How Much Does A Payroll Service Cost?

Payroll is one of the most crucial tasks of a business owner. Not only does accurate and timely payroll improve employee satisfaction, but it also helps you avoid penalties and controls tax. 

Payroll entails a variety of duties, including deducting all appropriate local, state, and federal taxes from employees’ wages, paying your fair share of taxes for each employee, updating vacation and sick pay, and more.

Whether you have one or more employees, having your business’s payroll properly done can make things much easier. So, knowing how much payroll services cost, as well as the various methods by which you can outsource a payroll provider, is crucial for your business.

In this article, we explained what payroll is all about, the factors that determine the price of a payroll service, as well as how much payroll services cost.

Let’s delve in!

What Is Payroll?

Payroll is the compensation that a company pays to its employees for a fixed duration. It is typically administered by a company’s accounting or human resources departments.

Employee wage and timesheet data are collected to calculate gross wages, which are then subtracted from holdings and deductions to reimburse them via printed checks or direct deposits.

Payroll processing, employee benefits, insurance, and accounting functions like tax withholding are increasingly being outsourced to payroll companies.

A payroll company is simply a corporation or organization that assists employers with financial management by calculating their employees’ salaries and payroll claims. They can take the shape of self-service software or a full-service organization.

What Are the Benefits of Outsourcing A Payroll Service?

Hiring a payroll provider will save you time and cost as well as help you to stay on top of some payroll laws. Outsourcing a payroll service comes with several advantages, including the following:

Cost Saving

Maintaining a payroll department necessitates hiring, training, additional payroll fees, and more work. Staffing an in-house payroll, on the other hand, depletes finances and labor hours, especially for a small business.

Outsourcing to a payroll company saves you money on training and hiring, allowing you to focus on other aspects of your business while specialists manage your payroll.


Payroll services have safety measures in place to protect the vital company and employee data, including numerous server locations and backup systems.

Tax Protection

Outsourcing your payroll always comes with a tax guarantee provided by most payroll firms. If the corporation makes an error on your taxes, it will rectify the error and pay any fines that occur.

Avoiding Fines

Making sure you’ve submitted all of your deductions correctly can be tough, and many small business owners end up paying penalties fees.

A professional payroll service is conversant with both state and federal tax requirements. It also guarantees that you submit your paperwork correctly and on time. This saves you money in the long term by avoiding IRS penalties.

Regulatory Compliance

It’s challenging to stay on top of the numerous payroll laws and penalties, which necessitates paying close attention to existing and evolving laws at the state and federal levels.

Payroll services providers are trained in these rules, so they’ll work to ensure that you comply with all payroll-related laws.

Having known the benefits of outsourcing a payroll service let’s take a look at the factors that affect payroll service costs.

Also see, How Much Does Hollister Pay? Average Salaries For Employees

What Are The Factors That Affect Payroll Service Costs?

When it comes to payroll fees, it’s critical to know exactly what’s included. This will help you to have an understanding of what makes the prices differ while you conduct your comparison among the various payroll service providers.

Here are some of the key factors that will play a part:

The size of your company

The larger your company grows, the more employees you’ll have, and they’ll all need to be paid on time.

So, because each employee payslip has a cost, outsourcing your payroll will cost twice as much if you have 100 employees versus 50, regardless of whether the service is fully or partially handled.

Large businesses, on the other hand, may benefit from having a larger workforce because some suppliers provide discounts to businesses with more than 250 employees.


You might want to expand and connect your payroll service with additional managed services and operations. HR management and accounting are examples of these, and they will raise the overall managed payroll cost.


Of course, the price you pay will be influenced by the features you require from your payroll service.

Some providers, for example, impose a fee if you want them to administer and auto-enroll your employees into pension plans.

What Are the Methods of Running Payroll?

Payroll costs vary depending on how you handle them. Below are major ways in which payroll can be done:

  • Hiring a professional
  • Utilizing payroll software
  • Management by hand

Hiring a professional

Although you won’t have to worry about payroll when you hire a professional, hiring a professional remains one of the most expensive payroll services.

Instead of you passing through the stress you’ll hand over your employees’ information to a professional and they’ll take it from there.

The cost of professional payroll services for small businesses is determined by the number of employees you have and the services you choose.

When it comes to hiring a payroll expert, you might hire a payroll accountant or a professional employer group to help you out.

See also, How much does Kohl’s pay? Average salaries for employees

Utilizing payroll software

Using the software is a smart compromise between employing a professional and manually processing payroll. Using software makes all the processes automated and will ensure that all disbursement is done on time.

Management by Hand

Managing payroll by hand will save you a lot of money because you don’t have to hire any payroll provider nor are you paying for payroll software.

However, it’s the most time-consuming method. In addition, payrolling your employees by hand can lead to mistakes. For a small business, mistakes might result in penalties or even legal fees.

How Is Payroll Pricing Structured?

While there are a variety of methods that payroll firms charge customers for their services, you’ll most likely encounter three of them. And they’re as follows:

Based on Frequency

The most common way payroll companies charge for their services is based on pay frequency. That means you’ll be charged a base cost and a charge for each employee you pay, regardless of how often you pay them whether weekly, bi-weekly, or monthly.

Per Employee Per Month (PEPM)

Instead of paying costs for each payroll, PEPM allows you to run an unlimited number of payrolls for a single monthly base charge plus a fixed rate for the number of employees you pay each month.

PEPM is a good option for businesses that may need to do additional payroll runs for bonuses or commissions. You’d pay a base cost of $75 and about $6 per employee with this option.

Fixed Pricing

In some cases, a payroll company would offer a fixed monthly amount that covers a specific number of employees or a range of employees, such as $60 for 1-9 workers, $120 for 10-20 workers, and so on.

No matter how frequently you pay your employees each month, it is the sole amount you will be charged for payroll processing.

Now that you’ve gained knowledge on the benefits of outsourcing a payroll service, the various methods as well as how payroll service is structured, we believe you’d be asking how much payroll services cost so you can work on taking the available type. Below is an answer to what you’re looking for.

How Much Do Payroll Services Cost?

The cost structure and pricing for payroll services are determined by several factors which have been mentioned and explained. So, how much does payroll processing usually cost?

Almost every payroll system comes with some sort of expense. There is normally a monthly basic cost that ranges from $10 to $80 each month.

Then, for each worker on the account, you may have to pay an extra fee ranging from $5 to $15 per employee every month.

Keep in mind that certain providers will charge a minimum monthly fee regardless of how many employees you have.

Using such pricing, a small business with 10 employees may pay normal monthly fees ranging from $50 to $180, depending on the provider.

In addition to the base and per-person fees, you should inquire about whether there is a cost for every payroll run.

Choosing software that allows you to conduct an off-cycle payroll allows you to give pay advances, bonuses, and numerous pay cycles per month without incurring additional costs to your small business.

You should budget between $15 and $200 per month for a quality payroll solution.

These are generally the fees for a payroll processing service, note that some companies may charge you extra costs based on your location.

FAQs On Payroll Services

A payroll firm is simply a corporation or organization that assists employers with financial management by calculating their employees’ salaries and payroll withholdings.

Payroll software typically costs about $30 per month for the base charge, followed by $4 to $8 per employee each month. Some of the most expensive plans start at $150 per month including $12 per month for each additional member.

Here are some of the cheapest payroll services providers:

  • Gusto Payroll 
  • Square Payroll
  • OnPay 
  • SurePayroll
  • Patriot Payroll

The current Social Security tax rate is 6.2 percent for employers and 6.2 percent for employees, totaling 12.4 percent. The current Medicare rates are 1.45% for the employer and 1.45% for the employee, for a total of 2.9 percent.

According to 2018, Small Business Taxation Survey conducted by the National Small Business Association, 45 percent of small businesses use payroll services, with 42 percent spending between $101 and $500 each month.

More than $500 is spent by 23% of those polled. Businesses should budget between $15 and $200 per month for a quality payroll solution.

Final Thoughts

One of the most important responsibilities of a business owner is payroll. Payroll accuracy and fast processing not only improve employee happiness but also helps you avoid penalties and keep track of taxes.

Payroll is one of the most difficult tasks for business owners, but doing it correctly may make things much easier and help you keep organized.

Hiring a payroll provider will save you time and money while also assisting you in staying on top of some payroll laws while allowing you to focus on other vital aspects of your business, and protecting the company’s and employee data, among other benefits.

The cost of your payroll services will be determined by the features you demand as well as the size of your organization. When it comes to payroll services, you have the option of managing it yourself, employing a payroll professional, or using payroll software. (

A quality payroll solution should cost you anywhere between $15 and $200 each month as a business owner.

We hope that this article has provided you with a basic understanding of how payroll works and how much payroll services cost.


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