Published: April 2026
Payroll is the finance function with the least margin for error and the highest consequences when things go wrong. Pay someone incorrectly and you face Fair Work penalties of up to $93,900 per contravention for companies. Miss a superannuation deadline and the Superannuation Guarantee Charge is non-deductible, meaning it costs you more than the original amount owed. Get an award interpretation wrong and you could be looking at back-pay claims stretching back years.
From 1 July 2026, Payday Super adds another layer. Super contributions must reach the employee's fund within seven business days of each payday, replacing the current quarterly system. For a business running fortnightly payroll, that means processing and remitting super 26 times per year instead of 4.
This guide covers what payroll outsourcing costs in Australia in 2026, what should be included at any price point, and how to compare the cost against running payroll in-house.
There is an important distinction between payroll processing and payroll outsourcing. Processing means someone runs your pay cycle when you tell them to. They take the hours you provide, push the button, and generate payslips. If you give them the wrong hours, the wrong rate, or the wrong leave balance, the output is wrong. The responsibility stays with you.
Outsourced (or managed) payroll means someone owns the entire function. They interpret the relevant Modern Award, calculate the correct rates including penalty rates and overtime, manage leave accruals, process STP Phase 2 reporting to the ATO, calculate and remit superannuation, handle payroll tax calculations and lodgements across states, manage onboarding and offboarding paperwork, and calculate termination entitlements including notice, accrued leave, and redundancy.
The difference matters because errors in interpretation, timing, and compliance are where the real cost lies. A payroll processor running the wrong penalty rate for 12 months creates a back-pay liability. A managed payroll provider catches the rate change at the annual wage review and updates it proactively.
This is the most common pricing model for outsourced payroll. The price per employee varies based on award complexity, pay frequency, and the scope of services included.
Worked example (lower end): A trades business in Western Sydney with 20 employees paid fortnightly under the Building and Construction General On-site Award. At $12 per employee per pay run, that is $240 per fortnight or roughly $6,240 per year. This covers wage calculations, STP reporting, super processing, and leave accrual tracking.
Worked example (higher end): A hospitality group in Melbourne with 45 employees across three venues, a mix of full-time and casual, three different awards (Hospitality Industry General Award, Restaurant Industry Award, and the Clerks Private Sector Award for back-of-house admin), and a weekly pay cycle. At $18 per employee per run, that is $810 per week or roughly $42,120 per year. The higher rate reflects award complexity, casual loading calculations, penalty rate variations across different days and times, and weekly processing frequency.
Some providers offer a fixed monthly fee regardless of the number of pay runs. This model provides cost certainty and works well for businesses with stable employee counts.
Worked example: A marketing agency in Surry Hills with 8 employees on the Clerks Private Sector Award, fortnightly pay. Monthly retainer: $650. This covers all payroll processing, STP, super, and leave management. Annual cost: $7,800. At a per-employee-per-run equivalent, that works out to approximately $15.60 per employee per run, which is mid-range.
A flat fee per pay run regardless of employee count. This model benefits larger businesses where the per-employee cost would be high. A 50-employee business paying $400 per fortnightly run is effectively paying $8 per employee, well below the typical per-employee rate.
Regardless of the pricing model, any payroll outsourcing engagement in 2026 should include: wage calculation and payment processing, payslip generation compliant with Fair Work requirements, STP Phase 2 reporting to the ATO, superannuation calculation and remittance, leave accrual tracking (annual, personal, long service), and award interpretation for applicable Modern Awards.
From July 2026, Payday Super compliance should be included as standard. If your provider is charging extra for this, question why, as it is now a core payroll obligation. For the full picture on how Payday Super changes your compliance obligations, see our Payday Super guide.
The quoted per-employee or monthly rate is rarely the total cost. Watch for these common add-ons.
Payroll tax lodgements across multiple states: $200 to $500 per state per month. If you operate in NSW and Queensland, that is potentially $400 to $1,000 per month on top of your base fee. Check our payroll tax thresholds to see if this applies to you.
Termination and redundancy calculations: $200 to $500 per event. These are complex (notice period, accrued leave, redundancy entitlements, pro-rata long service leave in some states) and most providers charge per occurrence.
Back-pay calculations and rectifications: $100 to $300 per hour. If an award rate change was missed or a classification error needs correcting, the remediation work is usually billed at an hourly rate.
Workers compensation reporting: $100 to $300 per quarter. Some providers include this, others charge separately.
Onboarding and offboarding administration: $50 to $150 per event. Tax file number declarations, super choice forms, employment contracts, and exit paperwork.
Platform subscriptions: Employment Hero, Xero Payroll, or KeyPay platform costs of $10 to $25 per employee per month are sometimes billed through to you on top of the service fee.
Worked example of the gap between quoted and actual cost: A 25-employee business quoted $12 per employee per fortnightly run ($7,800 per year). Actual annual cost after add-ons: $7,800 base plus $3,600 payroll tax lodgement (2 states) plus $1,200 for 3 terminations plus $1,500 workers comp reporting plus $3,000 platform subscription. Total: $17,100, more than double the headline quote. Always ask for the all-in cost.
The current system allows employers 28 days after the end of each quarter to pay super. From 1 July 2026, super contributions must reach the employee's fund within seven business days of each payday.
For a business running fortnightly payroll with 30 employees, this means processing and remitting super 26 times per year instead of 4. Each payment needs to be correctly calculated, allocated to the right fund, and confirmed as received within the seven-day window.
Late contributions under the new regime attract redesigned Superannuation Guarantee Charge penalties with additional surcharges of 25 to 50 per cent. Unlike the current SGC, which is already non-deductible, the new penalty structure is designed to make late payment significantly more expensive than timely compliance.
The Small Business Superannuation Clearing House (SBSCH) is closing on 1 July 2026. If you currently use it, you need to transition to a private clearing house or a payroll platform with integrated super processing before that date.
Impact on outsourcing cost: providers are likely to increase pricing by 10 to 20 per cent to handle the additional processing volume and compliance monitoring that Payday Super requires. Factor this into any quotes you are receiving now.
Running payroll yourself or having the office manager do it saves money until it does not. Here are the penalties that apply when things go wrong.
Fair Work penalties for underpayment: up to $93,900 per contravention for companies in 2026. These penalties apply per employee, per pay period. A systematic underpayment affecting 10 employees over 12 months is not one contravention, it is potentially 260 contraventions (10 employees multiplied by 26 fortnightly pay periods).
Superannuation Guarantee Charge: non-deductible. Includes the unpaid super plus 10 per cent interest plus an administration fee per employee per quarter. Because it is non-deductible, a $10,000 SGC costs approximately $14,000 after tax.
ATO penalties for late STP reporting: $222 per 28-day period the report is overdue.
Director penalty notices for unpaid super and PAYG: personal liability for directors. The ATO can issue a director penalty notice making you personally responsible for unpaid amounts, even if the company goes into liquidation.
Wage theft laws in Victoria and Queensland now carry criminal penalties for deliberate underpayment. Even unintentional underpayment due to incorrect award interpretation can trigger significant civil penalties.
See our payroll late penalties guide for the full breakdown of what goes wrong and what it costs.
Worked example for a 30-employee business:
In-house payroll officer: $65,000 to $85,000 base salary plus 12 per cent super ($7,800 to $10,200) plus payroll tax (if applicable, approximately $3,500 to $5,000) plus leave entitlements ($7,500 to $10,000) plus workers compensation ($400 to $1,300) plus software and training ($3,000 to $5,000). Total loaded cost: $87,000 to $116,000 per year. Plus recruitment cost every 3 to 4 years ($10,000 to $20,000). Model this with our employee cost calculator.
Outsourced at $12 per employee per fortnightly run: 30 employees multiplied by $12 multiplied by 26 pay runs equals $9,360 per year. Add platform costs of $3,600 per year and payroll tax lodgement fees of $2,400 per year. Total: $15,360 per year.
Annual saving: $72,000 to $101,000. Over five years with one in-house turnover event: total saving of approximately $380,000 to $530,000.
The real advantage beyond cost is compliance certainty. A dedicated payroll provider processes hundreds of pay runs per month across multiple awards. They catch rate changes, leave entitlement updates, and legislative changes as part of their core business. An office manager doing payroll as one of eight responsibilities catches these things when the Fair Work inspector calls.
In many Australian SMEs, payroll is handled by the office manager, the owner's partner, or whoever happened to be in the room when the task needed doing. This creates several risks. Single point of failure: what happens when they go on leave? What happens when they resign? No award interpretation expertise: they are using software defaults rather than understanding the underlying Modern Award obligations. Common errors include incorrect penalty rates on weekends and public holidays, wrong leave accrual calculations for part-time employees, missed superannuation deadlines (which under Payday Super become weekly or fortnightly compliance events rather than quarterly), and incorrect casual loading calculations.
Each of these errors creates a liability that grows with each pay period it goes uncorrected. See our workers compensation guide for another area where incorrect classification by non-specialist staff creates significant financial risk.
In 2026, the typical range is $5 to $20 per employee per pay run, depending on award complexity, pay frequency, and the scope of services included. A simple payroll with one award and fortnightly processing sits at the lower end. Complex payrolls with multiple awards, casual and part-time mix, and weekly processing sit at the higher end. Always ask for the all-in cost including platform fees, payroll tax lodgement, and any per-event charges.
Almost always, yes. An in-house payroll officer costs $87,000 to $116,000 loaded per year. Outsourced payroll for the same 30-employee business costs approximately $13,000 to $17,000 per year. The saving is $70,000 to $100,000 annually. The only scenario where in-house is more cost-effective is very large payrolls (100 or more employees) where the volume justifies a dedicated full-time resource.
Super contributions must reach the employee's fund within seven business days of each payday, replacing the current quarterly payment system. This means if you run fortnightly payroll, you process and remit super 26 times per year instead of 4. Late payments attract redesigned SGC penalties with additional surcharges. The Small Business Superannuation Clearing House closes on 1 July 2026. Every business needs to ensure their payroll system or provider is ready for this change.
Not necessarily, but you need to confirm your current provider is Payday Super ready. Ask them: can your system calculate super per pay run? Can it process payments within seven business days? Is it compatible with SuperStream 3.0? What clearing house solution will replace the SBSCH? If they cannot answer these questions clearly, it may be time to switch. See our Xero payroll setup guide for how the major platforms are handling the transition.
At minimum: wage calculation and processing, payslip generation, STP Phase 2 reporting, super calculation and remittance, and leave accrual tracking. Better providers also include award interpretation updates when rates change, onboarding and offboarding administration, and payroll tax calculation. The best providers include all of the above plus compliance monitoring, error correction at no additional charge, and direct support for employee payroll queries.
Ask each provider for the total annual cost based on your employee count, pay frequency, and number of awards. Include all add-ons: platform fees, payroll tax lodgement, termination calculations, workers comp reporting, and onboarding. Then compare the all-in annual figure, not the headline per-employee rate. A $10 per employee quote with $5,000 in add-ons is more expensive than a $14 per employee quote with everything included.
Yes, though the per-employee cost tends to be higher for very small payrolls because there is a minimum overhead for any payroll engagement. For 1 to 5 employees, expect to pay $300 to $500 per month on a flat-fee basis, which works out to a higher per-employee cost but is still significantly cheaper (and safer) than the compliance risk of doing it yourself.
Scale Suite is a Sydney-based provider of outsourced finance and HR services for Australian SMEs. We deliver weekly bookkeeping, payroll, BAS/IAS lodgement, cashflow reporting, management accounts, and strategic fractional CFO oversight as a fully embedded team that works inside your business. Employment Hero Gold Partner, CA-qualified, Xero Certified, and registered BAS Agents. No lock-in contracts and a 30-day money-back guarantee.
Learn more at scalesuite.com.au/services/finance
We review and check this guide periodically. At the time of writing (April 2026), all pricing and regulatory information was current. Some details may change over time as ATO requirements and market rates evolve.
Scale Suite is a Sydney-based provider of outsourced finance and HR services for Australian SMEs. We deliver bookkeeping, financial reporting, payroll processing, fractional CFO support, recruitment, employee onboarding, people and culture support, and fractional HR oversight, all as a fully embedded team that works inside your business.
Employment Hero Gold Partner, CA-qualified, and Xero Certified, we replace fragmented finance and HR processes with one responsive, senior-level function at a fraction of the cost of full-time hires. We serve growing businesses across Sydney, Melbourne, Brisbane, and Perth, with packages starting from $1,500 per month and no lock-in contracts.
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