Payroll has a reputation for being one of the most frustrating parts of running a business. In fact, around 40% of small business owners say financial tasks like payroll are their most time-consuming tasks.
The upside is that you have options. You can either manage payroll in-house with your own staff and software or outsource the entire process to a third-party provider.
How much does each approach cost in Kenya? And which makes the most sense for your business?
In this guide, we’ll break down both in-house and outsourced payroll service rates, the extra fees you’ll want to watch for, and help you weigh the trade-offs of each.
In-House Payroll Service Rates
In this scenario, you hire an in-house payroll officer and invest in payroll software.
Most payroll systems in Kenya cost between KSh 23,200 and KSh 150,800, depending on the number of employees and the provider.
Many of these systems are one-time purchases, usually covering up to 10 employees, while others charge a monthly subscription that scales with your headcount.
For example:
- Entry-level systems for small teams start from around KSh 20,000–30,000 as a one-time purchase.
- More advanced systems with more comprehensive capacity can cost between KSh 60,000 and 150,000+.
- Subscription-based options typically range from KSh 1,500 to 10,000 per month, with fees scaling as your employee count increases.
Keep in mind that the software is only one part of the cost.
You’ll also need an in-house payroll officer to run it. Payscale estimates the average payroll officer salary in Kenya is about KSh 761,914 per year, before factoring in benefits and allowances.
So, if you’re an SME handling payroll in-house, your annual costs will include the software license or subscription, plus the payroll officer’s salary package.
Below is an estimate of what SMEs in Kenya might expect to pay, depending on their size.
The figures include a one-time payroll software license, a one-time setup fee, and the annual salary of an in-house payroll officer.
| Employees | Software/License (One-Time, KSh) | Setup Fee (One-Time, KSh) | Payroll Officer Salary (Annual, KSh) | Total Estimated Year 1 Cost (KSh) |
| Less than 10 | 23,200 | 2,900 | 761,914 | 788,014 |
| 10–20 | 70,000 | 5,000 | 761,914 | 836,914 |
| 50 | 60,000 | 10,000 | 761,914 | 831,914 |
In subsequent years, the main recurring expense will be the payroll officer’s salary, with only minimal system maintenance or upgrades if required.
Outsourced Payroll Service Rates
This is also a popular option if you’d rather have a third party take care of payroll on your behalf.
We might be biased because this is our area of expertise, but we believe this is one of the best options for growing businesses.
Outsourcing payroll will save you time and reduce administrative overhead.
It is especially useful if you don’t have the budget for a full HR department to make sure payroll is compliant with NSSF, SHIF, and PAYE as required by labour laws in Kenya.
Most payroll service providers charge a fixed monthly fee plus a per-employee fee.
- Base fee usually ranges from KSh 3,875 to 15,000 per month
- Per-employee fee typically between KSh 516 and 1,500 per employee
An SME with 15 staff members would usually pay KSh 2,500–10,000 upfront for statutory setup, then budget between KSh 5,000 and 18,000+ each month for payroll processing services.
What Do You Get with Outsourced Payroll?
When you outsource payroll, the provider takes over the complex, repetitive tasks that come with paying employees. Most providers in Kenya include:
- Salary calculations: Processing gross pay, deductions, and net pay for each employee every month.
- Statutory compliance: Withholding and remitting PAYE, NSSF, and SHIF contributions to the relevant government bodies on time.
- Disbursement of salaries: Ensuring employee payments are sent accurately and on schedule.
- Payslips and employee access: Generating payslips and giving staff secure access to their pay information.
- Payroll reporting: Providing reports that highlight payroll trends and support better financial decisions.
- Support with cash flow gaps: Some providers may offer payroll advances to help cover salaries when cash flow is tight.
Extra Costs to Watch Out for in Payroll Outsourcing Services in Kenya
Usually, the figure you get quoted for outsourced payroll might not give you the full picture. Be sure to look into these charges that might increase your bill at the end of the year.
1. Onboarding and Setup Fees
Many payroll service providers charge initial fees for setting up your account and customizing services to your needs. These costs can range from KSh 2,500 to KSh 10,000 for SMEs. Larger organizations, because they have more employees, will potentially face higher charges.
2. Per-Employee Processing Fees
Some providers impose additional charges per employee processed, typically between KSh 150 and KSh 750.
3. Currency Exchange and Transaction Fees
If you operate internationally, currency conversion fees may apply when paying employees in different currencies. Additionally, international wire transfer fees can add to the overall cost.
4. Compliance and Legal Consultation Fees
While Payroll outsourcing companies handle statutory compliance, some may charge extra for legal consultations, contract modifications, or updates on regulatory changes. These fees are often not included in standard service agreements.
5. Termination and Exit Costs
Ending a contract with a payroll provider may incur termination fees or other exit-related expenses, depending on the terms of your agreement.
So, before signing an SLA with your payroll services provider, make sure to:
- Ask for a full pricing breakdown so that each deliverable and cost is clear
- Confirm which services are included and which are optional.
- Check for fees related to employee changes, terminations, or contract updates.
- Negotiate for a customized agreement so you can forecast monthly payroll costs accurately.
Cost Isn’t Everything: 3 Other Considerations for SMEs
By now, based on the calculations we’ve done, you have a better idea of which option might be a better fit for your budget.
However, please note that ‘how much you pay’ is not the only consideration to make. You also have to think about these three other things.
1. Payroll errors
Errors tend to happen more often when you handle payroll in-house because there’s usually no extensive quality assurance.
In fact, one report shows that payroll errors occur nearly twice as often with in-house payroll compared to outsourced payroll.
Often, it comes down to one employee rushing to meet deadlines.
By contrast, outsourcing gives you a Payroll processing partner with multiple checks in place to minimize mistakes. If the mistakes do happen, they’re corrected quickly.
2. Access to HR expertise
Most payroll processing services, including Bridge Talent Management, are full HR consultancies.
In other words, you get access to a partner that keeps tabs on all statutory requirements and ensures that every inch of payroll processing is fully aligned with legal requirements.
3. Reporting
With in-house payroll processing, you have the benefit of quick access to all your raw data. You can also customize reports based on your business needs.
On the other hand, with outsourced payroll processing, you may not have the benefit of ad hoc reports. However, many providers are flexible enough to provide access to a dashboard that generates ready-to-use reports.
In-House Vs. Outsourced Payroll Pricing Comparison
Below is a final side-by-side comparison to help you settle on the best service for your business.
| Factor | In-House Payroll | Outsourced Payroll |
| Costs | One-time license fee, setup fee, plus annual salary of payroll officer (≈ KSh 761,914). Higher fixed costs for SMEs. | Base monthly fee (KSh 3,875–15,000) + per-employee fee (KSh 516–1,500). Predictable and scales with the workforce. |
| Compliance | Depends on the level of in-house expertise. | Handled by a provider who stays current with NSSF, SHIF, PAYE, and labour law requirements. |
| Risk of errors | Higher, since one person usually manages payroll, and mistakes can go unnoticed. | Lower, thanks to multiple checks and faster error correction. |
| Reporting | Full access to raw data and customizable reports. | Ready-to-use reports and dashboards, but less flexibility for ad-hoc reporting. |
| Employee access | Payslips generated internally. | Payslips and portals are usually included, giving staff secure access to pay info. |
| Scalability | Adding more employees may require upgrading software or licenses. | Easily scales with per-employee pricing since the provider adjusts as your team grows. |
| Support | Limited to internal staff capacity. | Comes with dedicated HR and compliance support |
Ready to Simplify Payroll? Let’s Talk
If you have decided to go with outsourcing, Bridge Talent Management has the right solution for your business. Our HR management services go beyond processing salaries to include:
✓ Real-time HR data processing and an employee information database
✓ Automated payslips and P9 forms
✓ Staff payroll and leave management
✓ Leave tracking tools
✓ Full compliance with Kenyan tax authorities
✓ Dedicated HR specialists who support you as your workforce grows
Book a free consultation with our payroll experts today to experience how effortless payroll can be.
FAQs
How much do payroll services cost?
Payroll services in Kenya typically cost between KSh 3,875 and 15,000 per month as a base fee, plus KSh 516 to 1,500 per employee. For a 15-person company, you’ll budget around KSh 5,000 to 18,000 monthly after paying initial setup costs of KSh 2,500 to 10,000. The exact cost depends on your employee count and the services included in your package.
What is a payroll fee for employees?
A payroll fee for employees is the per-person charge that payroll service providers add to their base monthly fee. In Kenya, this employee processing fee ranges from KSh 516 to 1,500 per staff member and covers salary calculations, statutory deductions, payslip generation, and compliance management.
Which is more expensive between in-house payroll processing and outsourced payroll?
In-house payroll is typically more expensive for SMEs, with first-year costs reaching up to KSh 788,014. Outsourced payroll costs significantly less at KSh 60,000 to 216,000 annually for most small businesses.
What should you look for in a payroll service provider?
Choose a provider that offers comprehensive statutory compliance with NSSF, SHIF, and PAYE requirements, transparent pricing with no hidden fees, and reliable customer support. They should also provide employee self-service portals, detailed reporting capabilities, and have experience with businesses your size.
Contact Bridge Talent Management to learn more about how we can help simplify your payroll processing.
