At what point does it actually make sense to stop running payroll yourself? For most small business owners, the question isn’t whether outsourcing payroll would help – it’s whether it’s worth it yet at their current size. Here’s a straightforward way to work that out.

The Real Cost of Doing Payroll Yourself

When business owners compare “outsourcing cost” against “doing it myself,” they usually only count software subscription fees. That’s a small part of the real cost. The fuller picture includes:

  • Your time or your bookkeeper’s time, every single pay cycle, not just at busy periods
  • Software and update costs to stay compliant with STP Phase 2 and upcoming Payday Super requirements
  • Error correction time – reconciling SG shortfalls, fixing misclassified pay items, amending STP submissions
  • The cost of getting it wrong – the superannuation guarantee charges for SG shortfalls, ATO penalties for reporting errors, and in the worst cases, Fair Work underpayment claims

Add these up over a year, and manual or unsupported payroll is rarely as cheap as it looks on paper – particularly once headcount grows past a handful of employees or you introduce casuals, under-18 workers, or multiple pay rates.

Pros and Cons of Outsourcing Payroll

Pros:

  • Frees up owner or internal staff time for revenue-generating work
  • Reduces the risk of STP, SG and award compliance errors
  • Gives you access to specialist knowledge without a specialist salary
  • Scales up or down with your headcount without hiring/firing internal payroll staff
  • Keeps you ahead of regulatory changes like Payday Super, rather than scrambling to react

Cons:

  • You lose some day-to-day control over the mechanics of the pay run
  • Requires clear communication of hours, leave and changes each cycle – the provider can only work with what you give them
  • Ongoing cost, rather than a cost that only appears when things go wrong (though as above, that’s often a false economy)
  • Quality varies significantly between providers – the wrong one can create as many problems as it solves

At What Point Does It Make Sense?

There’s no single employee-count threshold, but a few signals suggest it’s time to look seriously at outsourcing:

  • You’re spending more than an hour or two per pay cycle on payroll admin, chasing hours, or fixing errors
  • You’ve had an SG or STP compliance issue in the last 12 months – even a small one
  • You’ve hired your first casual or under-18 employee and aren’t confident about SG eligibility rules
  • You employ across more than one state and payroll tax thresholds are getting harder to track
  • Payday Super is landing in July 2026 and you haven’t yet worked out how it changes your cash flow and pay cycle

If two or more of these apply, outsourcing is very likely to pay for itself – not just in time, but in avoided compliance risk.

What a Good Small Business Outsourcing Relationship Looks Like

For small businesses specifically, the ideal setup usually isn’t a large payroll bureau processing you as one of thousands of anonymous clients. It’s a smaller advisory-led provider who:

  • Actually knows your business, your award coverage, and your growth plans
  • Bundles payroll with related compliance work (BAS, super reconciliation) so nothing falls through the gaps between providers
  • Can explain, in plain language, why a number changed or why an SG calculation looks the way it does
  • Is proactively preparing you for Payday Super rather than waiting for it to become urgent

Making the Call

Outsourcing payroll isn’t an all-or-nothing decision, and it isn’t only for larger businesses. Even a five-person business can be exposed to real compliance risk – SG errors and STP issues don’t care about company size. The right test isn’t “am I big enough to outsource,” it’s “can I currently guarantee my payroll is fully compliant, every cycle, without disproportionate time and stress.” If the answer is no, it’s worth a conversation.

RV Advisory Group supports small and growing Australian businesses with payroll, BAS and superannuation compliance. Get in touch for an honest assessment of whether outsourcing makes sense for where you’re at.

Frequently Asked Questions

Key signals include spending more than an hour or two per pay cycle on admin, a past SG or STP compliance issue, hiring your first casual or under-18 employee, employing across multiple states, or needing to prepare for Payday Super from July 2026.

It depends on the comparison. Factoring in owner or staff time, software costs, and the cost of correcting errors (including the superannuation guarantee charge for SG shortfalls), outsourcing is often cheaper than it first appears against “doing it yourself.”

You lose some day-to-day control over the mechanics of the pay run, and quality varies significantly between providers – a poor-fit provider can create as many problems as it solves.

For small businesses, a smaller advisory-led provider who understands your specific business and bundles payroll with related compliance work (like BAS) often works better than being one of thousands of clients at a large bureau.

From 1 July 2026, super must be paid every pay cycle instead of quarterly, which changes cash flow planning. Small businesses without dedicated finance staff are often the least prepared for this shift.

Yes. Some businesses outsource the full function; others keep processing in-house and outsource only the compliance review, STP reporting, or superannuation validation layer.