Worked Costings and Selection Checklists
Payroll software cost per employee: worked examples for 3, 15, 40 and 150 employees
Illustrative worked examples of the monthly and annual cost of payroll and HR software per employee at four business sizes, showing how base fees, minimums and casuals change the result.
The effective cost per employee of payroll and HR software is the total monthly bill divided by the people you actually pay, and it can be very different from the per-employee price on the pricing page. Small employers often pay the most per head because base fees and minimum monthly charges are spread over few people; employers with many casuals can pay more than expected if the vendor bills every active record; and larger employers usually pay less per head but more in one-off implementation. The four illustrative examples below show the arithmetic at 3, 15, 40 and 150 employees so you can see which cost lines matter at your size.
This guide is part of how to choose payroll and HR software. All figures are illustrative ranges, not vendor prices. Use the cost per employee estimator with your own quotes.
The formula
Effective cost per employee per month = (per-employee price × billable employees + base or minimum fee + add-ons + hardware spread monthly) ÷ employees actually paid.
Add one-off costs spread over the expected life (say 36 months) if you want a full-cost figure.
Example 1: 3 employees, a trades business
A plumber with two employed tradespeople and a part-time office administrator. Simple hourly rates and one award, fortnightly pay.
| Option (illustrative) | Calculation | Monthly | Per employee |
|---|---|---|---|
| Payroll included in accounting plan (up to 5 employees) | Higher accounting tier costs $35 more a month than the current one | $35 | $11.67 |
| Standalone payroll, $6 per employee, $40 minimum fee | Greater of 3 × $6 = $18 and $40 | $40 | $13.33 |
| Low-cost STP solution for micro employers | Flat $10 a month | $10 | $3.33 |
At this size the differences are small in dollars. The questions that matter are whether the product handles Payday Super payments each pay day without manual work and whether the award rules (including allowances such as tools and vehicle allowances) are applied correctly.
Example 2: 15 employees, a professional services firm
An accounting practice with 15 salaried employees and a few on salary sacrifice arrangements. No award interpretation needed beyond checking salaries meet award minimums where they apply.
| Option (illustrative) | Calculation | Monthly | Per employee |
|---|---|---|---|
| Standalone payroll at $7 | 15 × $7 | $105 | $7.00 |
| Payroll plus HR at $12 | 15 × $12 | $180 | $12.00 |
| Payroll plus HR at $10 with $60 base fee | 15 × $10 + $60 | $210 | $14.00 |
The HR tier adds onboarding, document storage and leave approvals. Whether $75–$105 a month extra is worth it depends on how often the firm hires and how much time leave admin takes. See HR modules and their costs.
Example 3: 40 employees, a hospitality venue with casuals
A restaurant and bar with 12 permanent staff and 28 casuals. On average 22 casuals are paid in a month; all 28 have active records. Needs award interpretation, rostering and time clocks.
| Option (illustrative) | Billable employees | Calculation | Monthly | Per paid employee (34) |
|---|---|---|---|---|
| All-in at $18, "paid in the month" | 34 | 34 × $18 | $612 | $18.00 |
| All-in at $16, "active employees" | 40 | 40 × $16 | $640 | $18.82 |
| Rostering at $6 per active user + payroll at $8 per paid employee | 40 and 34 | 40 × $6 + 34 × $8 | $512 | $15.06 |
Add two time-clock tablets at an illustrative $600 each, spread over 36 months: $1,200 ÷ 36 = $33.33 a month. The cheaper headline price ($16) costs more here because of the billing definition. The combined option is cheapest on subscription, but you must check that award rules are applied in one place only; see award interpretation software.
Example 4: 150 employees, a multi-state services company
A cleaning and facilities company with 150 employees in three states, two awards, weekly pay, high turnover.
| Cost line (illustrative) | Calculation | Monthly |
|---|---|---|
| Payroll and HR platform at $14 per employee | 150 × $14 | $2,100 |
| Award interpretation and rostering add-on at $5 | 150 × $5 | $750 |
| Additional entity (second ABN) | Flat | $150 |
| Implementation of $18,000 spread over 36 months | $18,000 ÷ 36 | $500 |
| Total | $3,500 | |
| Per employee | $3,500 ÷ 150 | $23.33 |
At this size, negotiating matters: a 10% discount on the per-employee charges saves (2,100 + 750) × 10% = $285 a month, or $10,260 over three years. Multi-state employers should also check payroll tax reporting by state and state-based long service leave rules, which most payroll products support only with configuration. Payroll tax thresholds and rates are set by each state and territory revenue office; check them directly.
What the examples show
| Size | Biggest cost driver | What to negotiate or check |
|---|---|---|
| 1–5 | Base or minimum fees | Whether payroll inside your accounting plan is enough |
| 10–25 | Tier choice for HR features | Whether you need the HR tier now or later |
| 25–80 with casuals | Billable employee definition, add-ons | Paid vs active billing, archiving rules |
| 100+ | Per-employee price and implementation | Discount, uplift cap, implementation scope |
For a full multi-year view, see the 3-year TCO worked example and renewal price increases. The best-fit guide links these sizes to software types.
Frequently asked questions
What is a reasonable cost per employee?
There is no official benchmark. Illustrative ranges run from a few dollars per employee a month for basic payroll to $20–$40 for all-in HR platforms. Compare quotes for the same features rather than chasing a number.
Should I include the payroll officer's wages?
For a TCO, include their time on implementation. For ongoing cost comparisons, include time only if the products genuinely differ in how long a pay run takes.
Do contractors count as employees for billing?
Usually not, unless you pay them through payroll. Check the vendor's definition.
Does cost per employee fall as I grow?
Usually, because base fees are spread wider and discounts become negotiable, but moving up a tier can cause a step increase.
Sources
- business.gov.au — employer obligations and links to state payroll tax offices
- Fair Work Ombudsman — award coverage and pay rates
- Australian Taxation Office — Single Touch Payroll and low-cost STP solutions for micro employers
- Revenue NSW and State Revenue Office Victoria — examples of state payroll tax authorities
