How to implement the right pricing for outsourced payroll services

Determining the appropriate pricing model for your outsourced payroll services is crucial for both profitability, how your clients value your services, and standing out from competitors. As an accountancy, bookkeeping, or outsourced payroll services firm, understanding the various pricing models available can help you attract clients and build a successful outsourced payroll services revenue stream.

In this blog, we will explore key factors to consider when implementing the right pricing model for your outsourced payroll offering.

Why is it important to select the right pricing model for your outsourced payroll services?

Determining the ideal pricing model for your outsourced payroll service is not a one-size-fits-all approach, as it relies on factors such as goals, client preferences, and market conditions. However, selecting the right pricing model will impact:

• Profitability: By accurately assessing costs and setting appropriate prices, you can ensure that your outsourced payroll services are financially sustainable.
• Client satisfaction: Fair and transparent pricing builds trust and demonstrates value for money, leading to stronger client relationships and increased customer retention.
• Competitiveness: Positioning your services effectively, and differentiating from competitors, can attract clients based on perceived value.
• Long-term focus: Sustainability is ensured by setting prices that cover operational expenses and support long-term growth.
• Flexibility and scalability: By offering tiered pricing or customisable packages, you can cater to a diverse range of client needs and expand your services accordingly.

7 steps to implement the right pricing model for your outsourced payroll service

1. Understand clients, costs, and the scope of services

Before setting a price for your outsourced payroll service, it is essential to understand your clients and the scope of the work involved. Consider the complexity of the payroll processes you will handle, including tax calculations, employee wages, software subscriptions, deductions, compliance, employee benefits, and record-keeping. This assessment will help you determine the level of expertise and costs associated with delivering outsourced payroll services. It’s important to accommodate the varying needs of your clients, ensuring that you provide fair and accurate pricing based on the effort and expertise required for each engagement.

2. Consider the market

Researching the market and understanding industry standards is crucial when pricing your outsourced payroll service. Explore what your competitors are offering, their pricing models, and the value they provide to clients. Conduct thorough market research to understand the pricing landscape for outsourced payroll services in your target market. This information will give you a benchmark to work from and help you position your services competitively.

3. Determine pricing objectives

Establish clear pricing objectives for your outsourced payroll services. After understanding market dynamics, decide whether you will aim to be a cost leader, a differentiator, or a premium service provider.

4. Consider a comprehensive and valuable service offering

Identify any value-added services that you can offer alongside outsourced payroll services such as tax compliance, HR advisory or support, employee onboarding, time and attendance tracking, and employee self-service portals or reporting and analytics. By bundling these services, you can justify higher pricing and provide more value to your clients.

5. Define your pricing strategy

There are various pricing models you can consider when offering outsourced payroll services. It’s important to select the appropriate pricing method that aligns with your business objectives and client expectations. Here are some common approaches:

•  Hourly Rate: Charging an hourly rate is a straightforward method. Estimate the number of hours it takes to complete payroll tasks and multiply it by your hourly rate. This approach works well for clients who are smaller in size and have simple payroll needs.
• Per Employee or Per Payroll Run: With this model, you charge a fixed rate per employee or per payroll run. It provides clarity for clients and helps them budget their payroll expenses.
• Flat Monthly Fee: A flat monthly fee is a popular choice for many accountants and bookkeepers. Consider the size and complexity of the client’s payroll, the number of employees, and the additional services provided when determining the monthly fee.
• Tiered Pricing: If you offer different service levels or packages, consider tiered pricing. This allows you to accommodate clients with varying needs and budgets. For example, you could offer basic payroll processing, mid-level services with additional features such as HR support, and premium packages with comprehensive offerings. Each tier should have different pricing based on the services provided.

6. Test, refine and monitor

Implement your chosen pricing strategy on a limited scale and gather feedback from clients. Regularly assess the market for any changes that may impact your pricing model and adjust the model as necessary to ensure it is effective, profitable and aligns with client needs. Stay agile and be prepared to adjust your pricing strategy accordingly if needed. When finalising your pricing strategy, ensure itis scalable and flexible.

7. Clearly communicate your pricing structure

Once you’ve confirmed your pricing strategy, it’s time to communicate the value clients will receive with each package. Develop transparent pricing documentation and marketing materials to help clients understand the benefits of your outsourced payroll services. Learn how to set your business apart and promote your payroll services effectively.

Add extra value to your outsourced payroll services with Employment Hero Payroll

Employment Hero allows accounting, bookkeeping and outsourced payroll firms to enable a value-add reseller model with its’ proven and trusted payroll platform, Employment Hero Payroll. By white labelling Employment Hero Payroll, outsourced payroll providers can combine a comprehensive platform with their brand, and take their services to the next level.

By partnering with Employment Hero, you can make use of a ready-made payroll platform, ongoing product development, and valuable support. That way, you can focus on building a successful and scalable outsourced payroll service. Learn more in our guide about how to become a value added reseller or learn more about joining our partner network.