How Much Does Payroll Cost for Small Business- Are you a small business owner trying to figure out how much does payroll cost for small business? And are you thinking of using the payroll services for your business? Payroll services are very useful indeed if you are a small business owner who wants to focus exclusively on getting the work done, and leave the rest to professionals.
Small business payrolls can seem a bit scary at first, especially if you have little to no accounting experience. However, once you get to know the ins and outs of payrolls, it becomes a fairly simple process to manage them each month. In this article I will give you a complete overview on how much does small business payroll cost as well as what are the cheapest payroll services out there.
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The cost of payroll
Payroll service providers typically charge a monthly base fee, as well as additional fees for every employee at your company or every check sent out. Pricing for payroll service packages varies depending on the payroll company you use. However, many payroll providers charge around $29-150 for a monthly fee, plus a $2-12 fee per employee every pay period.
Additional costs and fees may be charged for other payroll add-ons, such as:
- Workers comp
- 401k
- Time tracking
- Tax penalty protection
- Automatic check signatures
- A direct deposit option
- State and federal tax filing
- Printing and check delivery
- Tax form processing
Payroll calculation example
Let’s say you have a small business with 10 employees, and you run payroll every two weeks. Your company uses a payroll service provider that charges a $40 monthly base fee and a $3 fee for every employee you have each pay period.
This means that every two weeks, you would pay the following amount for payroll services:
[$40 / 2] + [$3 x 10] = $20 + $30 = $50
In this scenario, your company would be paying $50 every two weeks, or $100 per month, for payroll services. Keep in mind that for every additional employee you hire, this cost will increase.
Factors that can change the cost of payroll
The factors that affect the cost of payroll ultimately depend on the payroll system or provider you’re using. For example, some of the following factors can affect payroll pricing:
- Total number of employees: Since many payroll providers charge a fee per employee, you increase payroll costs with each additional employee on your team. If you do payroll manually, the more employees you have, the more likely you’ll spend more time calculating payroll.
- Pay frequency: Payroll providers typically charge a fee for every employee at your company each pay period or for each check sent out. For instance, if there’s a $3 fee per employee every pay period and you pay employees every two weeks, that fee will add up to $6 per month. But if you choose to pay your employees weekly, that fee jumps to $12 per month.
- Direct deposit: Setting up a direct deposit is an additional cost for your business, but most employees will expect it, as it’s a convenient way to get paid.
- Tax filing services: Payroll providers often charge extra fees for performing tasks. These tasks include filing state and federal taxes, FICA taxes for Social Security and Medicare, doing year-end tax preparation, and processing tax forms.
- Employees in multiple states: Different states have different tax laws, meaning you could pay more taxes in one state than another. Payroll providers may also charge an extra fee to cover employees located in multiple states.
What is the average cost of different payroll systems and services?
As a small business owner, how do you choose a payroll provider? Well, you generally have four main options when it comes to payroll services. You can hire a bookkeeper, run payroll yourself, purchase payroll software, or contract with an online payroll service provider. Let’s examine these different options and the advantages they bring to the table.
1. Bookkeeper
A bookkeeper is usually an accountant who is responsible for keeping track of company finances and handling the payroll process. Ideally, this person is an organized financial professional who knows their way around tax laws and regulations.
While the cost of a bookkeeper depends on the services you want them to perform and their experience, they can be expensive. In 2018, the median annual salary for an accountant was about $70,500.
2. Do it yourself
If you think you’re up to the task, then you might try managing payroll yourself. It’s not uncommon for small business owners just starting out to personally handle their company’s payroll. As a matter of fact, more than 40% of small business owners report spending more than 80 hours each year on accounting.
That’s because owners just trying to get their company off the ground are often working on a tight budget with very few employees, if any. On a small scale, payroll isn’t very complicated, but once your business starts to grow, it becomes much more challenging to handle payroll yourself. Plus, as a business owner, you’ll likely want to focus on other aspects of your business instead of spending your time doing payroll.
3. Payroll software
Automating payroll can help streamline the process and minimize the amount of time that you, as a business owner, have to spend managing payroll. The services included in payroll software varies by the plan or product you choose.
Most accounting software offers basic payroll functions. Other software offers more advanced features like time tracking and tax filing services. The cost of payroll software varies widely depending on the size of your company and the features you’re looking for.
4. Online payroll service provider
Since payroll can be tedious and time consuming, outsourcing payroll to an online payroll service provider is a common practice. An online payroll service provider is a company that handles payments, withholdings, tax filings, and other payroll services for your business.
Depending on your small business’s needs, an online payroll service provider can help you save time and minimize payroll mistakes. It can also be a cost-effective option—QuickBooks online payroll services start at just $22.50 per month!
Payroll Software vs. Payroll Module
Payroll is often included as a module within accounting software, human resources management systems (HRMS) and enterprise resource planning (ERP) solutions.
Payroll modules generally have fewer features than dedicated payroll solutions, but better integration with other business processes. For companies that already have comprehensive accounting, HRMS or ERP software, purchasing separate payroll software adds extra costs.
In either case, if a company needs advanced payroll functionality, it may want to consider a specialized payroll solution.
Payroll Pricing Models
Payroll software prices usually depend on the number of employees and level of features. There are three common payroll software pricing plans:
Per month, plus per employee monthly subscription plan – In a software-as-a-service (SaaS) pricing model, companies pay a monthly fee to access software through the cloud. The most common subscription plan for payroll software is a per month, plus per employee monthly fee.
For example, Patriot Software charges companies $10 per month, plus $4 per employee each month for the Basic plan. A company with 100 employees would pay $410 per month.
Monthly subscription plans often come in several tiers with varying levels of features and services. The most expensive plans may include more technical support, HR advice and a dedicated accountant to review and file taxes.
This option is popular with companies of all sizes because the monthly fee is small and the per employee, per month fee is scalable. Companies also have flexibility in the features they choose to deploy.
Per month subscription plan – Some vendors offer a per month subscription plan that includes an unlimited number of employees. These solutions, however, generally have limited functionality and support.
The ideal customers for per month subscription plans are small businesses that don’t have extensive payroll needs. Larger companies will likely need more comprehensive features like tax filing and the ability to edit employee checks.
Perpetual license fee – Companies that deploy ERP, HRMS or accounting solutions on-premise can often purchase a perpetual license for a payroll module as well. This one-time fee is generally much higher than a monthly subscription price and doesn’t include upgrades.
With a perpetual license, however, companies have more opportunities to customize the software. In addition, the payroll module is better integrated with other modules for accounting, HR, and time and attendance.
Additional Costs to Consider
There are additional costs for payroll software beside the subscription or license fee. Here are a few expenses that businesses should consider:
Implementation – Implementation includes adding employee info and business tax data, as well as integrating the software with other solutions, such as accounting, time and attendance, or an HR self-service portal. Some vendors include implementation with their more expensive monthly subscription plans, while others will charge an extra fee.
Support – Limited support (e.g., knowledge base, email support) is generally included in basic subscription plans. Priority support and access to a dedicated customer service manager, however, are generally offered with the higher tiers of features.
Maintenance – Payroll software often requires ongoing maintenance, including updates, patches and upgrades. This is particularly important because tax codes can change from year to year. For companies with a perpetual license, obtaining software upgrades usually requires additional fees.
Payroll Software Vendor Pricing
We’ve compared pricing for several popular payroll solutions. Note that many vendors don’t publicly list pricing info, so you’ll need to contact them directly for a quote.
CheckMark Payroll targets small businesses and has two pricing plans.
The Pro plan costs $449 for full features, online access to program fixes and up to 90 minutes of support within the first year. The Pro+ plan is $519 and includes up to five hours of priority support in the first year, exclusive live chat support and reduced data recovery rates.
Equip Payroll helps small business owners efficiently run payroll and manage their basic HR tasks in the cloud. Its Core Payroll tier has a base price of $29 per month, plus $6 per employee, per month. Its optional Time and Attendance feature costs $4.50 per employee, per month, while the HR Support feature is priced at $2 per employee, per month. Note that each feature requires a minimum spend of $50 and $15, respectively.
Gusto is an online payroll system that includes benefits management and compliance for small businesses. It has three pricing tiers.
The Core plan costs $39 per month, plus $6 per employee, per month. It adds on full-service payroll in all 50 states, two-day direct deposit, employee self-service, workers compensation administration, paid time-off policies, employee onboarding tools, integration with accounting and time-tracking software, health insurance administration, Payroll on Autopilot, employee access to Gusto Wallet and employee offers and document management features and unlimited phone, email and chat support.
The Complete plan is $39 per month, plus $12 per employee, per month and adds next-day direct deposit, time-off requests, project tracking, customizable employee onboarding features, access permissions, an employee directory and an employee survey features.
The Concierge plan costs $149 per month, plus $12 per employee, per month and adds an HR resource center, advice from certified HR experts and access to a dedicated support team.
There’s a Contractor plan for companies that want to pay their 1099 contractors. It costs $6 per contractor (no base price) and includes unlimited contractor payments, contractor self-service and 1099 form creation and filings.
Gusto also offers options for employee benefits.
401(k) retirement plans cost $8 per participant, per month ($49 per month minimum). The 529 college savings plan is $6 per participant, per month ($18 per month minimum), and healthcare reimbursement starts at $15 per employee, per month.
OnPay – OnPay has an all-inclusive pricing plan (e.g., features, onboarding, support) that costs $36 per month, plus $4 per person. Note that the client is billed for only the employees paid in a particular month.
Patriot Software is a web-based payroll system for small businesses with two plans.
The Basic plan is $10 per month, plus $4 per employee. It includes paychecks, direct deposit, printable W-2s, setup and expert support.
The Full Service Payroll plan is $30 per month, plus $4 per employee. The vendor will file federal, state and local taxes on behalf of the company.
The vendor also provides add-on time and attendance ($6 per month) and HR features ($6 per month).
Paychex Flex is a cloud-based human resources (HR) and payroll software that empowers businesses to streamline their processes. It offers three pricing packages clients can choose based on their needs.
Paychex Go costs $59 per month, plus $4 per employee, per month. Some of its features include online payroll processing, tax administration, direct deposit, new-hire reporting, prepaid paycards and check printing.
Paychex Flex Select includes all of the features of the Paychex Go package, plus: a mobile app, integration with third-party software (e.g., HRMS solutions, productivity tools) and check signing.
Paychex Flex Enterprise includes all of the features of the Paychex Flex Select package, plus standard integration with accounting software, workers’ compensation report and state unemployment insurance services.
Pricing for the Paychex Flex Select and Paychex Flex Enterprise packages isn’t publicly available. Contact the vendor directly for a quote.
QuickBooks is a comprehensive business accounting solution from Intuit. As discussed in our research on Quickbooks pricing, companies can purchase the online payroll module separately or have it integrated with the desktop software.
The online payroll module has three pricing plans.
The Core plan costs $45 per month ($22.50 for the first three months), plus $4 per employee, per month. This plan includes full-service payroll, unlimited payroll runs, calculating paychecks and taxes, next-day direct deposit, employee self-service, health benefits, 401(k) plans, expert product support and availability in all 50 states.
The Premium version is $75 per month ($37.50 for the first three months), plus $8 per employee, per month. It adds same-day direct deposit, mobile time tracking, on-boarding expert review, workers compensation administration and a HR support center.
The Elite Plan costs $125 per month ($62.50 for the first three months), plus $10 per employee, per month. It adds on white-glove customized setup, mobile time and project tracking, 24/7 expert product support, tax penalty protection and support from a certified HR expert.
Payroll for Quickbooks Desktop also has two pricing plans.
The Enhanced plan costs $50 per month (20% discount for the first six months), plus $2 per employee, per month. It includes many features, such as direct deposit, the ability to pay W-2 and 1099 workers and payroll tax forms.
The Assisted plan is $109 per month (40% discount for the first six months), plus $2 per employee, per payroll. It adds on next-day direct deposit, 24/7 premium support, and a payroll expert sets up the software and files company taxes each year.
Conclusion:
Payroll is a complex and involved topic. It’s no surprise that small business payroll can quickly become a headache. That’s why we put together everything you need to know about how much does payroll cost for small business to help remove the headache, stress, and guess work from the equation.