The average cost of payroll services can vary depending on the size of the company, number of employees, and services required. Outsourcing payroll is almost always more cost effective compared to handling it in-house.
The cost for outsourcing payroll services is made up of a base fee plus a fee per employee. Our survey of the top payroll services found that the cost to outsource payroll for a small business with 10 employees is $70 to $100 per month.
Payroll Cost / Company Size
Number of employees is the primary factor that determines the cost for payroll services. See how scaling up headcount affects the cost of a standard payroll service plan.
|Company||Base fee||Per employee||Cost for 10 employees||50 employees||100 employees|
Payroll outsourcing costs also depends on the package of services provided.
Payroll Service Packages
- Basic Payroll
- Standard Payroll
- Premium Payroll
Each offers different levels of service, affecting the overall cost. Consider which package of services you need, then compare providers.
Cost for Basic Payroll
$5 to $7 per contractor per month
Basic payroll is a good option when you only need to pay contractors.
Paying contractors is more straightforward and cost-effective than paying full-time employees. Companies like Gusto, Square, and SurePayroll provide affordable plans to simplify contractor payments.
Cost for Standard Payroll
$7 to $10 per employee per month
Standard payroll helps to pay your employees, and you also get features like tax filing and integrations with other apps.
Gusto, ADP, Zenefits, Square, and OnPay all offer slightly different service packages with different features and pricing structures, but they all have standard feature plans which will allow you to more easily run payroll at your business.
Cost for Premium Payroll
$21 to $59 per employee per month
Premium payroll includes HR support, employee engagement services, and could also include medical / dental insurance.
The broadest price range exists here because there’s the widest variety in services. Companies like Zenefits and Gusto offer a more enhanced version of their standard services with add-ons like tax credit processing and expense integration, while Justworks offers access to comprehensive employee benefits through a PEO.
Payroll Service Pricing Structures
|Frequency pricing||When a payroll outsourcing company charges you a flat fee every time you pay everyone on your payroll|
|Per employee / month||When a payroll company charges you a fee every month for each person you employ|
|Fixed pricing||When a payroll outsourcing company charges you a fixed amount at some specified interval|
|Custom quote||When a payroll company makes a custom quote for each of its clients|
While there are payroll companies which offer pricing based on each of these models, practically all of the industry leaders are per employee per month. However, there is an important distinction between how these companies price their services.
Some payroll companies charge a base fee of around $30-$40, plus an additional per employee per month fee. Others, like Zenefits, only charge per employee.
There are also DIY options that provide software for a licensing fee, allowing you to handle payroll yourself.
Standard Payroll Services
Payroll service providers or in-house payroll teams typically handle these tasks to ensure that employees are accurately compensated and all relevant taxes and insurances are properly managed.
- State and Federal tax withholding
- Time tracking
- Approving time off
- Overtime pay
- PTO, sick days, and holidays
- Bonus and commission pay
- Worker compensation
- Unemployment insurance
- Social Security and Medicare deductions
Payroll Add-On Charges
Aside from their normal pricing structures, many leading payroll companies offer additional services. When answering the question, “How much do payroll services cost?”, it’s necessary to consider the add on charges.
Add-on for Fee Services
- Multi-state payroll: $50 – $200 per month
- I-9: $0 – $5 per form (usually a one-time cost per employee)
- W-2: $5 – $20 per form
- 1099: $5 – $20 per form
- 401(k): $500 – $2,000 setup fee + $25 – $75 per participant per month
- Online record storage: $20 – $100 per month
- Online signatures: $10 – $50 per month
- Check delivery and direct deposit: $1 – $4 per transaction
- Tax filing: $50 – $200 per month
- International payments: $20 – $50 per transaction
The cost of these fees vary from provider to provider. If your business, for instance, has employees in multiple states and therefore needs one of these additional services, it’s worth looking at how much the companies you’re considering charge for it.
It’s important to note that not all providers charge add on fees. For instance, OnPay includes everything in their most basic plan, making them a highly affordable yet quality provider.
For some providers, the add on fees come in the form of their more expensive plans. If your business needs health insurance broker integration or expenses reimbursement, you may need to upgrade.
While plan upgrades often come with compelling features, they too often come with steep price increases. For leading payroll companies offering multiple plans, the price jump between the most bare bones and most extensive is greater than 100%.
While outsourcing your payroll isn’t a total cakewalk, it comes with some compelling benefits.
Benefits of payroll Outsourcing
- Time savings
- Reduce payroll related errors
- Tax protection
- HR benefits
- Peace of mind
The most important benefit of payroll outsourcing is the time it saves. If you’re doing payroll yourself, you’re probably devoting a significant amount of time each pay period.
Your business is successful because of your skills and abilities that generate value for your customers, not because of your ability to do payroll. This is the most compelling argument for outsourcing and delegating lots of administrative tasks, like bookkeeping and payroll.
Another major benefit of payroll outsourcing is that it is one of the most effective ways of protecting yourself against payroll fraud. Payroll fraud can be a devastating problem for small business owners, and the major payroll outsourcing companies incorporate comprehensive fraud prevention methods into their services.
Choose a Payroll Service
If you’ve made the decision that payroll outsourcing is right for your business, it’s time to decide which payroll service you want to work with.
We wrote a comprehensive guide about the best payroll services, and while going through it you’ll want to ask yourself a few important questions:
- What do you need in a payroll provider?
- How does your business execute pay periods?
- What pricing structure would work best for your business?
- Are there any additional services you need from a payroll provider?
Depending on the complexity of your operation and benefits, a comprehensive payroll provider like OnPay might work best, whereas some would be best served with a cheaper, simpler service like Wave Payroll.
Once you’ve figured out your base needs in a payroll provider, and what pricing structure is the best deal with your pay period frequency and employee number, you’ll be able to make an informed decision about who to work with.
Save on Payroll Costs
To reduce payroll costs, consider paying employees less frequently, such as switching from weekly to monthly payments. This reduces the resources spent on executing payroll or outsourcing fees.
Additionally, explore delegating payroll to someone within your business or using a service that includes payroll in their offerings, such as a certified public accountant.
Joining a PEO (professional employment organization) offers many benefits to small businesses, including employee benefits, HR, and payroll services.
Outsourcing payroll can be a cost-effective solution for small business owners, with the average cost for payroll services at under $100 per month for a small team.
When selecting a payroll outsourcing company, consider the pricing structure and service packages that best suit your business needs. Be cautious of additional fees and weigh the benefits of extra services. By outsourcing payroll, you can focus on your core business activities and ensure tax compliance with less stress and time commitment.
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