"How much will it cost to outsource our payroll?" is one of the first questions business owners ask us. The honest answer is: it depends on what you include. This guide explains the pricing models used in India, what a fair quote should contain, and the hidden charges that make cheap quotes expensive.
The three pricing models
1. Per employee per month (PEPM)
The most common model. The provider charges a fixed rate for every employee processed in a month. If the rate is ₹300 and you have 50 employees, your bill is ₹15,000 for that month; hire 10 more and it becomes ₹18,000. It scales naturally with headcount.
2. Flat monthly fee
Some providers quote one fixed amount for small, stable teams. Simple to budget, but check what happens when headcount grows.
3. Base fee + PEPM (hybrid)
A fixed platform or account-management fee plus a lower PEPM rate. Common with larger providers and multi-state payrolls.
Typical price ranges in 2026
Published Indian industry guides in 2026 commonly put basic payroll processing at roughly ₹150–₹500 per employee per month, with full-compliance and HR-inclusive packages going well above that. Treat these as indicative only – your quote will depend on the factors below.
| Service level | Usually includes | Relative cost |
|---|---|---|
| Basic processing | Salary calculation, payslips, bank transfer file | Lowest |
| Processing + statutory | Above + PF, ESIC, PT, TDS computation and filings | Medium |
| Full-service / HR-inclusive | Above + leave/attendance, F&F, compliance registers, helpdesk, audits | Highest |
What drives your price up or down
- Headcount – higher volumes usually get a lower PEPM rate.
- Number of states – each state adds professional tax, labour welfare fund and shops-act rules.
- Pay complexity – shift allowances, overtime, incentives and arrears take more effort.
- Attendance integration – clean biometric data is cheaper to process than manual registers.
- Contract vs own employees – contract staff on the provider's payroll are usually priced as part of a staffing service charge instead.
Hidden charges to ask about
- One-time setup or data-migration fee
- Off-cycle payroll runs (bonus, arrears, full-and-final)
- Form 16 generation and year-end processing
- Custom reports or integrations with your accounting software
- Charges per new joiner or exit
- GST at 18% on the service fee
How the new labour codes affect payroll
India's four labour codes came into force on 21 November 2025. One of the biggest payroll impacts is the uniform definition of "wages", under which excluded allowances above 50% of total remuneration are added back for calculating benefits such as PF and gratuity. Many companies have had to restructure salaries. A good payroll partner should already have reviewed your structures – see our labour codes guide for details.
In-house vs outsourced: a quick test
Outsourcing usually makes sense if any of these are true: payroll depends on one person; you have missed or nearly missed a PF, ESIC or TDS due date; you operate in more than one state; or you employ contract staff. The cost of a single compliance lapse – interest, damages and management time – often exceeds a year of outsourcing fees.
How to compare payroll quotes
- Send every provider the same headcount, states and pay components.
- Ask for a scope list: which filings are included, which are extra.
- Ask who signs off each payroll and the cut-off dates.
- Check data security: access controls and where data is stored.
- Ask for a sample monthly MIS report.
Payroll management with A1 Hiring
A1 Hiring handles salary processing, payslips, TDS/PF/ESIC deductions, leave records, reimbursements and payroll data management for businesses across Mumbai, Thane and Pan-India. Learn more on our payroll management page or ask for an itemised quote.
