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How Much Do Payroll Services Cost?

Simone Johnson
Simone Johnson
Staff writer

Find out how much it costs to use a payroll company and how it compares to having a CPA run payroll for you.

  • Online payroll services typically charge a base fee of $29 to $150, plus $2 to $12 per employee.
  • Some payroll companies may also charge an implementation fee, which is a setup fee to cover the cost of adding your employee and business tax data to the system.
  • If you decide to outsource payroll to a certified public accountant, you'll pay an hourly fee. 

Payroll processing is like cutting up an onion: It has many layers, and cutting through them can cause discomfort. The upside is that you don't have to do either task yourself. Just as you can buy pre-chopped onions at the grocery store, you can outsource your payroll by hiring a certified public accountant (CPA) or a payroll company to manage it for you. 

While both options can complete your payroll accurately and on time, CPAs and payroll solutions provide different levels of service. Before you hire anyone to help you manage your finances, it's important to understand how you'll be charged, where hidden fees may lurk and what you can get out of each option. To ensure you understand what you may be paying for, here's a breakdown of what the best online payroll services and CPAs do and what they cost. 

What is a payroll company?

Payroll services offer finance management support by helping employers compute their employees' pay and withholdings. They can come in the form of self-service software or a service company. Payroll functions include collecting employee wage and timesheet data to calculate gross wages, withholdings, and deductions to compensate employees through printed checks or direct deposit. They can also manage employee tax filing information.


How much do payroll companies charge?

The costs structure and pricing for basic payroll varies. The benefit of this is that most businesses can find a service that fits within their budgets. 

Most payroll services charge a base fee. This can be a monthly charge or a per-payroll fee. With the latter, you would be charged the base fee each time you run payroll. So, if your company pays employees every two weeks, you would pay the base fee every two weeks. If you run payroll weekly, you would have to pay the fee each week. Base fees can run anywhere from $29 to $150. 

In addition to the base fees, there is typically a per-employee charge that you pay each month or pay period. These fees typically range from $2 to $12. 

Payroll providers often offer multiple service plans with different features and services. This gives you the ability to find a plan that fits your budget and needs. 

Some basic payroll processing services have a monthly subscription plan. With this option, they charge a set price for an unlimited number of employees. This option may have more restrictions on features, but it can be a good choice for small businesses, since smaller teams often don't require many features. 

Some payroll providers have a set fee structure that they publish online, while others provide a custom quote for your business based on the specific payroll functions and features you need. The number of employees you have and how often you run payroll will factor into the quote. 

If you are just looking for DIY payroll software that you install on your own computers or access online, you may be charged a license fee for it. This may be charged either as a monthly subscription or as a perpetual license fee, which is a one-time payment. It usually costs more upfront than a monthly subscription, and there may be annual upgrade costs as well. 

Do payroll companies have hidden fees?

Although there is no one pricing structure that works best for all small businesses, it's important to understand exactly what you're paying and what it covers. Here are some fees to watch for when you're choosing a payroll provider. 

  • Your payroll company may charge you for full-service tax filing features, which include processing your state, federal and local taxes. 
  • Payroll processing services may charge an implementation fee. This is a setup fee that often covers things like adding all of your employees into the system. There may be other charges based on how you choose to pay your employees. For example, a service provider may charge extra for direct deposit, while others may charge an extra fee if you require printed checks. 
  • If you use payroll software, look out for customer support fees or maintenance charges. 

Which features might be worth the cost of outsourced payroll?

One of the benefits of outsourcing your payroll is the tax guarantee that most payroll services offer. If the company makes a mistake on your taxes, it will correct it and pay any resulting fines. 

In addition to paying your employees and managing payroll taxes, many of today's payroll companies offer a host of other HR services that may be worth paying extra for. These include time and attendance tracking, benefits administration and retirement savings plans

That said, it's important not to overbuy on features if you may not need or use everything the program has to offer. Matthew Venuto, regional sales manager at ConnectPay, told business.com that a full HR suite is the most common feature that small businesses purchase unnecessarily from their payroll providers. Given how expensive the feature is, it's important to only add it on if you know you'll make the most of it. 

Editor's note: Looking for the right online payroll service for your business? Fill out the below questionnaire to have our vendor partners contact you about your needs. 


Do payroll companies offer any discounts?

Whether you're shopping for groceries or a payroll provider, a discount is always appreciated. As a small business owner, you can save a lot of money just by asking about the onboarding process. Before you purchase anything, ask the provider if any discounts are available for agreeing to a long-term contract or signing up with a certain number of employees, or if it is willing to match the price of a cheaper payroll service you found. You may also be able to save money by agreeing to an annual contract instead of paying month to month. 

Should you sign a payroll contract?

If you can help it, avoid signing up for payroll software or services with long-term contracts unless you've mapped out all payments and are comfortable with what you're paying, satisfied with the quality of the service you're receiving, and confident that you will be happy working with this company for a long time. 

"Check out the surface model, security and how it runs," Venuto said. "Ask about your access to payroll specialists and whether they're well versed with tax laws in your state. Do your research."

Before you sign any contract, read it thoroughly to make sure it doesn't have built-in price increases. Contract length can vary, but you want to find out if the contract automatically renews. It's also important to understand how the cancellation process works so you don't get stuck or heavily charged when you're ready to close your account. Find out how much notice you must give and any cancellation costs the company may charge. Be wary of signing any contract that has a liquidated damages clause, as it can be very expensive to get out of. 

Also look into the company's employee onboarding process, and see if there's a free trial so you can take the service for a test run before you commit. [Ready to learn more about specific payroll companies? Check out the payroll companies we recommend.] 

Do CPAs offer payroll solutions?

A certified public accountant is a financial advisor who helps businesses, entrepreneurs and other organizations map out their finances and reach their fiscal goals. Can a CPA run payroll for you too? 

"I would never say payroll replaces CPAs," said Sara Menke, CEO of Premier Talent Partners. "But they can complement one another because [payroll companies] don't offer the same work as an accountant." 

CPAs can do more than handle your payroll records. They offer tax and accounting consultations and help you make financial decisions. And yes, they can be very helpful when it comes to payroll processing and administration. A CPA will ensure your team is paid on time and your retirement withholdings are properly deducted, and they can handle your payroll taxes as well as your insurance policy. They can also keep track of payroll reports, expense reimbursements and profit-sharing disbursements. 

"They provide an extremely high level of service to a small business owner," Menke said. "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." 

A CPA can also act as a bookkeeper, collect accounts receivable, send out invoices and pay your vendors. 

How much do CPAs charge?

Now that we understand just how much work a CPA is capable of, let's look at how much they charge. Because of their level of expertise, it can be expensive to hire a full-time dedicated CPA for your business, so most small and midsize businesses work with CPAs on an hourly or project basis. 

Typically, CPAs bill clients on an hourly basis, but fixed fees are becoming more common. According to an Intuit survey, 57% of accounting professionals bill by the hour. The average rate for CPAs, as reported in a 2018 survey by the American Institute of CPAs, may be anywhere from $160 to $275 per hour. 

What do I gain from hiring a CPA rather than an accountant to process payroll?

With a CPA handling your payroll, you can rest assured that it will be done correctly, tax payments will be made on time, withholding calculations will be error-free, and you'll be compliant with the laws that change every year. Not only do CPAs get the job done right, but considering their extensive education requirements, they're more than qualified to run full-service payroll. 

Sure, you could hire an accountant to run payroll, and it would cost less, but you should understand the difference between accountants and CPAs before making this decision. Although both have a strong understanding of accounting, CPAs receive more in-depth and rigorous training that drills tax law and standard accounting practices into their expertise. They are also held to ethical standards by the state and must take courses in order to keep their licenses. 

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

Outsourcing your payroll to a CPA can be expensive, depending on the number of employees you have, your tax situation, what you need and where you live. If cost is a concern, it may make more sense to outsource the task to a payroll services company and then consult with a CPA on taxes and your business's more complex financial needs. For instance, if you are thinking about acquiring, merging, selling or closing your business, a CPA can help you make a quality decision. They can guide you through the tax implications and financial documents, help you analyze assets, prepare final reports and statements, and provide a thorough report of the fair market value of the business.

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Simone Johnson
Simone Johnson
business.com Staff
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Simone Johnson is a business.com and Business News Daily writer who has covered a range of financial topics for small businesses, including on how to obtain critical startup funding and best practices for processing payroll. Simone has researched and analyzed many products designed to help small businesses properly manage their finances, including accounting software and small business loans. In addition to her financial writing for business.com and Business News Daily, Simone has written previously on personal finance topics for HerMoney Media.