{
  "slug": "in-house-vs-outsourced-payroll-cost",
  "title": "In-House vs Outsourced Payroll Cost Calculator",
  "heading": "In-House vs Outsourced Payroll Cost Calculator",
  "category": "financial",
  "url": "https://www.revenuelab.fyi/toolbox/in-house-vs-outsourced-payroll-cost",
  "summary": "Compare staff time and software cost of running payroll yourself against an outsourced provider's fee.",
  "description": "Running payroll in-house costs staff hours plus software subscription fees, while outsourcing to a payroll provider charges a per-employee monthly fee but frees your team's time and shifts compliance risk to the provider. This tool compares the fully-loaded cost of in-house payroll processing time against a provider's base and per-employee fees to show which is cheaper at your headcount.",
  "formula": "In-House Cost = (Hours per Pay Run × Hourly Rate × Pay Runs per Year) + Software Cost. Outsourced Cost = (Base Fee + Per-Employee Fee × Employees) × Pay Runs per Year.",
  "dateModified": "2026-09-06",
  "run_url": "https://www.revenuelab.fyi/api/public/calc?tool=in-house-vs-outsourced-payroll-cost",
  "inputs": [
    {
      "id": "employees",
      "label": "Number of employees",
      "kind": "number",
      "hint": null,
      "default": 15,
      "unit": null,
      "min": 1,
      "max": null
    },
    {
      "id": "payRunsPerYear",
      "label": "Pay runs per year",
      "kind": "number",
      "hint": null,
      "default": 26,
      "unit": null,
      "min": 1,
      "max": 52
    },
    {
      "id": "hoursPerRun",
      "label": "In-house hours per pay run",
      "kind": "number",
      "hint": null,
      "default": 4,
      "unit": null,
      "min": 0.5,
      "max": null
    },
    {
      "id": "hourlyRate",
      "label": "Loaded hourly rate of person doing payroll",
      "kind": "number",
      "hint": null,
      "default": 35,
      "unit": "$",
      "min": 0,
      "max": null
    },
    {
      "id": "softwareAnnual",
      "label": "In-house payroll software annual cost",
      "kind": "number",
      "hint": null,
      "default": 1200,
      "unit": "$",
      "min": 0,
      "max": null
    },
    {
      "id": "providerBaseFee",
      "label": "Outsourced provider base fee per run",
      "kind": "number",
      "hint": null,
      "default": 40,
      "unit": "$",
      "min": 0,
      "max": null
    },
    {
      "id": "providerPerEmployee",
      "label": "Outsourced provider fee per employee per run",
      "kind": "number",
      "hint": null,
      "default": 6,
      "unit": "$",
      "min": 0,
      "max": null
    }
  ],
  "outputs": [
    {
      "id": "winner",
      "label": "Lower annual cost option",
      "format": "raw",
      "hint": null,
      "primary": true
    },
    {
      "id": "inHouseCost",
      "label": "In-house payroll annual cost",
      "format": "currency",
      "hint": null,
      "primary": false
    },
    {
      "id": "outsourcedCost",
      "label": "Outsourced payroll annual cost",
      "format": "currency",
      "hint": null,
      "primary": false
    },
    {
      "id": "diff",
      "label": "Annual difference",
      "format": "currency",
      "hint": null,
      "primary": false
    },
    {
      "id": "breakevenEmployees",
      "label": "Breakeven headcount",
      "format": "number",
      "hint": null,
      "primary": false
    }
  ],
  "worked_example": {
    "inputs": [
      "Number of employees: 15",
      "Pay runs per year: 26",
      "In-house hours per pay run: 4",
      "Loaded hourly rate of person doing payroll: 35 $",
      "In-house payroll software annual cost: 1200 $",
      "Outsourced provider base fee per run: 40 $",
      "Outsourced provider fee per employee per run: 6 $"
    ],
    "outputs": [
      "Lower annual cost option: Outsourced",
      "In-house payroll annual cost: $4,840",
      "Outsourced payroll annual cost: $3,380",
      "Annual difference: $1,460",
      "Breakeven headcount: 16.7"
    ]
  },
  "how_to": {
    "title": "How to use this",
    "steps": [
      "Enter number of employees.",
      "Enter pay runs per year.",
      "Enter in-house hours per pay run.",
      "Enter loaded hourly rate of person doing payroll ($).",
      "Enter in-house payroll software annual cost ($).",
      "Enter outsourced provider base fee per run ($).",
      "Enter outsourced provider fee per employee per run ($).",
      "Read your lower annual cost option on the right — it updates as you type.",
      "Hit Share to keep the scenario or send it to someone."
    ]
  },
  "scenarios": [
    {
      "name": "Conservative",
      "description": "Lower-end numbers — what if things land soft?",
      "values": {
        "employees": 9,
        "payRunsPerYear": 16,
        "hoursPerRun": 2.4,
        "hourlyRate": 20,
        "softwareAnnual": 700,
        "providerBaseFee": 25,
        "providerPerEmployee": 4
      }
    },
    {
      "name": "Typical",
      "description": "Defaults — the most common real-world setup.",
      "values": {
        "employees": 15,
        "payRunsPerYear": 26,
        "hoursPerRun": 4,
        "hourlyRate": 35,
        "softwareAnnual": 1200,
        "providerBaseFee": 40,
        "providerPerEmployee": 6
      }
    },
    {
      "name": "Ambitious",
      "description": "Higher-end numbers — what if things really pop?",
      "values": {
        "employees": 24,
        "payRunsPerYear": 42,
        "hoursPerRun": 6.4,
        "hourlyRate": 55,
        "softwareAnnual": 1900,
        "providerBaseFee": 65,
        "providerPerEmployee": 10
      }
    }
  ],
  "limitations": [
    "Results are estimates before tax, fees, and inflation unless an input explicitly covers them.",
    "Rates are treated as fixed for the whole period — variable-rate products will drift from this projection.",
    "This is educational maths, not financial advice. Check anything contractual with the lender or your accountant."
  ],
  "faq": [
    {
      "q": "Does outsourcing reduce compliance risk?",
      "a": "Yes — most providers guarantee tax filing accuracy and absorb penalty risk from their own errors, a real but hard-to-price benefit not captured in the raw dollar comparison."
    },
    {
      "q": "Why does the cost gap shrink as headcount grows?",
      "a": "In-house time per run doesn't scale linearly with employees as fast as per-employee provider fees do, so larger companies often find in-house or a flat-fee enterprise plan cheaper."
    },
    {
      "q": "What about benefits and HR features bundled in?",
      "a": "Many outsourced providers bundle benefits administration and HR support into the per-employee fee, which can offset separate software costs you'd otherwise pay for in-house."
    }
  ],
  "related": [
    "https://www.revenuelab.fyi/toolbox/payroll-tax",
    "https://www.revenuelab.fyi/toolbox/w2-employee-vs-1099-contractor-cost"
  ],
  "license": "CC-BY-4.0",
  "citation": "RevenueLab — In-House vs Outsourced Payroll Cost Calculator (https://www.revenuelab.fyi/toolbox/in-house-vs-outsourced-payroll-cost)"
}