How Much Do Payroll Services Cost

Managing payroll is vital in ensuring your business’s employees are paid accurately and on time. But how much do payroll services cost? That’s exactly what we’ll be exploring here.

By the time you’re done reading this article, you’ll know about the factors that affect payroll service costs as well as the different types of payroll services available. And we’ll also break down the costs associated with each type of service and hidden fees you should consider when choosing a provider for your business needs.

Factors that Affect Payroll Service Costs

When determining how much payroll services will cost, there are several things to consider.

The number of employees - The number of employees a business has is the biggest factor that affects payroll service costs. Generally, the more employees you have, the higher your costs will be.

Frequency of pay periods - The frequency of pay periods also determines how much you’ll pay for payroll services. If you run weekly payrolls, it’ll cost more than bi-weekly or semi-monthly payrolls.

The complexity of payroll processing - The complexity of your payroll also affects costs. If you need additional services such as time and attendance tracking, human resources technology, and general ledger reporting, these will incur additional charges.

Additional services and features - Payroll services may offer additional features like employee scheduling, benefits management, and electronic employee onboarding. These services will increase the total cost of the payroll service.

Support - Do you want to manage your payroll on your own, or do you need full-service support? Full-service providers offer a higher level of assistance but also come at an additional cost.

Understanding Different Types of Payroll Services and What They Cost

Now that you understand the factors that affect payroll service costs let’s take a look at the different types of payroll services available on the market today.

Full-Service Payroll Providers:

Full-service payroll is the most comprehensive type of payroll service and comes with full support services. You will have an assigned rep that you can speak with whenever you need help or assistance, and your provider will be there to watch your back when it comes to compliance. While this type of service will cost more than other types, it’s worth considering if you don’t have payroll expertise in-house.

For example, with full-service payroll, you won’t have to worry about making sure your employees are paid the legal minimum wage or forgetting to run your payroll altogether. With all of these services taken care of for you, you can focus on more productive activities like selling and training that will help your business grow instead of worrying about payroll.

Self Service Payroll

Self-service payroll is the lowest-cost type of payroll service. This kind of service provides you with software to manage your own payroll. It comes with basic features such as calculating taxes and deductions, issuing paychecks or direct deposits, and filing tax forms.

With self-service payroll, you will have access to a platform where you can input your employee information, set up pay runs, and generate reports. However, you will still be responsible for compliance and timely tax reporting.

Professional Employer Organizations (PEOs)

PEOs are third-party organizations that provide services such as human resources, benefits management, and payroll processing. With a PEO, you outsource the management of your employees to an outside provider. This can be a great option for businesses looking to delegate everything, including who your employees’ legal employer is.

However, it’s important to note that PEOs can be much more costly and require business owners to relinquish control to the PEO, which the owner may not wish to do.

Cost Breakdown for Payroll Services

The cost of payroll services can vary depending on the size of your company and the complexity of your payroll. But another thing to take into consideration is how you’re being charged. There are two ways payroll companies charge for their services:

1. Per transaction

With this type of pricing, you’re only paying per transaction, or in other words, for how many employees you paid each payroll. This is the most logical method and the one that has been in place for decades.

2. Per employee, per month

As software companies across the board began charging license fees per employee, some payroll software companies latched on to this same pricing model. This method charges a flat fee per employee, regardless of if the employee worked or not. For companies with on-call employees, high turnover, or employees who do not work every pay period, this model overcharges them.

Keep in mind that companies will try to sell you on this model because in theory, you’d be able to run payroll as many times as you would like. But the reality is that’s the blue sky, and most companies will not do that. You want a fixed, clean payroll frequency.

So when shopping around for payroll services, it pays to do your research and ask any questions you may have about their pricing method upfront before committing to a provider. That way, you can make sure you get the fairest deal for your business.

Hidden Costs to Consider

When considering the cost of payroll services, it’s important to keep in mind there may be additional fees, such as:

Setup fees/onboarding fees - one-time fees up front. This is the cost of getting your account set up and loaded into the system, making sure all information is accurate, and everyone is properly trained. This is the most important fee to consider, as it ensures that your payroll is up and running correctly.

Annual fees - Annual fees, such as for end-of-year tax reporting and filing, W2s, and other documents, plus archiving payroll data.

Delivery fees - With modern systems, you can print back your own checks and reports much faster than it takes to have them shipped and delivered. This is an extra, unnecessary cost that you can get rid of! Why pay for delivery when you can put that money toward more responsive service?

Services you don’t need or use - It pays to be aware of the services that are included in your payroll plan and make sure you’re not paying for services that you don’t need or use. Payroll salespeople are notorious for selling you the “service of the month” even if you don’t need it so they can make the most commissions.

Services you do need but are missing - On the other hand, it’s also important to make sure that you have all of the services and features you need for compliance and accuracy. Failing to do so can lead to fines, penalties, and employee lawsuits if required paperwork is not completed, or you are not in compliance.

Finding the right payroll services for your business is critical. Take time to research and compare different providers to make sure you choose one that meets all of your needs, offers the best value, and doesn’t put their own selfish interests ahead of yours.

Comparison of Payroll Service Providers

The Big Guys - Giant public companies that prioritize stockholders above all else are often plagued with high overhead, high prices, and a lack of support, especially in the wake of COVID. Their customer base has grown immensely while their staff members have remained stagnant, thus making them as reliable as owning a car that’s a “lemon” and is constantly breaking down or needing to be recalled - not desirable at all.

The Locals - Choosing a local payroll provider who is well-versed in your state and local regulations, as well as knowledgeable about your compliance issues and audit risks, can make all the difference for small or medium businesses. Not only will it be easier to get on the same page with such an expert team of professionals, but you’ll also have peace of mind knowing they know where the minefields are in your state and understand what you need to do to protect yourself.

Tips to Make the Best Decision for Your Business

When choosing a payroll provider, remember to look beyond the cost factors alone. It pays to consider that:

Bigger isn’t always better - A larger provider may initially seem like the better choice, but this isn’t always the case. Smaller providers usually have more flexibility when it comes to customizing the way you do payroll and have the manpower to build out the features you need.

Knowledge of your state and local employee regulations is essential - Regulations change all the time, so make sure you have a provider who, with your specific state and local laws, will alert you about the latest changes, so you have no surprises.

Make sure that you’re paying for things that you’re using and really need - Do a thorough review and audit of your payroll invoice and make sure the services you’re paying for are the ones you use. Why waste money paying for things you don’t use?

All in all, finding the right payroll provider for your business is critical. Switching payroll providers is not an easy task and is not something you want to do and then find out you made a mistake.

Doing proper research, understanding the pricing models payroll providers use, and having an awareness of the hidden costs of services you may never use, will help make the best decision for your business. Armed with all this knowledge, you should be able to find a reliable payroll partner who offers exactly what you need.

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