The pricing mistake most accountants make
When accountants set fees for outsourced payroll, the most common error is anchoring to the software cost. The calculation goes: we pay X for the payroll software, so we should charge Y and make margin on the difference.
That is not a pricing model. It is a margin accident waiting to happen.
Payroll pricing needs to account for: data collection time, payroll processing time, approval management, HMRC filing, query handling, pension management, year-end processing, P60 production, P11D handling where applicable and the professional risk of getting it wrong. None of those costs are captured in the software fee.
Payroll fee income is recurring. That is its strength. But if it is priced too low, recurring revenue becomes a recurring drain on capacity.
A practical pricing structure for outsourced payroll
Minimum employer fee
Every employer should have a minimum monthly fee regardless of employee count. This covers the fixed cost of managing the employer relationship: PAYE reference maintenance, pension reporting, HMRC communication, approval process. A minimum fee of £35–£60 per employer per month is reasonable for a small practice in the current market.
Per-payslip fee
Above the minimum, charge per payslip. The market rate for white-label payslip production ranges from £3 to £8 depending on complexity, frequency and volume. A simple weekly casual workforce charges differently from a monthly salaried team with benefits and salary sacrifice.
CIS per-subcontractor fee
CIS subcontractors should be priced separately from PAYE employees. CIS adds verification, deduction review, monthly return management and statement production — all of which are additional scope. Pricing from £8–£15 per subcontractor per month at retail level is typical.
Setup fees
Every new employer or CIS contractor should have a setup fee covering data collection, system configuration, scheme verification and first-run checking. A setup fee of £75–£200 per employer is appropriate depending on complexity.
Rescue and cleanup
When a payroll or CIS arrangement has been poorly managed — missing data, YTD errors, incorrect PAYE references — cleanup work should be quoted separately and charged as a fixed-scope project, not absorbed into the ongoing fee.
Protecting margin with minimum fees
The single biggest margin protection in outsourced payroll is a monthly minimum per employer. Without it, a two-employee payroll at £3 per payslip is £6 per month — completely unprofitable once approval, pension reporting and query handling are factored in.
With a minimum fee of £40 per employer, the same client generates £40 per month. That is still modest, but it is sustainable at scale — and it aligns the practice fee structure with the actual cost of managing employer compliance relationships.
Want to discuss a white-label payroll arrangement?
Bookd provides white-label payroll and CIS processing for accountants who want capacity without hiring, training or client leakage.
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