Outsourcing payroll: Costs, benefits, and providers at a glance

70 emails a day. Data in Excel, via WhatsApp, as a scan. Clients who ignore their own software and still want to be billed on time. If this sounds familiar, you are not alone.

According to a DIHK survey, there is currently a shortage of over 50,000 skilled workers in payroll accounting in Germany. At the same time, complexity is increasing: new reporting obligations, collective agreements, minimum wage increases. The consequence: Many payroll offices and tax consultants have to turn clients away because they lack capacity.

A solution that more and more companies are utilizing: outsourcing payroll processing. In this article, you will learn what outsourcing specifically means, what costs to expect, who it is worthwhile for, and what to consider when selecting a provider.

What does outsourcing payroll mean?

Outsourcing payroll means transferring all or part of the salary processing to an external service provider. They take over the calculation of salaries, the creation of pay slips, reporting to social security agencies and tax offices, as well as the management of personnel master data.

Three models compared

Full-service outsourcingThe service provider takes over the complete process from data collection to pay slip distribution. You only provide the raw data.

Hybrid modelYou use a digital platform for data collection and communication with employees. The actual processing occurs at the service provider.

Software with serviceYou process payroll yourself but have a partner for complex cases and support.

The difference from a pure software solution: In outsourcing, a person takes responsibility for correct accounting. In software solutions, this responsibility remains with you.

Typical services provided by an outsourcing partner

• Collection and verification of all payroll-relevant data

• Calculation of gross and net salaries

• Creation of monthly payroll statements

• Reports to health insurance companies, tax office, employers' liability insurance associations

• Contribution certificates and wage tax registrations

• Certificates (employment certificate, income certificate)

• Year-end closing work (wage tax certificate, annual social security report)

The 5 most important advantages of outsourcing payroll

1. Time savings in routine tasks

The biggest advantage is evident in everyday life. Let's take a concrete example: a sick leave report.

With manual processing, the process typically takes 30 minutes: open the email, save the attachment, transfer data to the personnel file, record absences, ask follow-up questions if necessary, document.

With a modern outsourcing partner like project b., this effort is reduced to under 5 minutes. The AI assistant RITA automatically recognizes the sick leave report, extracts the relevant data, and prepares everything for approval. You only need to review and confirm.

"I have an email flood, up to 70 emails a day. I sort them with flags in Outlook, and I also have to file them in document management. That all takes a lot of time. But I have no time to improve it."

This is exactly where outsourcing comes in: Instead of sorting data, you can focus on consulting and client management.

2. Cost efficiency through economies of scale

The calculation is simple: An internal payroll accountant costs you at least 45,000 € per year (salary plus overhead). Software licenses, training, staffing arrangements, and office supplies add to this.

Outsourcing costs, depending on the provider, between 10 and 40 € per employee per month. For 50 employees, that amounts to 500 to 2,000 € monthly, which is 6,000 to 24,000 € annually.

The break-even calculation

From about 150 to 200 employees, having your own payroll processing can be justified. Below that, outsourcing is almost always cheaper when all costs are considered.

Moreover: An external service provider spreads its fixed costs across many clients. These economies of scale are passed on by good providers as lower prices.

3. Avoiding the skilled labor shortage

"We currently have no capacity for new clients and even have to decline them."

So describes a larger payroll office its situation. This is not an isolated case.

If you outsource your payroll processing, you avoid this problem. The outsourcing partner has the personnel and expertise. You can grow without having to hire proportionally more employees.

Specifically, this means managing 40 new mandates with only 0.5 FTE more. Instead of a full position, you only need someone for the interface to the service provider.

4. Compliance and error reduction

Current industry studies show: In manual payroll processing, errors occur in up to 8 % of the statements. That's 8 erroneous statements per month for 100 employees that need to be corrected.

Professional outsourcing partners achieve error rates below 1 %. The reason: standardized processes, automatic plausibility checks, and specialized personnel who only do payroll processing.

Additionally, there is the complexity of the German wage system: collective agreements, social security, minimum wage, ELStAM reporting, private health insurance employer notifications. Those who deal with this daily make fewer mistakes than someone who does payroll "on the side."

5. Scalability without building staff

Your company is growing? Traditionally, you would now have to create another position in payroll accounting. With outsourcing, the service provider simply scales up.

Whether you have 50 or 500 employees: the processes remain the same. The price per employee often decreases at higher volumes.

For tax advisors, this means: You can offer your clients a complete package without having to build up the capacity yourself. The keyword is "Payroll by project b." Your clients receive professional payroll processing, and you maintain the client relationship.

Cost structure: What to expect

Pricing models at a glance

Per employee per monthThe most common model. You pay a fixed amount for each processed employee. Typical range: 10 to 40 €.

Flat rate modelsA fixed monthly price regardless of the number of employees. Useful with a stable workforce and predictable costs.

Base fee plus variable costsA monthly base fee (e.g. 100 €) plus a reduced price per employee. Often the case with smaller companies.

Realistic cost ranges

Prices vary depending on complexity: construction payroll, short-time work, or shift models cost more than simple salary statements.

Watch out for hidden costs

When calculating, don’t forget these items:

Setup feesMany providers charge a one-time setup fee for the initial setup. Typical are 200 to 1,000 €.

Special casesCompany audits, short-time work compensation, or construction payroll are often billed separately.

InterfacesConnecting to your HR system or financial accounting can incur additional costs.

TerminationPay attention to contract terms and termination deadlines. With project b., there is no minimum contract duration.

Who can benefit from outsourcing? Decision matrix

For tax advisors and firms

Situation: You have clients asking for payroll processing but no capacity or desire to process it yourself.

Solution: With an outsourcing partner like project b., you can offer your clients a complete package. Payroll processing is handled by project b., you keep the client relationship and make a profit.

Advantage: Manage more mandates without having to build your own payroll team. Clients get everything from one source.

For payroll offices with growth ambitions

Situation: You want to grow but can't find skilled workers. Every new client requires proportionally more staff.

Solution: The project b. platform digitizes your preparatory payroll accounting. RITA handles data collection, allowing you to focus on quality control and client consulting.

Advantage: Capacity for 40 new mandates with only 0.5 FTE more. Competitive advantage through AI positioning.

For HR managers in medium-sized businesses

Situation: Your company is growing, but a dedicated payroll department is not yet cost-effective. Or your payroll accountant is retiring.

Solution: Full-service outsourcing with a digital employee portal. Your employees report absences and master data changes themselves, and the service provider processes payroll.

Advantage: Modern processes without the need for your own IT investment. No dependence on individual employees.

Decision table

Provider landscape in Germany: Why project b. is the best choice

The market for payroll service providers in Germany can be divided into three categories:

Classic payroll offices

Traditional payroll offices often still work with email and Excel. Data comes in, is manually collected, checked, and processed. This works but is time-consuming and error-prone.

Tax advisors with payroll services

Many tax advisors offer payroll processing as an additional service. The advantage: everything from one source. The disadvantage: payroll is often not their core competency, and prices are based on the tax advisor's fee schedule.

Tech-enabled services: project b. as market leader

project b. combines the best of both worlds: personal support from real payroll experts plus AI-supported automation from RITA.

The facts speak for themselves

Setup in 30 minutesWhile other providers take weeks for onboarding, you can start with project b. within 30 minutes. No complicated setup, no long waiting times.

DATEV integration without media breaksproject b. is designed as a pre-system and integrates seamlessly into DATEV, Agenda, and SPS. Your existing infrastructure remains intact. Approved changes flow directly into the payroll system.

AI assistant RITARITA recognizes and extracts payroll-relevant information from all formats: emails, PDFs, Excel, scans. No matter how your clients send data, you receive it uniformly and structured.

Time savings of up to 70 %10 processes that AI already handles today: from master data collection to compliance checking. Pre-recording becomes predictable, reproducible, and scalable.

ISO 27001:2022 certifiedAll data is processed in compliance with GDPR and stored exclusively in the EU. No compromises on data security.

Full control with humansRITA makes suggestions, but the final decision always rests with the payroll clerk. Every change is transparent and verifiable documented.

No minimum contract durationYou can cancel project b. at any time. This shows: project b. convinces through performance, not through contractual obligations.

Investors who know what they are doingBehind project b. are Lakestar (known for Spotify, Delivery Hero), QED Investors (Klarna, Credit Karma), and other experienced investors.

The difference in practice

"We see the most efficiency gains with you when the client can still do what they want, but we get the data uniformly."

This is the core of project b.: You do not force your clients to change their behavior. RITA takes on the translation work between client chaos and structured payroll processing.

More details about the comparison can be found in the article Personio vs. project b.: The great comparison.

Checklist: 10 criteria for provider selection

Before deciding on a provider, check these points:

1. DATEV/Agenda/SPS compatibility
   Your tax consultant works with DATEV? Then the outsourcing partner must offer seamless integration. Media breaks waste time and cause errors.

2. ISO 27001 / GDPR compliance
   Payroll data is sensitive. Ask about certifications and where the data is stored. EU servers are mandatory.

3. Personal contact person
   In case of problems, you don’t want to be stuck on a hotline. A dedicated customer success manager is invaluable.

4. Digital client portal
   Modern providers offer a portal where employees can report absences and change master data. This significantly reduces emails.

5. Transparent pricing structure
   No hidden costs. You should know in advance what special cases will cost.

6. Industry experience
   Construction payroll, nursing, gastronomy: some industries have specific requirements. Ask for references from your industry.

7. Response times and SLAs
   What happens if data is missing right before billing? Clarify response times and service level agreements.

8. Onboarding process
   How long does setup take? What do you need to provide? A good provider has a clear documented process.

9. Exit strategy
   What happens if you want to switch? How do you get your data back? No minimum contract duration is a good sign.

10. Check references
    Ask for contacts with existing clients. A good provider has nothing to hide.

Conclusion: The next step

Outsourcing payroll processing is not a question of whether, but how. The advantages are clear: time savings, cost efficiency, avoiding the skilled labor shortage, fewer errors, better scalability.

The crucial question is: With whom?

project b. combines real payroll expertise with modern AI technology. Setup in 30 minutes. DATEV integration without media breaks. Full control with humans. ISO 27001 certified. No minimum contract duration.

Three ways to learn more:

1. Free online demo: See RITA in action. Not a sales event, but an honest insight into the platform.

2. No-obligation consultation: 30 minutes, your questions, our answers. We'll jointly explore whether project b. fits your situation.

3. Practical guide AI in payroll accounting: If you want to read first how modern payroll works.

All three options are free. No subscription, no hidden catches. You don’t have to decide anything today.