for your business. You will need your employees to complete the relevant forms. After this, you must sign up for Employee Identification Numbers. Next, choose your payroll schedule and then calculate the amount of taxes each employee should pay. You should then withhold income taxes and pay them, as well as filling your tax forms. It is important to make sure you do this correctly so that you do not end up on the wrong side of HMRC. This is why a lot of business owners decided to outsource payroll instead so that all of this is handled for them.

Why do companies outsource payroll?

There are a lot of different benefits that are associated with outsourcing payroll. When you outsource payroll, you will be able to free up time at your company so that you can focus on your core business tasks. Not only this, but you can make sure that your employees are paid the right amount and that they are paid on time. This can help to boost employee satisfaction while also attracting the best talent to your business as well. Not only this, but you can have the peace of mind that someone with the relevant experience and training will take care of your payroll. This can ensure that your business handles everything above board and achieves compliance.

What do payroll companies do?

A payroll service provider is a business that will automatically process year-end taxes, payroll tax statements, payroll calculations, and more. A lot of employers prefer to utilise payroll service providers to help make certain that their employees and taxes are paid on time and accurately.

How much do payroll companies charge?

Payroll charges can differ considerably from company to company. There are a number of different reasons why this is the case. Generally, it will come down to how many employees work at your business, as most payroll companies will charge per employee per month. The best thing to do is get quotes from a number of companies so that you can compare costs.

What is a local payroll company?

A local payroll company is simply a business that is based in the UK close to your business premises. A lot of outsourced companies are situated around the world. While you may be able to lock in a cheaper rate if you opt for a provider in the likes of India, there are a lot of limitations. Firstly, they may not fully understand the UK regulations. In addition to this, the quality may not be as good. This is why it makes sense to look for a local company to provide you with payroll services.

What is the best payroll company?

There is a lot that you need to consider when looking for the best payroll company. It is important to look for a company that has plenty of experience and a good reputation in the industry. Take the time to read reviews that have been left by others who have used the services of the payroll company in question before. You should also find out what sort of services are included with the package. A lot of payroll providers will offer a basic package and then you will have different add-ons that you can add to your package.

Important – The information provided in our articles is intended to be for general purpose use only, and not advice for you or your business. We strive to publish accurate information, but encourage you to fact-check and seek expert guidance. We recommend that you always speak to a qualified professional to get advice about how to operate your business under your specific requirements and circumstances.