What is outsourced payroll?
Outsourced payroll is a service where an external provider manages your payroll cycle and compliance. In practice that means onboarding staff, setting up pay items and awards, processing regular pay runs, calculating PAYG and super, lodging Single Touch Payroll (STP) reports with the ATO, paying super via a clearing house, handling terminations and EOFY finalisation, and keeping records aligned with your accounting system.
Providers may operate inside your software (e.g. Xero, MYOB, QuickBooks) or in their own environment and give you approval steps and reports. If they lodge to the ATO for you, they must be a registered BAS or tax agent. Many Australian businesses combine outsourced payroll with bookkeeping or BAS services for a tidy month‑end close.
Australian rules and deadlines to keep in view
- PAYG withholding registration is needed before withholding tax from employees, directors and some contractors.
- Single Touch Payroll (STP) Phase 2 is reported each pay event through compliant software and must be finalised by 14 July for most employers.
- Superannuation Guarantee is compulsory (rate currently 11.5% for 2024–25, legislated to reach 12% from 1 July 2025). Pay by the quarterly due dates to avoid the Super Guarantee Charge.
- Fair Work awards and enterprise agreements drive minimum rates, allowances, overtime and penalty rates. Correct classification is critical.
- Super stapling rules require you to request an employee’s stapled fund from the ATO if no fund is nominated.
- Payroll tax is a state/territory tax with different thresholds and lodgement cycles; check your state if your wages exceed the threshold.
- Workers compensation/WorkCover requires accurate wage declarations and may depend on industry classification.
If your situation affects tax or award interpretation, a BAS agent or tax accountant should review the setup before you run the first pay.
What to compare before you commit
Scope
Confirm exactly what is included: onboarding, awards setup, pay runs, STP lodgements, super payments, payroll tax, workers comp, terminations/ETP and EOFY finalisation. Clarify cleanup and migration work if you are switching systems.
Software fit
Check capability in your stack (e.g. Xero, MYOB, QuickBooks, Deputy, Tanda, Employment Hero). Ask for a clear workflow and sample reports, not just a tool list.
Turnaround and communication
Agree on cut‑off times for timesheets, approval checkpoints, how urgent corrections are handled and who signs off lodgements.
Commercial fit
Compare fee models (per employee, per pay run or monthly retainer), contract terms, implementation fees and who bears the cost of error correction with the ATO or super funds.
Costs and pricing in Australia
Pricing varies by headcount, pay frequency, award complexity and whether you need payroll tax and integrations. Typical patterns:
- Small teams (1–10 employees): roughly $150–$600 per month, or $6–$12 per employee per pay run.
- Setup or cleanup projects: from about $300–$1,500+, depending on history, awards and migrations.
- Add‑ons: timesheet/rostering integrations, payroll tax returns, ETP/long service leave, workers comp declarations.
Cheapest is not always safest. Look for documented processes, registrations and clear responsibility for lodgements and payments.
In‑house vs outsourced vs software‑assisted
- In‑house: full control; requires training, cover for leave and staying current with STP2 and awards.
- Software‑assisted: you run payroll using tools like Xero/MYOB; good for simple needs with confident operators.
- Outsourced: specialists handle processing and reporting; you retain approvals and visibility with fewer errors and better continuity.
Many businesses blend approaches: internal approvals with an external BAS agent for compliance and EOFY finalisation.
Checklist to get ready for outsourcing
- ABN and PAYG withholding registration confirmed.
- Employees classified to the correct award/level, agreed hours and pay cycles documented.
- Employee data: TFN, date of birth, address, bank details, super choice or stapled fund reference.
- Software access: payroll file, timesheets/rostering, and bank ABA file permissions if required.
- Historical records: year‑to‑date balances, leave accruals, prior STP submissions and super payments.
- Decide on scope: compliance‑only vs advisory support, and who approves changes each pay run.
If you’re starting fresh, see our best accounting software guide and the BAS agent vs accountant comparison to get the right mix of tools and support.
Best next steps
Decide the outcome you want first: accurate pay runs, clean STP history, award‑compliant rates, on‑time super or a full payroll handover. Shortlist providers who can show they deliver that outcome in your software, not just talk about it.
Use the service pages to move from research into action: Payroll, Bookkeeping, BAS, Tax and the broader accounting services hub. If you want quick guidance, use the form below and outline your situation.
Frequently asked questions
What is outsourced payroll?
It’s when a payroll bureau, BAS agent or accountant runs your payroll for you, including pay runs, PAYG and super calculations, STP Phase 2 lodgements, super payments and EOFY finalisation. You still approve changes and maintain oversight.
What does it include and exclude?
Inclusions typically cover onboarding, awards setup, pay processing, STP, super payments, terminations/ETP, payroll tax returns (if applicable) and year‑end finalisation. It usually excludes legal HR advice, performance management and workplace relations rulings.
Who can lodge STP on my behalf?
You can lodge yourself via software. If a third party lodges, they must be a registered BAS or tax agent authorised by you. Ask for their registration details and engagement letter.
How much does outsourced payroll cost?
Small teams often see $150–$600 per month or around $6–$12 per employee per pay run. Setup and cleanup work commonly ranges from $300–$1,500+, depending on history and complexity.
Is using Xero/MYOB the same as outsourcing?
No. Software is the tool; outsourcing adds specialist people and processes to operate that tool and handle compliance deadlines for you.
When should I outsource payroll?
When deadlines slip, awards are complex, you are hiring quickly, super or STP finalisation is overdue, or you want better controls without hiring internally.
What are my next steps?
Work through the checklist above, decide your scope, and use the form below to request help. You can also review the Payroll services page and related hubs to compare options.