Payroll Services Cost: How Much Does Outsourcing Payroll Cost? (2024)

Outsourcing your payroll can help your business save time, reduce errors, ensure compliance with tax regulations, improve data security, streamline processes, and allow your team(s) to focus on core business activities. The average cost of outsourcing payroll is between $25 and $250 depending on your chosen services.

In this article, we explore the payroll service cost and factors to consider when choosing a payroll management provider.

Table of Contents Table of Contents

1. Key Takeaways
2. What is a Payroll Service?
3. Why Outsource Payroll?
4. Benefits of Outsourcing Payroll
5. Payroll Services Pricing Structure
6. Payroll Services Hidden Fees
7. How to Choose Payroll Services?
8. What are the Best Payroll Services?
9. Conclusion
10. FAQs
11. References

Show Full Guide

Table of Contents

1. Key Takeaways
2. What is a Payroll Service?
3. Why Outsource Payroll?
Show Full Guide
4. Benefits of Outsourcing Payroll
5. Payroll Services Pricing Structure
6. Payroll Services Hidden Fees
7. How to Choose Payroll Services?
8. What are the Best Payroll Services?
9. Conclusion
10. FAQs
11. References

What is a Payroll Service?

A payroll service is a third-party company dedicated to managing payrolls and processing tasks for small, medium, and large-scale businesses, such as:

• Calculating wages
• Withholding taxes
• Making direct deposits
• Issuing paychecks
• Handling payroll-related compliance

Unlike in-house payroll software, payroll services offer streamlined, scalable solutions tailored to the specific needs of businesses of all sizes, mitigating potential errors associated with payroll management.

Why Outsource Payroll?

Payroll tasks are no easy job, regardless of one’s business size. When it comes to managing payroll, business owners often find themselves with limited options. One solution is to delegate payroll tasks among team members, also known as DIY. However, this approach can strain a team’s capacity and divert their focus from essential core tasks.

Relying solely on payroll software may offer a more economical solution at a glance, but it can also be unpredictable and susceptible to human or software errors. Moreover, considering how much an accountant costs, startups and SMBs might better spend $75,000 per year or $38 per hour elsewhere.

In such a delicate landscape, outsourcing payroll services emerges as a cost-effective solution offering scalability and reliability.

Benefits of Outsourcing Payroll

Payroll Services Pricing Structure

Payroll services cost structures are tailored to cater to the varying needs of different organizations, from small startups with a handful of employees to large enterprises boasting thousands of workers.

They usually offer scalable pricing structures, allowing businesses to adjust their payroll costs according to changes in employee counts, ensuring companies pay for the services they need, regardless of whether they’re processing payroll for three employees or three hundred.

Here are the most common pricing structures:

• Base fee — A fixed fee that covers basic services regardless of the number of employees.
• Per-employee — Charging a set fee for each employee processed during each pay period. Suitable for businesses with fluctuating employee counts.
• Monthly charge — A business pays a set fee each month for restricted or unlimited access to payroll processing services.
• Set fee — Paying for a predetermined price for a specific payroll service or set of services, depending on the provider’s pricing structure.
• Custom pricing — Tailored to the specific requirements of the organization. Includes additional services, making it ideal for large-scale businesses with complex payroll needs.
• License fee — Grants unlimited access to payroll service software within the licensed period.

Payroll Services Hidden Fees

In addition to the standard cost of acquiring a payroll service, business owners should also factor in ancillary fees, such as:

• Tax Support — Assistance provided by the payroll service for tax-related matters, including filing and compliance.
• Implementation — Fees associated with setting up and integrating the payroll service into the business’s existing systems and processes.
• Payment methods — Costs related to offering different payment methods to employees, such as direct deposit or printed checks.
• Customer support — Charges for accessing customer support services, including assistance with troubleshooting, inquiries, and guidance on using the platform effectively.

It’s worth mentioning that while these fees are common in the industry, this list isn’t exhaustive. These additional costs are generally standard practice and are unlikely to pose a significant strain on businesses’ budgets.

What is the Average Cost of Payroll Services?

Generally, for SMBs, the cost of payroll services can range from roughly $25 to $250 per month per employee. However, the average payroll service cost can vary depending on factors such as:

• Business size — Businesses with fewer employees may pay less per employee compared to massive enterprises with a substantial workforce.
• Included services — Additional features such as direct deposit, time and attendance tracking, employee benefits administration, and HR management may come with extra charges.
• Complexity of payroll needs — Businesses with complex payroll structures, multiple pay rates, or various employee benefits may pay more than those with straightforward payroll processes and minimal payroll deduction.

How to Choose Payroll Services?

Selecting the right payroll service not only helps your organization maintain compliance with various laws, regulations, and standards related to payroll and employment but also enhances your business’s efficiency and overall financial health. Here’s how to choose the best payroll service that aligns perfectly with your needs:

1. Budget — You should look for a service provider with transparent pricing with no hidden fees. This will allow you to compare the costs of different providers and access the value you’ll receive for the price.
2. Ease of Use — Make sure the payroll service provider offers an intuitive and user-friendly platform for adding new employees and generating reports.
3. Compatibility — Ensure that the payroll service integrates seamlessly with your existing systems and software, such as accounting, HR, and time-tracking solutions, to eliminate the need for manual entry and mitigate the risks of errors.
4. Key Features — What features does your business require? Is it payroll processing? Tax filing? Direct deposit? Compliance management? Create a list of must-have features and choose a provider that offers comprehensive solutions that match your needs.
5. Scalability — Are there plans for future business growth, and if so, to what extent? Consider the services your business may require in the future to avoid the inconvenience of switching between payroll management providers as your business outgrows its current solutions.
6. Customer Support — Look for a provider that offers responsive and knowledgeable customer support. Also, consider factors such as availability, response times, communication channels (phone, email, live chat), and additional support options such as dedicated account managers.

What are the Best Payroll Services?

Following our experience in the wage management field, we assembled a list of the top three payroll service providers that excel in efficiency, accuracy, and client satisfaction. After careful consideration and detailed analysis of dozens of payroll management solutions, we narrowed our list to the following vendors:

1. Gusto — Best for HR and Payroll
2. Deel — Best for Managing a Global Workforce
3. Rippling — Best for Using Third-Party Integrations

Conclusion

When calculating the cost of payroll services, business owners should consider various factors. These include their budget constraints, level of technological proficiency, required features, scope of services provided, quality of customer support, desired level of control over their payroll data, and hidden costs associated with third-party payroll companies.

Despite initial expenses that can vary between $25 and $250 per employee, the benefits of accuracy, compliance, and time savings make it a worthwhile investment. Outsourcing payroll can free up resources, reduce errors, ensure adherence to relevant regulations and laws, and enhance overall business efficiency.

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Aleksandar Stevanovic

Software Reviews Expert

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Aleksandar Stevanovic

Software Reviews Expert

Aleksandar Stevanovic spent 10 years honing his craft as a freelance content writer. He has a degree in Economics, and extensive experience in software, crypto, and cybersecurity industries. He covers a multitude of topics, writing factual and informative articles, helping individuals better understand the intricacies of the online world. Over the last two years, his research focus shifted more towards tech and software content, as evidenced by his publications on CEX.IO, Business2Community, and Techopedia. He believes in simplifying complex topics and bringing them closer to like-minded individuals. His work is as detail-oriented as it is creative, and is designed to…

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