How Much Do Payroll Services Cost?

What is a payroll company?

Payroll companies help employers compute their employees’ pay and payroll withholdings. Payroll services may be full-fledged companies that perform an array of services; they may also come in the form of self-service software.

Payroll services collect employee wage and timesheet data to calculate gross wages. Next, they subtract the appropriate withholdings and deductions and compensate employees via payment methods like printed checks, direct deposit and direct deposit alternatives like payroll cards. Payroll services can also manage employee tax filing information.

How much do payroll companies charge?

Payroll services have various cost structures and pricing based on several factors, including the payment methods your employees need and where your business operates. Most businesses can find a professional payroll platform that fits their budgets. 

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Payroll companies generally charge monthly fees, taxes and additional fixed fees for each employee on your payroll. Additional costs may include fees for managing 401(k) distribution, direct deposit, dealing with payroll taxes and payroll forms and more. 

Payroll pricing structures

Payroll companies have varying pricing structures to accommodate different business needs. In general, they incur the following costs: 

• Base fee: Most payroll services charge a monthly or per-payroll base fee. With a per-payroll base fee, you pay every time you run payroll. For example, if your company pays employees every two weeks, you pay the base fee every two weeks. If you run payroll weekly, you pay the fee each week.
• Per-employee charge: Payroll services typically charge a per-employee fee each month or pay period. These fees typically range from $2 to $15, depending on your service plan and the features it includes. 
• Monthly fee: Some payroll processing services have a monthly subscription plan. With this option, they charge a set price to accommodate unlimited employees. This option may have feature restrictions. Subscription payroll plans are a good choice for small businesses with teams that need only essential services.
• Set fee: Some payroll providers have a set fee structure they publish online. This practice is common among do-it-yourself (DIY) services designed for smaller companies where employers monitor and input payroll processing data.
• Custom quote: Some services provide a custom quote for your business based on the specific payroll functions and features you need. Your employee numbers, payroll frequency, payroll methods and the number of states in which you operate will affect your quote. 
• License fee: Some businesses prefer DIY payroll software they install on local computers or access online. In this case, you’d pay a license fee to access this software. This license fee may be a monthly subscription charge or a one-time fee. You may have to pay for annual software upgrades. 

Payroll service hidden fees

Payroll services may also charge additional, less apparent fees, including the following: 

• Tax service fees: Your payroll company may charge for full-service tax filing services, including processing your state, federal and local taxes.
• Implementation fees: Payroll processing services may charge an implementation or setup fee that covers functions, such as adding your employees to the system.
• Payment method fees: Some payroll services may charge extra for direct deposit, while others may charge an additional fee if you require printed checks.
• Support fees: You may also encounter customer support fees or maintenance charges.

Are payroll services worth the cost?

Paying for a full-fledged payroll service may be worthwhile for the following reasons: 

• Payroll services take the guesswork out of payroll: A payroll service that handles all your company’s payroll needs will increase payroll accuracy and efficiency while helping you avoid and fix payroll discrepancies and adhere to paycheck record-keeping laws. The reduced headaches may be worth the cost.
• Payroll services provide tax protection: Most payroll services provide a tax guarantee. If the company makes a mistake on your taxes, it will correct the error and pay any resulting fines. The service will also keep your business compliant with ever-changing tax laws and payroll liabilities.
• Payroll services provide HR services: Many payroll companies offer a host of helpful HR services. For example, many payroll services handle time and attendance tracking, benefits administration and retirement savings plans. When a payroll service handles these HR functions, employers have time to focus on bigger-picture issues. Additionally, employees benefit from bundled services that make it easy to track hours and access benefit and retirement information.

However, paying for a payroll service may not be worth the cost for some businesses. Consider the following: 

• Payroll services may provide more features than you need: Your payroll service costs may include various features your business doesn’t need. You could end up paying for unnecessary functions or tasks your team could handle easily. For example, according to Matthew Venuto, regional vice president at ConnectPay, businesses often purchase a full HR suite when they need only a few HR features.
• Payroll service prices may be too high for your business: For some businesses, payroll software or running payroll manually would be a better fit cost-wise. High upfront costs and monthly or per-payroll payments can get prohibitively expensive. 

The best payroll services

The best online payroll companies will provide the services your business needs at a price you can afford. Consider the following top-notch options as you choose the right payroll provider: 

• Gusto: Gusto uses a single interface to support the entire payroll process and provides essential HR tasks, including new hire reporting and digital onboarding. It’s a full-service, one-stop shop for your payroll and HR needs. Read our Gusto Payroll review to learn how this platform syncs with third-party systems and allows numerous helpful add-ons. 
• Rippling: Rippling uses a straightforward, clear interface that users find intuitive and easy to navigate. Our Rippling review details how this platform streamlines many standard HR functions, including applicant tracking, task management, payroll processing and benefits training.
• OnPay: OnPay caters to small businesses with its first-rate customer support functions and user-friendly tools, such as unlimited payroll runs. Check out our in-depth OnPay review to learn about its transparent and inclusive pricing structure. 
• Paychex: Paychex has the unique ability to scale functions within its platform quickly and easily, making it an ideal option for larger businesses with many employees. Our comprehensive Paychex review details the platform’s robust feature set. 

Do CPAs offer payroll solutions?

CPAs can be extremely helpful regarding payroll and other financial functions. A CPA is a financial advisor who helps businesses, entrepreneurs and other organizations map their finances and reach their fiscal goals. 

“I would never say payroll replaces CPAs,” explained Sara Menke, founder and chairman of Premier Talent Partners. “But they can complement one another because [payroll companies] don’t offer the same work as an accountant.”

How much do CPAs charge?

According to the National Society of Accountants (NSA), the average CPA rate is $180 per hour for filing federal or state tax returns and $174 per hour for other tax services. 

On average, CPAs handle complete payroll services for $100 per hour and bookkeeping for $109 per hour. However, that price can vary based on factors like the CPA’s knowledge and experience, your business’s location and the size of your company. Because of their level of expertise, a full-time dedicated CPA can be expensive, so most small and midsize businesses work with CPAs on an hourly or project basis.

Typically, CPAs bill clients hourly, but fixed fees are becoming more common. Many businesses opt for fixed-rate CPA plans to get crucial services at a price they can afford. With more custom options now available for managing payroll, CPAs are adjusting their services to better serve small businesses.

What are the advantages of using a CPA?

CPAs can help your organization meet its financial goals and do the following:

• Offer tax and accounting consultations 
• Help you make financial decisions
• Handle payroll processing and administration
• Ensure retirement withholdings are properly deducted
• File payroll taxes
• Run payroll reports
• Track expense reimbursements and profit-sharing disbursements
• Act as a bookkeeper
• Collect accounts receivable
• Send invoices
• Pay vendors

“[CPAs] provide an extremely high level of service to a small business owner,” Menke noted. “It’s not just bookkeeping and the incoming and outgoing of cash management and investments; it’s future strategy. We do a really good job of keeping clients compliant.”

What are the disadvantages of hiring a CPA to manage payroll?

While having a CPA manage payroll can be a great strategy, there are some disadvantages:

• CPAs may not be cost-effective for your business: Outsourcing your payroll to a CPA can be expensive, depending on the number of employees you have, your tax situation, the services you need and where your company operates. If cost is a concern, it may make more sense to outsource the task to a payroll services company and then consult a CPA on taxes and your business’s more complex financial needs.
• CPAs might charge additional fees: CPAs can be a big help come tax time, but some businesses may find that the extra fees a CPA charges cost more than anticipated. For example, some CPAs charge a fee if a service must be expedited, if a client provides incomplete information or if the client submits information later than requested. It’s important to know what services are covered and what is considered an add-on service that will cost more than you budgeted.

CPAs vs. accountants for payroll

If you hire an accountant to run payroll, you’d likely pay less than you’d pay a CPA. However, CPAs have additional certifications and expertise that justify their price. When you use a CPA to handle your payroll, you ensure the following: 

• Payroll will be done correctly.
• Your company’s tax payments will be made on time.
• Withholding calculations will be error-free.
• Your business will comply with the laws that change every year.

Although both accountants and CPAs have robust accounting knowledge, CPAs receive more in-depth and rigorous training that drills tax laws and standard accounting practices into their expertise. They are also held to ethical standards by the state and must take courses to keep their licenses.

Danielle Fallon-O’Leary contributed to this article. Source interviews were conducted for a previous version of this article.