How Much Do Payroll Services Cost?

What is a payroll company?

A payroll company is a paid service that helps employers compute employees’ pay and payroll withholdings and issue payments. Payroll services may be full-fledged companies that perform an array of services or they may come in the form of self-service software. The best online payroll companies tailor services to fit a business’s needs at a price that fits their budget.

Payroll services collect employee wage and time sheet data to calculate gross wages. Next, they subtract the appropriate withholdings and deductions and compensate employees via payment methods such as printed checks, direct deposit or direct deposit alternatives like payroll cards. Many payroll services also handle employee tax filing, year-end forms such as W-2s and 1099s, and ongoing compliance with federal, state and local regulations.

How much do payroll companies charge?

Payroll companies have varying pricing structures to accommodate different business needs. They may also offer a wide array of optional add-ons and impose fees that can incur additional costs.

Payroll pricing models

Most payroll companies offer tiered pricing, with varying services, features and functionality on each service plan. Generally, the more you pay, the more you get. For example, QuickBooks Payroll offers three payroll plans with features that range from essential payroll services to access to financial experts.

“While each tier provides various levels of capabilities and functionalities, all plans in the QuickBooks Payroll portfolio offer full-service, automated payroll capabilities and can help business owners calculate, file and pay their payroll taxes with confidence,” explained Brian Rich, senior product marketing leader at QuickBooks.

Here are the various pricing structures you may encounter.

Base fee plus per-employee fee

Most payroll services charge a monthly base fee plus a per-employee fee. Base fees typically range from $20 to $150 per month, while per-employee fees generally run $2 to $15 per month.

For example, QuickBooks Payroll charges the following:

• $50 per month plus $6.50 per employee, per month on its lowest tier
• $88 per month plus $10 per employee, per month on its middle tier
• $134 per month plus $12 per employee, per month on its highest tier

Payroll frequency

Some payroll services charge fees based on how frequently you run payroll. For example, if you process payroll weekly, you may incur higher fees than if you process biweekly or monthly. This model is best for businesses with predictable payroll schedules and stable employee counts.

Fixed pricing or license fee

Some payroll software providers charge a fixed annual fee based on your business size or total payroll value. This model may require an upfront payment for annual software upgrades. If your team size stays consistent, this pricing can be more cost-effective per employee, making budgeting easier with predictable costs. For example, CheckMark Payroll software starts at $579 annually for its solution.

Optional services

Beyond essential functions, many payroll companies have additional services. These can be bundled into packages or purchased a la carte. Many of these companies have vast ecosystems of financial and human resources (HR) tools that integrate effortlessly with payroll, creating a streamlined solution. “A platform of connected tools allows a business to have access to real-time data and insights to help them make better business decisions,” Rich noted.

Additional services may include:

• Printing and mailing employee W2 forms
• Bookkeeping and accounting services
• HR management, such as employee benefits administration
• Managing 401(k) distribution
• Handling payroll taxes and payroll forms

For example, you can bundle QuickBooks Payroll with bookkeeping tools starting at $88 per month (billed annually) plus $6.50 per employee.

Hidden fees

Beyond optional services, keep an eye out for less apparent charges, such as:

• Tax service fees: Costs for processing and filing state, federal and local taxes.
• Implementation fees: Charges for setting up your payroll system, such as adding employees.
• Payment method fees: Some providers charge extra for printed checks or specific payment methods, such as direct deposit.
• Support fees: Some companies impose fees for premium customer support or ongoing maintenance.

What affects payroll costs?

Numerous factors can affect a business’s payroll costs, including the following: 

• Number of employees: The more employees you have, the higher your payroll costs, especially if your provider charges a per-employee fee.
• Add-on services: Optional services, such as HR management, benefits management or bookkeeping, can increase your overall costs.
• Benefits to process: If you offer employee benefits like 401(k) plans, health insurance or paid time off, their complexity and volume may affect payroll processing fees.
• Payroll frequency: Due to per-run charges, businesses that run payroll weekly or biweekly may incur higher costs than those that run it monthly.
• Tax filing requirements: If your business operates in multiple states or jurisdictions, managing and filing taxes in each location can increase payroll costs.
• Employee classification: Processing payroll for contractors, freelancers or international employees often comes with added fees, since each classification carries its own tax and compliance requirements.
• Industry: Certain industries, such as healthcare or construction, may require specialized payroll services that incur additional costs.
• Software integrations: Depending on the provider, integrating payroll software with other tools, such as the best accounting software or time-tracking systems, may increase your expenses.
• Support level: Premium support options, such as dedicated account managers or priority support, often cost extra.

Are payroll services worth the cost?

Paying for a full-fledged payroll service can be a smart investment for many businesses. Here are some of the key reasons to consider one:

• Payroll services take the guesswork out of payroll: A payroll service can increase payroll accuracy and efficiency while helping you avoid and fix payroll discrepancies and adhere to paycheck record-keeping laws.
• 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, including 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.

“[Comprehensive payroll solutions] provide business owners with a platform that does much more than administer payroll — it helps them grow and support their employees, all while maintaining compliance,” Rich explained.

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

• Payroll services may provide more features than you need: Matthew Venuto, regional vice president at ConnectPay, cautioned that businesses often purchase a full HR suite when they only need a few features. Without careful oversight, you could end up paying for unnecessary functions or tasks your team could handle easily.
• Payroll service prices may exceed your budget: For some businesses, payroll software or manually running payroll may be a more cost-effective fit. Recurring monthly fees, per-employee charges and add-on costs can become expensive.

Do CPAs offer payroll solutions?

CPAs can play a role in payroll, but their primary focus is broader financial management and advisory services. Typically, businesses hire CPAs to help manage their finances, plan for growth and meet fiscal goals. While some CPAs may assist with payroll as part of their services, they generally do not specialize in payroll processing or administration.

CPAs and payroll solutions can both provide valuable support to businesses. “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.”

Rich agreed that both financial resources can provide essential assistance. “While CPAs provide a great deal of guidance and strategy for a business’s finances and growth, their services may not extend beyond the administration of payroll,” Rich noted. “[Online payroll platforms can] provide a streamlined, end-to-end human capital management solution that spans beyond payroll.”

How much do CPAs charge?

CPA costs vary by region and specialty. According to 1-800-Accountant, the average CPA rate starts at approximately $200 per hour. Virtual services often have a flat rate for their services that can range from $100 to $400 for bookkeeping, tax prep and other support.

Some CPAs also offer monthly pricing for payroll services. “I’ve seen as low as $40 per month for just three to five employees paid bi-weekly with no benefits, up to $100-plus per month,” noted CPA Dan Henn. “It could be higher based on the cost of service.”

Because of their level of expertise, hiring a full-time dedicated CPA can be expensive. As a result, most small and midsize businesses work with CPAs on an hourly or project basis. However, fixed fees are becoming more common. With more custom payroll management options now available, CPAs are increasingly tailoring their services to better meet the needs of smaller organizations.

Henn noted that several factors affect CPA charges. “We look at cost of service, which includes the payroll platform or software used, in addition to the time involved, frequency of pay, number of employees and the benefits that need to be processed, such as health insurance, 401(k) or other retirement plans and other deductions,” Henn explained.

What are the advantages of using a CPA?

CPAs can help your organization meet its financial goals in the following ways:

• Offering tax and accounting consultations
• Assisting with financial decision-making
• Advising on hiring decisions based on financial health
• Handling payroll processing and administration
• Ensuring retirement withholdings are properly deducted
• Filing payroll taxes
• Running payroll reports
• Tracking expense reimbursements and profit-sharing disbursements
• Acting as a bookkeeper
• Collecting accounts receivable
• Sending invoices
• Paying vendors
• Advising on employee benefits and their tax implications

Henn emphasized the value of integrating a CPA into your payroll process. “When a CPA manages payroll, it makes it easier for the CPA to do their job in advising the business,” Henn explained. “They have access to all the information and reports needed for bookkeeping, consulting, advising and tax planning.”

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

Having a CPA manage payroll can bring the following disadvantages:

• CPAs may not be cost-effective for your business: Outsourcing payroll to a CPA can be expensive, depending on the number of employees, your tax situation, the services you require and your business’s location. For cost-conscious businesses, using a payroll services company for day-to-day payroll tasks and consulting a CPA for taxes or complex financial issues may be a more practical approach.
• CPAs might charge additional fees: CPAs often charge extra fees for certain situations, such as if a service must be expedited, if a client provides incomplete information or if the client submits information later than requested. Your costs may rise rapidly if you’re not careful.

CPAs vs. accountants for payroll

If you hire an accountant to run payroll, you’d likely pay less than you would for a CPA. However, CPAs have additional accounting and finance 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 ever-changing laws.

While both accountants and CPAs bring solid accounting knowledge to the table, CPAs undergo more rigorous training with a deeper focus on tax law and standard accounting practices. They’re also held to strict ethical standards by their state licensing boards and must complete continuing education to maintain their credentials — giving them an edge when it comes to navigating complex payroll and compliance issues.

Casey Conway contributed to the reporting and writing in this article. Source interviews were conducted for a previous version of this article.