Introduction
Business owners often ask: “Why does payroll always end up costing more than advertised?”
The truth is, many UK payroll services headline with “from £25 a month”, but once setup fees, starter and leaver charges, auto-enrolment pension admin, and year-end filings are added in, the real figure can be two or three times higher.
These hidden payroll fees are one of the biggest frustrations for SMEs, especially when cashflow is already tight.
In this guide, we’ll break down the most common hidden payroll fees UK SMEs face in 2025/26, explain why providers charge them, and give you a checklist of questions to ask before signing up, so you can avoid nasty surprises and budget with confidence.
Why Do Payroll Providers in the UK Add Hidden Fees?
Many business owners assume hidden payroll fees are a trick, but in reality, most providers use pricing models that headline the lowest figure and leave the rest in the small print.
Payroll is more complex than it looks. Beyond simply running payslips, providers handle HMRC reporting, pension duties, year-end submissions, and employee changes. Each of these creates extra admin, and that’s where unexpected payroll charges often come in.
It’s a bit like booking a budget airline flight. The ticket might be £9.99, but once you add luggage, seat selection, and taxes, the true cost is much higher. Payroll works the same way.
The problem? SMEs rarely find out about these hidden payroll fees until after they’ve signed a contract, leaving them stuck with higher-than-expected costs. For a full breakdown of payroll outsourcing prices in 2025/26, see our Payroll Costs Guide.
Setup & Onboarding Fees
One of the first hidden payroll fees UK SMEs encounter is the setup charge. While many providers headline with “from £25 per month,” they often add a one-off fee to cover transferring your employee data, registering with HMRC, and configuring pension schemes.
For small businesses, this setup fee can range from £25 to £200. For larger or more complex payrolls, it can climb to £500–£1,000+. Some providers call it an “onboarding fee” or payroll bureau setup fee, but it’s the same thing.
The issue is that these charges aren’t always made clear until the contract is ready to sign. That means business owners can be caught off guard with an unexpected upfront cost.
Question to ask before signing: “Is there a setup or onboarding fee, and is it fixed or based on my number of employees?”
For a full comparison of typical costs, see our Payroll Costs Guide.
Starters & Leavers
One of the easiest ways payroll bills creep up is through starter and leaver fees. Most providers charge extra for producing P45s, P46s, and setting up new employees in the system, often listed as “new employee setup fees” or “termination payroll costs.”
On paper, these charges look small, usually £5–£10 per employee, but they add up. A business with 20 staff and average turnover (20% a year) could pay £200–£400 annually in extra charges just for employee changes.
Some payroll bureaus roll these into their flat monthly fee, but many treat them as billable extras, which means SMEs are left facing surprise costs they didn’t plan for.
Question to ask before signing: “Are starter and leaver forms, like P45s and new joiner setup, included in the monthly payroll fee, or charged separately per person?”
Want to see how these charges fit into the bigger picture? Check our Payroll Costs Guide for a full breakdown.
Auto-Enrolment Pensions
Auto-enrolment is mandatory for all UK employers, but many SMEs don’t realise their payroll provider may charge extra for it. These hidden payroll fees often show up as charges for opt-ins, opt-outs, postponements, and the re-declaration of compliance.
The amounts vary. Some providers include pension admin in their standard fee, but many charge £1.50–£2.50 per employee per change. That means a small team of 10 staff could face £150–£250 in extra charges a year, just for pension-related admin. These are sometimes called workplace pension payroll fees, but however they’re labelled, they can still catch business owners off guard.
The frustration for SMEs is that these costs are rarely made clear up front — leaving them surprised when the first invoice arrives. According to The Pensions Regulator, employers remain legally responsible for compliance, which makes it vital to know exactly what’s covered in your payroll contract.
Question to ask before signing: “Does my monthly payroll fee include all auto-enrolment pension duties, or will I be charged per employee change?”
To see how pension costs fit into your overall payroll budget, visit our Payroll Costs Guide.
Year-End Filings & Reports
Another hidden payroll fee UK SMEs often overlook comes at the end of the tax year. Payroll providers frequently charge extra for producing P60s, P11Ds, and benefits-in-kind reports. These are sometimes listed as year-end payroll reporting costs or annual payroll charges UK.
Some bureaus include these filings in their standard package, but many add them as a bolt-on. Costs typically run at £5–£10 per employee, which means a 20-person team could be looking at £100–£200 in additional charges each year.
For SMEs, this is frustrating because year-end tasks are non-negotiable: every employer must provide P60s and report benefits to HMRC. According to HMRC, employers are legally required to complete these filings, which makes it vital to confirm what your payroll fee actually covers.
Question to ask before signing: “Are P60s, P11Ds, and all year-end payroll reports included in my monthly fee, or billed separately per employee?”
For more guidance on planning ahead, see our Payroll Costs Guide and Cashflow Forecasting Blog.
Ad-Hoc Reports
Beyond the basics, many UK payroll providers charge extra for ad-hoc reporting requests. These can include lender statements, CIS breakdowns, HR reports, or tailored management reports. Some providers also call these custom payroll reporting costs or payroll bureau reporting charges UK.
Fees are usually modest on a one-off basis, often £20–£50 per report , but for SMEs that need several across the year, the costs can quickly mount. A business applying for finance, for example, may be asked for multiple payroll reports to support their application. According to British Business Bank, lenders often require payroll and financial records as part of the loan assessment process, which means these “optional” reports may be unavoidable.
Some bureaus include a limited number of reports in their package, while others bill every request separately. The key is knowing where you stand, so there are no surprises when an urgent report is needed.
Question to ask before signing: “What reports are included in my payroll fee, and what counts as an extra charge?”
For more examples of hidden payroll costs, see our Payroll Costs Guide.
The Real Cost of a £25 Payroll Service
Many providers headline with payroll packages “from £25 per month.” But once the hidden payroll fees are added, setup, starters and leavers, pensions, year-end filings, and ad-hoc reports, the true payroll cost for UK SMEs is often far higher.
For example, a business with 10 employees might expect to pay £25 a month. In reality, once the extras are factored in, the monthly bill is often closer to £75–£100.
Here’s how it breaks down:
- Setup fee: £100 (one-off)
- Starters/leavers: £5–£10 each
- Auto-enrolment changes: £1.50–£2.50 per employee
- Year-end filings: £5–£10 per employee
- Ad-hoc reports: £20–£50 each
According to the Chartered Institute of Payroll Professionals (CIPP), over 60% of SMEs outsource payroll to save time and reduce compliance risk, but many underestimate the full payroll price when hidden extras are added.
The takeaway? A £25 payroll service may look cheap up front, but the small print often tells a different story. That’s why it pays to look for providers who offer transparent payroll pricing from the outset.
Question to ask before signing: “Can you show me a worked example of the total payroll cost for a business of my size, including all extras?”
For a full comparison by business size, see our Payroll Costs Guide.
How UK SMEs Can Avoid Hidden Payroll Costs
The good news is that hidden payroll fees aren’t inevitable. With the right questions upfront, SMEs can avoid surprises and get clarity on the true payroll cost from UK payroll providers.
Here’s a simple checklist to use before signing any payroll contract:
- Setup: Ask if there’s a fixed setup or onboarding fee.
- Starters & leavers: Confirm whether P45s, P46s, and new joiner setup are included.
- Pensions: Check if auto-enrolment duties are part of the monthly fee or billed separately.
- Year-end filings: Make sure P60s, P11Ds, and benefits-in-kind reports are covered.
- Reports: Find out which reports are included, and what counts as an extra charge.
By running through this list, you’ll know whether your provider is offering transparent payroll pricing or leaving you open to unexpected payroll charges. According to GOV.UK, employers remain responsible for payroll compliance, so clarity on fees is essential.
For a full breakdown of costs and examples by business size, see our Payroll Costs Guide and Cashflow Forecasting Blog.
Conclusion & Next Steps
Hidden payroll fees can feel like a nasty surprise, but they don’t have to be. By asking the right questions up front and checking what’s included, SMEs can budget accurately and avoid being caught out by extras.
The key is finding a payroll partner who offers transparent payroll pricing, so you know exactly what you’re paying for: no hidden setup charges, no surprise pension admin bills, and no unexpected reporting fees. With UK payroll costs rising, this clarity matters more than ever.
According to a recent CIPP survey, over 60% of SMEs now outsource payroll, but many still underestimate the impact of hidden charges. Choosing the right provider means you avoid these traps and keep control of your costs.
At Heights Accountancy, we believe clarity builds confidence. That’s why our payroll packages are straightforward, with clear pricing and no fine print.
👉 For a complete breakdown of payroll costs, read our Payroll Costs Guide.
👉 To understand how payroll fits into your wider cashflow, see our Cashflow Forecasting Blog.
👉 Or, if you’re ready for a transparent payroll solution, book a discovery call with Heights today.