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Payroll Services Cost Comparison: 2021 Outsourcing Pricing

When companies can’t manage payroll in-house, they use a third-party outsource payroll service provider. Many payroll companies also handle other financial tasks such as timekeeping, bookkeeping, tax, and accountancy. Furthermore, they also supply HR plans too.

To outsource payroll costs a small company with up to five employees an average monthly payment of $50-$75 per month plus processing fees of $1.50 per paycheck and $0.10 per direct deposit. Moreover, a company with 30 employees might cost on average $350-$650 per month. And this includes a fee of about $5 per employee. However, most payroll outsource companies offer service plans that benefit larger companies by introducing economies of scale.

Using a payroll service means that you don’t need trained and qualified employees to calculate weekly or monthly wages. Ultimately, this saves on benefits, salaries, training, workstation costs, and other employee overheads. All you need is a part-time worker who can check through the timesheets and pass on the totals to the payroll company or enter them into the software app.

But, it’s essential to choose the right payroll outsourcing company to ensure your employees have correct paychecks. Yes, occasional problems happen with payroll, and those problems are often associated with processing timesheets. But, if the outsourcing company you choose continually gets it wrong, you end up with a disgruntled workforce, and eventually, you lose your staff.

This guide will discuss the benefits of using a payroll outsourcing provider, the available service plan options, their pricing, and which payroll providers offer these. We’ll also mention the other associated jobs that outsourcing companies do, such as bookkeeping, accountancy, tax calculations, HR, and so on.

Outsourcing Payroll Services Costs

Outsourcing payroll providers vary considerably in their costs because each company offers different features. Therefore, it’s difficult to compare them as their plans might not be like-for-like.

Payroll CompanyLowest monthly priceFee / employeeNumber of Service Plans
ADPCustom priceCustom price4
DeluxeCustom priceCustom price1
Gusto$19$64
Intuit$22.50$43
OnPay$36$41
Paychex$59$43
Paycor$99None3
RipplingNone$82
Square$29$52
ZenefitsNone$83

Generally, payroll service providers charge a set fee plus a payroll service cost per employee. These charges vary depending on which service plan you choose and the features you prefer. We’ll talk more about each company’s service plans in more detail later

Payroll Outsourcing Services: What’s Included?

The payroll service providers offer a service you’d expect from a local bookkeeper at one end of the scale to a professional employer organization (PEO) at the other end. However, the payroll services you receive will vary between the different outsourcing providers. A typical outsourced payroll service solution includes many features. The essential functions include:

  • Payroll management.
  • Payroll runs.
  • Withholding calculations.
  • Direct deposit funds.
  • Issue paychecks.
  • Calculate state tax.
  • Calculate federal tax.
  • Make tax withholding payments.

To achieve these services, you have to notify the provider of the employee information, including:

  • Employee name and number.
  • Pay rate.
  • Hours worked (this process is easy if you already own integrating time tracking software).
  • Direct deposit or paycheck information.
  • You can also use this service to pay vendors. In which case, the provider needs the vendor’s details too.

Depending on your service plan, you can also use a specialist payroll team to help you with various payroll processes. You also use a dedicated team that will handle all payments and tax deductions in your payroll. 

Most of the available payroll service plans also process your end-of-year tax, including 1099 and W-2 paperwork. But, if not, you can usually pay a bit more to include this.

The payroll provider pays your taxes to state and federal governments when it’s time to pay your tax. Moreover, if you subscribe to this feature, the provider will pay your vendors’ and suppliers’ bills. But don’t think this goes on behind your back. You will receive regular reports so you can keep your records straight.

Factors

The price you have to pay for this service depends on a few factors:

  • How large is your company?
  • Where is the company located?
  • Which outsource services do you wish to buy?

Although we’ve already said that the average cost across the board ranges from $50 to $600 per month, you could end up paying $1,000 per month depending on the services you choose.

Types of Payroll Services

Let’s look at each of the types of payroll outsourcing services in more detail. Remember that each option you choose will have its benefits and disadvantages, and you will have to weigh these depending on your company’s circumstances. Furthermore, the benefits will also vary depending on the amount of work you outsource to the provider.

As a business owner, you must be aware of what’s happening at each level in your company. At one end, you need to know about the sales your company makes. And, on the other, you must keep your employees happy and contented. Generally, all these pieces of information ensure your company runs smoothly. One of these pieces is how well your payroll system works. It isn’t only a bare record of the payments made to employees; it’s also about having in place a complete system that’s guaranteed to provide a smoothly running payroll.  

Let’s look at a few different payroll types.

Payroll Software Packages

These packages become more popular every year. They are simple to use, and all you need is an internet connection and a way of inputting the employee details, usually with an app. The computer software then records, calculates, and maintains each employee’s records, so you don’t have to.

But, just how difficult to use are these systems? Fortunately, they adapt to your level of payroll knowledge. Usually, if you have a basic understanding, you or an employee can manage it individually or use the software’s in-built instructions. Everything is automated, you keep everything in-house, but you need someone who understands how to use it. Alternatively, if you choose this option, you can pay for customer support to help your payroll team if things become complicated. 

The inclusive payroll service prices for a solution like this are $2,000 to $4,000 per year. Moreover, you don’t have to worry about updating the software when tax laws and other regulations change, as the provider updates the software in the cloud.

However, although it might seem cheaper than a fully outsourced payroll solution, you still have to pay an employee to use the software. So, remember this when comparing the price of payroll outsourcing. And remember that you might not be using a payroll specialist to operate it in your workplace.

Professionally managed payroll systems

A professionally managed payroll system is one where you hand over the payroll management to an accounting professional such as a certified public accountant (CPA) or bookkeeper. Alternatively, you can also hire an expert from a reputable accounting company. However, you will probably find that a CPA or bookkeeper will only keep your accounts in order and manage your payroll records. Probably, they won’t pay the wages transactions, bank deposits, or make any wage deductions.

Local Bookkeeping Rates

You probably have local bookkeepers or certified accountants working nearby who you can hire to look after the payroll and nothing else. Of course, if you use a certified accountant for other work such as tax advice, they can usually provide this service too. But, they will cost more than a bookkeeper.

If you decide to use a qualified bookkeeper to work part-time on your payroll, you can expect to pay around $5,000 per year for their services. 

Using local professionals does the job and provides your company with a personal service while supporting local businesses. However, depending on what software they use, the process might take longer and be more complicated than using a specialist payroll outsourcing provider, especially if they don’t keep updated with tax and employment laws. And, unless you have a written statement to this fact, you can never be 100% sure that they comply.

Online Bookkeeper Service Plans

Using an online bookkeeper for the company payroll will be the same as using a local bookkeeper, except that you contact the contractor remotely. Remote contact might be better sometimes, but it might cause problems when getting in touch with the bookkeeper if you need them urgently. 

Online bookmakers cost about the same as a local professional, about $5,000 to $6,000 per year. But, usually, an online service does more than just payroll and needs to keep up to date with the various regulations applicable to all their clients. So, be aware of where the online bookkeeper comes from. As if out of state, they might need to brush up on the regulations.

Larger accountancy firms

Large accountancy firms tend to work for companies across the US and sometimes have clients in other countries. Accountancy firms have certified accountants on their payroll and have qualified bookkeepers, specialist tax consultants, and other relevant personnel. 

Unlike a small local CPA or bookmaker, you can ensure that their employees keep abreast of tax laws and regulatory changes, no matter which state you’re from. Most large-scale accountancy companies offer a fixed fee, and the overall charge will cost much more than a local service.

Payroll system agencies

Perhaps you can try using a payroll services agency to maintain your payroll system. These companies do everything to take the job off your hands. They will manage the paperwork and calculations, plus make wages deposits and appropriate deductions.

Generally, these agencies take full responsibility for their accuracy and ensure that there are no late payments to employees or suppliers, which might cause problems.

Common Payroll Compliance Problems

It can be difficult for any size company to maintain compliance with the payroll laws in the USA. 

For example, if we consider the number of minimum wage problems in California alone, the US Department of Labor stated that violations occurred about 372,000 times a week in the fiscal year 2017-2018. 

Another problem that happens across the country is that of employer theft from employees’ payroll. One particular example occurred when a construction company in California stole $12 million from 1,000 employees. And, those are only two of the problems that can occur. 

Using a professional payroll service provider ensures that your company complies with the labor laws. This decision benefits both your employees and your business.

Many thousands of compliance problems occur in the US every year, resulting in hundreds of thousands of dollars worth of fines imposed on the employers. We can’t comment on all of these. Instead, here are five of the most common payroll compliance problems:

1. Payment outside your payroll

It doesn’t matter what you pay your employees with. It’s always going to be taxable. Usually, business owners pay their hard-working employees in dollars, either as cash, a check, or a direct deposit into their bank. However, some employers decide to pay with tangible gifts or even gift cards. These payments might be for bonuses, commissions, or as part payment of their monthly wages.

Moreover, they are within their rights to do this as long as the employee agrees. However, the IRS considers every one of these items as taxable income. Therefore, it must go through the payroll system and show up on the company accounts.

Sometimes, you can apply for business reimbursement expenses to compensate your employee for items they have paid for on your behalf. For example, hotel and meals on a business trip. If you reimburse your employee for this money, they must supply receipts to prove the expenditure, which goes into your company accounts as a business expense. 

Unfortunately, many businesses disregard this simple IRS rule:

You must record in the company accounts every payment to and from your business, whether it’s money, gifts instead of payment, or legitimate business expenses. 

If you don’t, you run the risk of severe fines or imprisonment.

2. Not filing appropriate forms before the deadline

Since 1996, all employers must notify the federal government via their state agencies that they have taken on new employees. This submission must take place within 10-20 business days. This notification allows the IRS and other agencies to know who is employed and what their details are.

Furthermore, the company’s payroll must meet quarterly and annual payroll tax filing deadlines. The submissions include:

  • Usually, quarterly state filings become due on the last day of the month following the end of each quarter.
  • Also, you must submit Form 941, which also becomes due on the last day of the month following the end of each quarter.
  • You must distribute Form W-2 to your employees, Form-1099 to suppliers, and Forms-1096 and 1099 to IRS by the year-end deadline.

If your company misses the deadline, you will be liable for specific penalties and fines and possibly have your complete accounting system audited.

3. Incorrect worker classification

We can categorize the various workers in your company as one of the following:

  • Employees.
  • Independent contractors.
  • Statutory employee.
  • Statutory non-employee.

Each classification has a specific definition, and your workers must have the appropriate classification in your payroll. Fortunately, the IRS defines each of these workers on this webpage. Moreover, they will notify you as to the classification the worker should be. However, it’s your responsibility to withhold taxes and report their tax information even if you haven’t yet heard from the IRS.

If you fail to follow the rules, report wages, and withhold taxes, you will be liable for penalties.

4. Inaccurate employee records

You probably already know that you must maintain many employee records and payroll reports to comply with the labor regulations. Because of this, it’s very easy to make a mistake and unintentionally cease to comply. 

The FLSA (Fair Labor Standards Act) introduced and updated the existing labor regulations. The points relevant to this guide include:

  • You must store all employee records for four years after the employee leaves their employment.
  • You must store all payroll records for at least three years after the previous entry date.
  • All companies that employ at least 50 workers must store records relating to leave of absence to comply with the Family and Medical Leave Act.

5. Inaccurate overtime pay

The Fair Labor Standards Act defines overtime work and the rate at which it should be paid. Usually, it’s the responsibility of the employer to ensure this is applied correctly for all employees.

Using a Professional Employer Organization (PEO)

A professional employer organization (PEO) is an expensive way to outsource payroll services. However, a PEO also offers several other services besides pure payroll. These include:

  • Benefits.
  • HR.
  • Insurance.
  • Retirement processing.

The main benefit of using a PEO is that they take on the entire administration of these sectors, allowing you to get on with running your company. Generally, a typical PEO costs between $12,000 to $40,000 per year without charging additional payroll service fees. It’s all included in the price. Furthermore, the actual cost depends on which services you want the PEO to take on.

Many reputable companies offer their services as PEO. We look at the profiles of various payroll service providers later in this guide, and some of them operate as PEOs. 

Questions To Ask Your Payroll Outsourcing Provider

A payroll outsourcing provider will only do what you tell them. To choose the right company for your requirements, you must ask questions. But, asking the right questions is essential to prevent being the victim of fraudulent services.

Consider the questions in the following list, and you’ll see what you need to ask. Perhaps you can think of some others based on these:

  • How long has the provider been in business?
  • Have they had any cases of non-compliance in the past?
  • What security systems have they in place when working for companies with sensitive information?
  • Do they have any references from previous clients?
  • What payroll processing fees do they charge?
  • What insurance policies cover the company for non-compliance penalties? 
  • Do they have insurance coverage if the customer loses money through their fault?
  • What training do they provide for their employees?
  • What support do they provide for clients?
  • Does the provider have certifications or any state and federal law compliance documentation?
  • How do they keep their systems and employees updated with the latest tax and labor laws?

Outsourcing Payroll Benefits

Now we come to the advantages you get from outsourcing your payroll to a service provider. Here are some of the top benefits:

Productivity

Processing the payroll is a time-consuming task that has to be done regularly every week or month. If it’s late, then your employees will complain. But it’s not just about calculating the hours worked by your employees, although that’s part of it. Additionally, your payroll team must keep track of benefits, new hires, terminations, garnishments, paid time off, and federal and state labor law updates. Also, you must complete the forms you have to submit to the IRS, and you must do these by a deadline. All these tasks are challenging to do if you haven’t had the proper training.

Outsourcing this work to a specialist company whose employees do nothing else means that you and your employees can improve your business and make money. Even the in-house finance team can put their minds to more company-orientated tasks that affect your profit margin.

Outsourcing payroll and the associated tasks free other team members, and your only contact with the outsourced provider will be when you sign off the payroll once every pay period.

Cost reduction

Your company can reduce the direct costs incurred when processing payroll by working with an outsourced payroll provider. Only large companies can afford the additional overheads of an entire department dedicated to something that doesn’t improve your profit margin. However, if you’re a small or medium-sized business that has to cut the margins to beat the competitors, you can probably save money by outsourcing payroll.

Suppose you outsource your payroll to a third-party provider. In that case, you don’t have to worry about a crucial team member phoning in sick or going to a relative’s funeral, asking for maternity leave, or even worse, resigning. 

You also have the problem of confidentiality to contend with. If you have in-house payroll staff, you always risk someone letting on how much a colleague earns. This situation can cause all manner of problems.

Overall, the best way to prevent these problems and save money is to outsource to a reputable provider who charges an affordable average cost for payroll services.

IRS penalties because of mistakes

According to the IRS, many small businesses pay an average penalty of around $850 per year for mistakes, incorrect filings and payments, and delays. Suppose your company repeatedly has problems meeting IRS deadlines or submits incorrect forms. In that case, you will have fines and penalties and probably have an audit of your entire accounting system. And that is something that no one wants.

Small business owners can’t afford to employ highly paid corporate lawyers to fight their cases for them. So, it’s much better to choose a reputable payroll provider that is less likely to make a mistake. And if they do, then it will be the provider that gets fined, not you. Usually, as long as you provide the necessary information, payroll funds, and pay your bill on time, a payroll provider will accept all responsibility for mistakes.

Expert payroll team

Most business owners and their employees who handle payroll haven’t the time to keep updated with labor and tax law changes. The constantly changing regulations, federal and state government forms, and withholding rates require much study time that most employees don’t have. By outsourcing your company’s payroll, you take advantage of a large department dedicated to payroll and its associated tasks. While previously, this was only available to large corporate companies. Furthermore, many payroll service companies also provide other administration tasks such as HR and the complex legal problems involved.

For the best possible service, you should hire a third-party service provider that can handle payroll and all the other company administration tasks that otherwise you would forget.

Security

Processing a company’s payroll is potentially risky and full of confidentiality problems. If you use in-house payroll staff, you have the following potential situations:

  • Embezzlement of funds.
  • Changing personal details for financial gain.
  • Identity theft.

Even if you use software, which most companies do, you have a problem with the security of payroll details on the company’s network and server.

Continually worrying about these and other security situations can wear down the most energetic business owner. But, most third-party payroll providers have software tools to identify signs of payroll fraud and keep everyone’s details private. Their customers expect these. Therefore, the provider invests in up-to-date storage systems and backs up all data in multiple server locations.

Top 10 Best Payroll Providers

The following payroll providers offer good quality service at affordable prices. Generally, this list isn’t in any particular order, and we don’t recommend one above the other. Therefore, use the information as a starting point for your research.

Paychex

Paychex has a cloud-based payroll service managing all aspects of payroll and tax. Moreover, the company also provides many other HR and administration services. 

The company offers three service plans for small, medium, and large businesses.

  • Go – this basic plan costs $59 per month & $4 per person per month. The plan includes timesheet tracking, payroll, and payroll tax preparation.
  • Flex Select – Flex is the company’s specialist plan for small companies. It includes everything in the basic package plus a labor compliance pack, the option to pay by paper check, and a dedicated payroll specialist. Pricing is customized to suit your requirements.
  • Flex Enterprise – This plan is suitable for large businesses and is the most comprehensive package available. It includes everything from the cheaper plans plus analytics, HR administration, and reports. Pricing is customized to suit your requirements.

Paychex website

Gusto Payroll

Gusto Payroll is one of the best online payroll software services available. Not only does the company provide payroll and payroll tax preparation, but it also provides all the HR administration services you could need.  You can choose from four different service plans depending on your requirements.

  • Core – this costs $19 per month & $6 per person per month. However, after six months, the base fee increases to $39 per month. This is the lowest costing plan. Therefore, it doesn’t contain many features. Moreover, it includes payroll, employee health benefits, administration of workers’ compensation, and time tracking.
  • Complete – This plan costs $39 per month & $12 per person per month. The plan contains everything within the Core plan plus new hire offers, onboarding tools, employee directories and surveys, and enhanced paid time-off management.
  • Concierge – This is the provider’s top product. It costs $149 per month & $12 per person per month. It contains the features found in the cheaper plans plus additional support for your HR requirements. Furthermore, there is also a service where you have access to a professional HR consultant any time of the day.
  • Contractor – As you would expect, this plan is for companies that mainly work with contractors and freelancers. The plan costs $6 per contractor per month. Furthermore, you can pay your contractors as many times as you like in any given month. It also handles all 1099 forms, including the filings.

Gusto website

OnPay

OnPay is ideal for very small businesses. It has a simple-to-use cloud platform and manages all payroll and tax requirements.

The company only offers one plan, which costs $36 per month & $4 per person per month. You can include any classification employee, including part-time and independent contractors. Moreover, The plan includes payroll plus payroll tax, multiple payments for contractors, and an employee self-service access point. Furthermore, the software also integrates with QuickBooks, Xero, Kabbage, and many other leading accounting software brands.

Finally, you can print W-2 and 1099 forms free of charge, but if you want OnPay to print or post, these will cost you extra. 

OnPay website

ADP

ADP provides payroll plans for any size business: The Run Platform is for those companies with a small business payroll of fewer than 50 employees. In comparison, its Workforce Now Platform works for businesses with 50 to 99 employees. Larger businesses have various choices which are customizable.

Additionally, there are four service plans:

  • Essential – This plan provides direct deposit payments, paper checks, and prepaid debit cards. It also provides payroll reporting, new hire onboarding help, and a marketing toolkit.
  • Enhanced – This plan includes everything in the Essential plan, plus unemployment insurance management and the option of paper checks. Also, you can have background checks on all your new hires and provide job advertisements.
  • Complete –  Has everything already mentioned, plus an employee handbook, job applicant tracking, background checks, HR documents, and training. You also have advice from a team of HR specialists.
  • HR Pro – This plan includes an HR help desk, an expanded employee handbook, employee training, and legal assistance.

All plans are customizable, so the company doesn’t publish their prices.

ADP website

Rippling

Rippling is a cloud-based payroll service you can access from an online app. Everything is custom built to suit your requirements, so $8 per person per month is the only advertised price. It has two service plans that you can customize to suit your requirements.

You can easily input the applicable employee data such as total hours, time off, and labor expenses. Furthermore, you can also choose direct deposits or paychecks, so each employee has the money in whatever form they need.  The system displays tax and benefit withholding per pay period. Therefore, it offers a complete record of each for you and your employee.

Rippling website

Intuit Quickbooks

Intuit QuickBooks has many service plans that cover aspects not included in payroll and associated features.

However, the company offers three plans specifically dealing with payroll:

  • Basic – The package costs $29 per month & $2 per person per month. The plan includes live customer support and basic features such as payroll processing, a choice of paychecks, or direct deposit. Moreover, the system also includes services to manage W-2 and 1099 forms.
  • Enhanced –  This plan costs you $45 per month & $2 per person per month. The system calculates state and federal taxes leaving you to make the payment transfers, but you can pay these electronically through the system. Furthermore, you can print tax forms at year-end for your employees.
  • Assisted Payroll –  The cost of payroll services for this plan is $109 per month & $2 per person per month. The plan calculates, submits, and pays your payroll taxes and guarantees that they will be paid accurately and on time. Furthermore, Intuit will manage and correct mistakes caused by them, and pay any incurred fines. The system also processes and prints tax forms for year-end.

Intuit QuickBooks website

Deluxe

The Deluxe packages combine the essential payroll services and the HR systems you need for an efficient workplace, no matter how small or large your business is.

There are three service plans you can choose from to include HR and payroll.

  • Lite – This is the payroll package that also includes essential HR features. It costs $39 per month & $7 per person per month. It manages and performs your payroll needs with payroll and tax filings for any state, W-2, W-4, 1099 filings, new hires, and workers’ compensation payment solution. Moreover, the HR portion offers Digital hiring, Time tracking, employee documents, and data management.
  • Blended – This is the HR package that works with any payroll package you might already have. It costs $449 per month & $7 per person per month. Furthermore, you can import your current payroll solution. Also, it has an easy-to-use employee database, a self-service employee portal, and more.
  • The Works – This is a combination of Lite and Blended, but offered at an affordable price. It costs $39 per month & $12 per person per month.

Deluxe website

Square

Square payroll products offer precisely what you want from a piece of software. You can track your employees’ hours and sync them from your timecard system. The software processes the payroll and associated taxes and instantly pays your employees from your built-in checking or direct deposit account. Moreover, you can pay contractors as long as you have their details, pay multistate employees, and those who work at home. Square also submits and pays your state and federal taxes without costing you any more.

There are two plans you can choose from:

  • Employees and Contractors – To include both classifications of workers on the system costs $35 per month & $5 per person per month. Moreover, there are unlimited pay runs in any pay period, and you can cancel this plan at any time.
  • Contractors Only – This plan is ideal if you only use contractors and freelancers. The plan costs $5 per person per month. Moreover, you can make unlimited payments in any pay period and can cancel this plan at any time.

Square website

Zenefits

Zenefits offers a comprehensive HR software system to handle all aspects of your HR department. The module that handles the payroll requires data from the other modules to provide fully automated payroll processing serviced. Furthermore, it has three basic service plans onto which you can add extra features if you require them. The payroll module includes payroll administration and reports using general ledgers, labor distributions, timelines, and other data sources. Finally, it processes tax and tax filing and ensures you comply with the law. 

The company advises its customers to choose the payroll module as part of the overall HR plan rather than a standalone because it needs the integration to work efficiently.

  • Essentials$8 per person per month will provide scheduling, integrations, time tracking, and employee management.
  • Growth – This costs $14 per person per month. You have everything supplied in the Essentials plus payroll and compensation management, and performance management.
  • Zen – This plan costs $21 per person per month and provides everything from the previous two plans plus employee engagement surveys and a people hub.

Zenefits website

Paycor

Paycor is a simple to use and user-friendly payroll service. Unlike most other payroll software companies, the pricing is a little bit different. The only charge is a base rate, without the extra charge for additional employees.

There are three service plans you can choose from:

  • Basic – The cheapest payroll service plan starts at $99 per month and includes basic payroll processing and payroll tax filing. Also, employers get assistance handling child support and wage garnishments.
  • Essential – This costs $149 per month and includes everything in the Basic plan plus PTO requests, manager approvals, and compliance checklists.
  • Complete – Costs $199 per month and includes all the features in the previous plans. It also includes analytics and data benchmarking. Furthermore, it also integrates with 401(k) software providers, and you have a dedicated account manager to assist when you need help.

Paycor website

Next Steps

Choosing a suitable outsourced payroll service provider can be a very challenging task. First, you must separate the reputable providers. Then, it’s so tricky comparing payroll services when the plans and packages might not be like-for-like. Finally, you have to decide if the price they charge is affordable.

Complete the form at the top of this page, and we’ll put you in touch with companies that can offer payroll service quotes to help you decide which plan to choose.