Payroll Software Costs, Pricing Models and 2026 Rules
Payroll software pricing models: per employee per month, base fees, tiers and add-ons
How payroll and HR software is priced in Australia, from per-employee monthly fees and minimums to tiers, add-ons and annual contracts, with illustrative worked comparisons.
Most payroll and HR software sold in Australia is priced per employee per month (PEPM), often with a base or minimum monthly fee, a set of tiers that unlock features, and paid add-ons for things like award interpretation, rostering or time clocks. To compare quotes fairly, convert every option into one number: the monthly cost for your headcount, on the tier that includes every feature you need, including base fees and add-ons, in Australian dollars. Then multiply over the contract term and add one-off costs.
This guide is part of the payroll and HR software comparison overview. All prices below are illustrative, not vendor prices.
The main pricing models
| Model | How it works | Who it suits | Watch out for |
|---|---|---|---|
| Per employee per month | Price × employees billed in the month | Most businesses; cost scales with headcount | How "billable employee" is defined |
| Base fee plus per employee | A fixed monthly platform fee plus a smaller PEPM | Mid-sized employers | Base fee dominates at small headcounts |
| Minimum monthly fee | PEPM, but never less than a set amount | Vendors targeting 20+ staff | A 6-person business may pay for 20 |
| Bundled within accounting plan | Payroll for a few employees included; extra employees charged | Micro employers | Caps on employees or pay runs |
| Per active user (workforce tools) | Charged for each person rostered or clocking in | Shift-based teams | Casuals who work rarely still count |
| Per payslip or per pay run | Bureau or managed service fee per payslip | Outsourced payroll | Off-cycle pays and corrections cost extra |
| Per employee per year (enterprise) | Annual per-head price, often with a minimum contract value | Larger employers | Implementation and partner fees on top |
How vendors count employees
The definition of a billable employee changes your bill more than the headline price. Common definitions:
- Paid employees: anyone paid in the billing month, including a casual paid for one shift and a terminated employee receiving a final pay.
- Active employees: anyone with an active record, whether paid or not. Seasonal staff kept on the books may be billed all year.
- Rostered or clocked users: in rostering tools, anyone scheduled or using the time clock, who may also be billed again in the payroll product.
Illustrative example. A hospitality business has 14 permanent staff and 26 casuals. In a quiet month 18 casuals work. Under a "paid employees" definition it is billed for 32 people; under an "active employees" definition, for 40. At $15 PEPM the difference is 8 × $15 = $120 a month, or $1,440 a year.
Ask the vendor to put the definition in writing, and ask whether you can archive inactive records without losing access to their history, which you must keep for seven years.
Tiers and add-ons
Vendors usually offer two to four tiers. Lower tiers handle pay runs, STP and super; higher tiers add HR records, onboarding, performance, reporting and integrations. Some features are sold as add-ons regardless of tier.
| Feature | Often in base tier? | Often an add-on or higher tier? |
|---|---|---|
| Pay runs, STP Phase 2, Payday Super payments | Yes | Rarely |
| Leave accruals and balances | Yes | — |
| Employee self-service (payslips, leave requests) | Often | Sometimes |
| Award interpretation | Sometimes | Often |
| Rostering and time clocks | Rarely | Often |
| Onboarding, contracts, document signing | Sometimes | Often |
| Performance reviews, learning, surveys | Rarely | Often |
| Multiple entities or ABNs | Varies | Often |
| API access and advanced reporting | Rarely | Often |
Illustrative tier comparison for 40 employees:
| Option | Calculation | Monthly |
|---|---|---|
| Tier 1 at $7 PEPM + award add-on $5 + rostering add-on $4 | 40 × ($7 + $5 + $4) | $640 |
| Tier 2 at $14 PEPM including awards, + rostering $4 | 40 × ($14 + $4) | $720 |
| Tier 3 at $17 PEPM including awards and rostering | 40 × $17 | $680 |
Tier 1 looks cheapest per employee but, once you add what you need, Tier 3 is only $40 a month dearer and may include HR features you would otherwise buy separately. Plug your own figures into the cost estimator.
Annual versus monthly billing
Annual prepaid plans often carry a discount, commonly presented as "two months free" or a percentage off. The trade-off is commitment.
Illustrative example. Monthly billing at $640 a month costs $7,680 a year. An annual plan at 15% off costs $7,680 × 0.85 = $6,528, saving $1,152. But if headcount falls by a quarter mid-year, a monthly plan falls with it while an annual plan priced on a committed headcount may not. Check whether annual plans are billed on a committed minimum headcount with "true-ups" when you exceed it.
Also check the renewal clause: an annual contract that auto-renews with an uplift is covered in renewal price increases.
USD pricing, GST and other price traps
- USD prices: global HR tools often bill in US dollars. Your AUD cost moves with the exchange rate and card fees. See USD-priced HR software.
- GST: Australian suppliers add 10% GST; overseas suppliers generally do too if you are not GST-registered.
- Implementation fees: some vendors charge for set-up, award configuration or migration; others include a self-service set-up only.
- Support tiers: phone support or a dedicated account manager may be extra.
- Price changes during the term: check whether the vendor can change prices with notice during a monthly plan.
A five-step method for comparing quotes
- List your must-have features (awards, rostering, number of pay schedules, entities, integrations).
- For each vendor, find the cheapest tier that includes them all, plus required add-ons.
- Apply the vendor's billable-employee definition to your real headcount pattern, including casuals.
- Convert to AUD including GST you cannot claim, and add any base or minimum fee.
- Multiply over 36 months, add one-off costs and an allowance for uplifts. The 3-year TCO example shows the full calculation.
Frequently asked questions
Is per employee pricing always fairer than a flat fee?
Not always. Per-employee pricing tracks headcount, which suits growing or seasonal businesses, but a flat fee can be cheaper for a large stable workforce. Compare at your current headcount and at your expected headcount in three years.
Do terminated employees count?
Under many "paid in the month" definitions, an employee receiving a final pay is billed for that month. Under "active employee" definitions, they count until archived. Ask the vendor.
Are award interpretation add-ons worth it?
If your staff work penalty-rate shifts, overtime or split shifts under a modern award, often yes. The award-automation payback example shows how to test it with your own figures.
Can I negotiate the price?
Mid-sized employers often can, especially for annual terms, multi-year commitments or the renewal uplift cap. Get any agreed discount and the uplift cap in the written contract.
Sources
- business.gov.au — choosing business software and employer obligations
- Australian Competition and Consumer Commission — unfair contract terms in small business contracts
- Australian Taxation Office — GST on imported digital services and STP-enabled software
- Fair Work Ombudsman — record-keeping rules that affect archiving employee records
