TL;DR
- The fees for payroll outsourcing in India usually range between INR 150 and INR 2,500 PEPM, depending on the degree of services needed.
- However, most mid-sized organizations lie within the INR 300 to INR 800 PEPM range.
- Start-ups perform well with a flat monthly rate; companies negotiate their own PEPM rates with discounts based on volumes.
- Setup costs, non-standard processing, and custom reports generally increase the cost by 20% to 40% from the stated PEPM and GST is levied thereon.
- The lowest quote isn’t usually the cheapest once compliance risk is priced in. Compare providers on the compliance track record first, price second.
This guide breaks down real 2026 pricing, the charges that inflate your bill after month one, and how to tell a fair quote from an underpriced one that gets expensive later.
What’s the Real Cost of Payroll Outsourcing in India?
The cost of outsourcing of payroll in India would be between INR 150 and INR 800 per PEPM for basic payroll processing and statutory compliance. However, full payroll management with HR support will be more expensive than this, reaching up to INR 2,500 PEPM. Basic services of payroll processing will cost less.
Setup and onboarding typically adds INR 5,000 to INR 30,000 as a one-time cost, depending on how complex your salary structures and existing systems are.
These are estimated industry benchmarks, not confirmed rates from a specific provider survey and that applies to every pricing table, headcount example, and cost comparison later in this guide too. Treat them as a planning range, not a quote. Your actual cost depends on company size, payroll complexity, how many states you operate in, the integrations you need, and how much compliance work you’re handing off versus keeping in-house.
Payroll Outsourcing Pricing at a Glance
The above range will tell you the possibilities, but the important thing is what tier is required by you. The providers in India generally offer their services in three tiers, each covering more than the previous one.
| Service Type | PEPM (INR) | Setup Cost | Best For | What’s Included |
|---|---|---|---|---|
| Basic Processing | 150–400 | ~5,000–15,000 | Companies with in-house compliance staff | Salary calculation, payslips, bank transfer files |
| Payroll + Compliance | 300–800 | ~10,000–20,000 | Most mid-sized businesses | Above, plus PF, ESI, PT, TDS filings |
| Managed Payroll + HR | 800–2,500+ | ~15,000–30,000 | Startups and companies without HR depth | Above, plus self-service portal, dedicated support, HR advisory |
Looking for transparent payroll outsourcing pricing with statutory compliance built in? Explore TankhaPay’s Payroll Outsourcing Services to get a customized quote based on your workforce.
Basic Payroll Processing (INR 150–400 PEPM)
This tier is processing only, not compliance. Calculation of the salary, preparation of payslip and generation of bank file is done at this stage. PF, ESI, PT and TDS filing is left to your team itself.
It is meant for a firm where you have somebody taking care of statutory filing and you want to relieve him of calculations. If there is nobody to do that job then it is not meant for you.
Setup cost at this level is INR 5,000–15,000, and support is generally via email or ticketing system, not a personal representative.
What does it include specifically? Salary calculation (fixed and variable), payslip preparation and distribution, and salary bank transfer file generation (in NEFT/RTGS/IMPS format). Not sure whether to opt for the basic level or DIY payroll management? Find out what the actual difference is between Excel-based and software payroll.
Standard Payroll + Compliance (INR 300–800 PEPM)
This tier folds in the statutory work, like PF, ESI, Professional Tax, and TDS filings moving to the provider on top of everything in basic.
It’s the bracket most mid-sized businesses land in and the point where a missed filing becomes the provider’s problem to catch, not yours.
What’s usually still missing at this level: a dedicated account manager, an employee self-service portal, and HR advisory support. Those sit one tier up, in Managed Payroll + HR.
What’s in the box, specifically: PF monthly ECR filing and challan generation, ESI contribution filing, Professional Tax calculation and deposit, TDS on salary under Section 192 with quarterly Form 24Q filing, Form 16 generation for every employee at year-end, and consolidated annual PF returns (Form 3A/6A). For the fuller month-to-month list, see TankhaPay’s payroll compliance checklist.
Is This the Same as Payroll Software?
No, and the pricing logic is different. Payroll software is a tool: you or your team still run payroll, and you pay a subscription regardless of who does the work. Payroll outsourcing is a service: the provider runs payroll for you, and the PEPM fee covers their labour, not just platform access.
If you have HR capacity and just want a faster tool, payroll software is usually cheaper. If you don’t have that capacity or don’t want to spend it on payroll outsourcing is what you’re actually pricing.
How Pricing Shifts With Your Headcount
Headcount is the most important variable in your final cost. The exact same service could end up costing double per person at a 20-employee company than at a 500-employee company. And here’s what the graph would look like.
| Company Size | Monthly Range (INR) | Typical PEPM |
|---|---|---|
| 1–25 employees | 8,000–40,000 | 400–800 |
| 25–100 employees | 30,000–80,000 | 300–600 |
| 100–500 employees | 80,000–2,20,000 | 250–450 |
| 500+ employees | Custom, negotiated | 150–300 |
This is the case for most service providers since the PEPM decreases when headcount increases due to fixed costs, which include the platform, compliance documentation, and account management, being split among more employees. Payroll for 2,000 employees does not cost relatively more than 20 employees.
Watch for the minimum billing charge. Most service providers apply a minimum floor of INR 10,000 to INR 25,000 each month, irrespective of the number of people. Let’s say there is a firm having five members, for which the quote made is INR 300 per employee per month. The estimated price works out to INR 1,500 a month; however, you will not end up paying this figure, as the minimum floor will be applied by the service provider.
A Quick Way to Estimate Your Own Number
The tables above give you ranges. Here’s how to turn a range into a number for your business.
Estimated monthly cost = (Employee count × PEPM rate for your tier) + one-time setup fee (amortised if you prefer) + expected off-cycle or reporting charges
Worked example: A 50 person organization using Standard Plan at INR 500 PEPM will have to spend around INR 25,000 per month, excluding set up costs. This falls within the INR 20,000-35,000 range already suggested in this guide for an organization of this size. Set up costs should be somewhere between INR 10,000-20,000, and two-three cycles annually can be budgeted for if bonuses and arrears are frequent in the industry.
Run this with your own headcount and tier, and you’ll land inside the right band before you ever get on a call with a provider.
The Different Ways Providers Structure Their Fees
Providers don’t all bill the same way, and the pricing model matters as much as the rate itself. Five structures cover most of what you’ll be quoted in India.
- Per Employee Per Month (PEPM). The most common method. A fixed amount per active employee per month is easy to budget and scale and is where most firms land.
- Flat Monthly Fee. A single fixed rate regardless of small headcount swings. Works well for startups with stable, small teams; gets expensive if you’re paying for capacity you don’t use.
- Tiered Pricing. Rates drop at defined headcount thresholds (say 0–50, 51–200, 201+). Predictable, but you can hit an awkward point just below a tier break where growing by one employee doesn’t yet earn the better rate.
- Custom Enterprise Pricing. Negotiated pricing by individual companies that usually includes pricing for payroll, compliance, and HR services all together. Lots of negotiations upfront, better pricing in the long run.
- Hybrid Pricing. A base flat fee plus a smaller PEPM on top. Common among providers with strong platform features and variable compliance-heavy add-ons.
- Per-Payslip / Per-Run. Flat transaction fee plus a smaller fee charged per payslip produced, per payroll run, not per month. Fits well for payroll systems with irregular payment frequency; expensive if you decide to use weekly payroll processing.
None of these is inherently better. The right one depends on how stable your headcount is and how much predictability you need in your monthly budget.
What Actually Moves the Price Up or Down
Two companies with identical headcounts can still get quotes that differ by 50% or more. A handful of factors explain almost all of that variation:
- Employee strength and projected growth rate
- Number of states the firm is operating in (each state has its own PT, LWF, and Shops & Establishments laws)
- Complexity of the payroll can include different pay scales, shift pay, and variable components
- Depth of compliance handled, from minimum statutory to full compliance management
- Whether attendance and leave management is included
- Handling of bonuses, arrears, and off-cycle payments
- Contractual or gig-worker payroll, which carries separate compliance requirements
- Need for international payroll, if any employee works outside India
- Custom reporting and API access
- Support level, from email tickets to a dedicated account manager
- In payroll frequency, monthly is the default; weekly or biweekly costs more
- Volume of exits and full-and-final settlement processing required
Multi-state operations specifically tend to add 15–30% to your base cost, since each state brings its own Professional Tax rates, Labour Welfare Fund rules, and registration requirements.
The Costs That Show Up After You’ve Already Signed
This is where “cheap payroll” quotes stop being cheap. The PEPM rate covers standard payroll processing. It doesn’t include the services that happen infrequently or outside the regular cycle.
| Hidden Cost | Typical Range | When It Hits |
|---|---|---|
| Setup and migration | ~INR 5,000–30,000 | Before go-live |
| Custom reports | ~INR 500–2,000 per report | Ongoing |
| Off-cycle payroll runs | ~INR 50–200 per employee, per run | When arrears or bonuses need processing outside the regular cycle |
| HRMS/accounting integration | ~INR 10,000–1,00,000 | One-time |
| Year-end tax filing (Form 16) | Included in most Standard tiers; INR 100–300 per employee in Basic tier | Annually |
| Data corrections after cutoff | ~INR 50–200 per correction | As needed |
| Employee onboarding/offboarding support | Sometimes billed separately | Per employee event |
| API access | Sometimes a separate charge | If required |
| GST | 18% on the service fee, standard for outsourced professional services in India | Every invoice |
The pattern across providers: base rates look attractive until the line items above get added. Ask for a full fee schedule, including whether quotes are pre- or post-GST, not just the headline PEPM, before signing
Does Outsourcing Actually Pay for Itself?
For most companies past a small handful of employees, yes. The return shows up in five places.
Time savings. A payroll manager plus one or two executives running payroll in-house can consume 40+ hours a month once compliance filings and query handling are included.
Compliance and penalty avoidance. According to the provisions of the EPF Act, an employee not making the required PF contribution is liable to damages at the rate of 1% monthly (equivalent to 12% annually) under Section 14B in place of the previous range of 5–25% provided by EPFO amendments of June 2024 along with a simple interest rate of 12% annually under Section 7Q. This translates into an annual penalty burden of about 24% with no lower limit other than the 100% maximum limit applicable in case of arrears.
HR productivity. Time freed from manual payroll processing goes toward recruitment, retention, and the parts of HR that actually need judgement.
Technology cost savings. Payroll software licences, updates, and IT support for an in-house system add up to usually more than businesses expect when they first price it out. A provider’s existing payroll automation absorbs a cost you’d otherwise carry yourself.
Reduced key-person risk. What happens if your one payroll person walks out? Your internal payroll process grinds to a halt. Outsourcing payroll doesn’t have that same key person risk.
Payroll Outsourcing: The Short Version
Where it helps: Saves you over 40 hours per month of internal effort, transfers compliance risk to an expert in compliance risk, gets rid of key person risk, and is cheaper than an internal team.
Where it doesn’t: you give up some direct control over process and timing, a provider’s error is still your employees’ problem until it’s fixed, and switching providers later means a data migration you’ll want to plan for.
In-House Payroll vs. Outsourcing: A Real Cost Comparison
In-house payroll comes with costs that do not appear on a single bill. These include salaries, software and consulting fees, which are normally charged separately, hence making it difficult to ascertain their cost until the bills are summed up. This is how the comparison turns out.
| In-House Payroll | Outsourced Payroll | |
|---|---|---|
| Software | Annual license, INR 1–3 lakh/year | Included in service fee |
| Staffing | Payroll manager + executive(s), INR 9–13 lakh/year for a 200-employee company | No dedicated headcount needed |
| Compliance | Consultant/CA fees, INR 1–2 lakh/year, plus your own filing risk | Included, provider is accountable |
| Accuracy risk | Dependent on individual staff | Standardized process, error-and-omission coverage from most providers |
| Scalability | Requires hiring ahead of growth | Scales with headcount automatically |
| Maintenance | Your responsibility | Provider’s responsibility |
For a 200-employee company, in-house payroll often runs INR 12–20 lakh a year once salary, software, and compliance costs are added together. The same headcount on an outsourced Standard tier (roughly INR 400 PEPM) comes to about INR 9.6 lakh a year — before accounting for the penalty risk that outsourcing removes entirely.
Curious how this compares in practice? Read In-House Payroll vs Outsourcing for a deeper breakdown.
What This Looks Like at Different Company Sizes
The ranges above are useful, but seeing them applied to an actual headcount makes the numbers easier to plan around.
- A 15-person startup. Cost per month for simple processes and compliance services will range from INR 6,000 to 12,000. Startups usually choose the fixed pricing model in this case, as they don’t have an exact headcount each month.
- A 50-person company. Standard payroll plus compliance runs about INR 20,000–35,000 a month. This is the point where most businesses stop doing PF and ESI filings themselves.
- A 200-person company. Expect roughly INR 60,000–120,000 a month for the standard tier service, depending on how many states you operate in and how complex your salary structures are.
- A 1,000-person company. The pricing moves to a negotiated PEPM model, usually between INR 200 and 350 per employee, making the cost for each month around INR 2–3.5 lakh.
How to Bring Your Payroll Outsourcing Bill Down
None of these require switching providers or downgrading service. They’re mostly about how and when you negotiate.
- Negotiate volume discounts early, even before you need them. Many providers will lock in a lower future rate tied to headcount milestones.
- Make your reporting requirements clear ahead of time. Custom report requests will be more expensive than volume-based pricing that was determined at the beginning.
- Ask about multiyear discounts. By committing to two or three years instead of an open contract, you can save 10-15% per month on the total cost.
- Find out all about the fees in advance of signing. Knowing about off-cycle and correction fees will help make budgeting realistic.
- Pick the right level based on your needs. If your HR department is already good at compliance, then the Basic or Standard level will be enough, Managed will just waste money.
Choosing a Payroll Outsourcing Provider: What Actually Matters
However, price comparisons are not everything. Check these things before you sign, no matter which level you are comparing:
- Compliance history. Have they received any PF or ESI penalty letters due to mistakes with existing customers?
- Processing time. 3–5 days is common for processing data submission to salary credit within the industry. This may vary based on the actual SLA of the provider.
- Data security certification. The provider handling your employees’ financial information must be ISO 27001 certified or an equivalent.
- Platform Quality. A cloud-based platform with self-service for employees is the bare minimum expected in 2026, not a value-add service.
- Exit Terms. Check the notice period and portability of data in case of switching to another provider.
- Scalability. Ask how they’ve handled an existing client’s 30%+ headcount growth in a single quarter.
Where Businesses Get This Wrong
Most overpaying isn’t about picking the wrong provider; it’s about missing one of these at the comparison stage.
- Comparison based on PEPM headline rate without taking into account what is covered at that rate level.
- Omitting the cost of the setup fee while comparing two similar quotes.
- Selecting the Basic plan despite the absence of in-house compliance expertise and finding out that PF & ESI submissions will still be needed, but not through the provider.
- Without taking into account the new Labour Codes. The Labour Codes are applicable since 21 November 2025, and the 50% salary rule will be impacting the calculation of basic salary and CTC. It will have an immediate effect on the calculation of PF, gratuity and Leave Encashment Liability, and consequently, this will directly increase your payroll costs irrespective of who processes your payroll. TankhaPay’s comprehensive guide on the new Labour Codes will tell you about the changes.
- Entering into multi-year contracts without undergoing the trial period first, binding the service provider before assessing their quality.
Bottom Line
Payroll outsourcing in India costs anywhere from INR 150 to INR 2,500 per employee per month, with most mid-sized firms falling into the INR 300–800 bracket. The figure that matters more than the headline PEPM is the number you get after adding setup charges, GST, and predictable off-cycle costs.
Evaluate providers on accuracy, compliance depth, and support responsiveness first. The lowest quote rarely stays the lowest once the first off-cycle run or compliance filing comes due.
For a full view of who else operates in this space, see Top Payroll Outsourcing Companies in India.
Frequently Asked Questions
How much does outsourcing payroll cost in India?
INR. 150 to INR. 2,500 per employee per month, based on what is required from just payroll processing or a complete package that involves statutory compliance with payroll and HR services.
Is payroll outsourcing cheaper than an in-house team?
Yes, generally, especially for companies having more than 20 employees or so. A 200-person company can save up to 30-40% on payroll costs as compared to maintaining a payroll department in-house.
What is the payroll outsourcing cost per employee?
Most mid-sized companies pay INR 300–800 per employee per month for processing plus compliance. Basic processing alone can run as low as INR 150–400.
Can startups outsource payroll?
Yes, and many do right from the start. Startups tend to opt for the flat monthly fee or basic-level offering and then go for compliance as soon as the number of employees exceeds founders’ manual capabilities.
Why do payroll outsourcing costs vary so much between providers?
The price will depend on the level of completeness of the service, its coverage by the number of states, the complexity of salary calculation, and additional compliance processing. Two offers that seem similar at first sight may be quite different in essence.
What affects payroll outsourcing pricing the most?
Compliance depth and multi-state operations are the biggest drivers, since each additional state brings its own Professional Tax, Labour Welfare Fund, and registration requirements.
Is payroll outsourcing worth it for a small business?
Usually, once compliance filing starts eating real time, typically around the 10-to-25-employee mark. Below that, a flat-fee service may be all you need.
Is my employee data secure with a payroll outsourcing provider?
Ask specifically about ISO 27001 certification, encrypted data transmission, and role-based access controls. TankhaPay’s parent company, AKAL Information Systems, holds ISO 9001, ISO 20000, and ISO 27001certifications.
TankhaPay, built by AKAL Information Systems, 26+ years in the industry, CMMI Level 5 appraised, and ISO 9001, ISO 20000, and ISO 27001 certified is a payroll platform combining payroll software, managed payroll outsourcing, domestic and international EOR, NATS apprenticeship management, and global talent mobility. Registered across 28 states in India, with 1,000+ client organisations.
