Payroll Services Cost: Average Prices for Outsourcing Payroll

Payroll service costs start from $20 per month, with a monthly fee of $4 to $12 per employee on top of that. 

Running your payroll yourself is clunky, time consuming and inefficient. Outsourcing this activity and signing up with the best payroll software for small businesses can help you streamline your operation, increase productivity, save time and resources and ensure your business stays tax compliant. 

Businesses of all sizes benefit from outsourcing payroll services, including smaller operations. You may be tempted to avoid the cost of payroll outsourcing, especially when running a small business. But when you consider the potential errors and penalties that can occur from not running payroll correctly, it’s worth every cent. 

How Much Does Payroll Outsourcing Cost?

Typically, payroll services cost anywhere from $20 to $149, plus a fee per employee of around $4 to $12. These costs are monthly, and the per employee fee means your monthly costs can fluctuate. 

You might find that the cost is a little higher if you opt for a platform that integrates HR processes, benefit management, or hiring solutions, or a specific payroll solution designed for hotels, restaurants, or other types of establishments. But this extra cost will mean you can carry out various business processes from one place seamlessly, whatever industry you’re in.

Payroll providers offer full-service payroll as well as the ability to choose specific services to outsource. You might choose to only outsource certain parts of your payroll due to cost, or because you’d rather keep a close eye on the process yourself, but you can be as involved as you want to be. Plus, outsourcing payroll isn’t a lifetime commitment, since you’ll have a fair amount of flexibility when it comes to scaling or switching providers. 

Some providers don’t advertise their prices, in which case you’ll need to contact them directly for a quote. Generally, this quote will be based on your business size, and the services you need. 

If you’re looking for a flexible monthly subscription-based service, there are a number of providers that offer this, including Square Payroll. 

How Much Does Full-Service Payroll Cost?

A full-service payroll will generally cost around $39 to $149 per month as a base fee, plus a fee per employee which is around $4 to $12 per month. Some providers don’t advertise their pricing, though, so you’ll need to contact them directly to find out what they charge. 

Many full-service providers are fairly affordable considering how comprehensive their platforms are. They’re often much cheaper than other options such as keeping payroll in-house. Many providers will offer various packages at different prices, with the more expensive options offering a lot more features. 

Since most providers charge per employee on top of their monthly base fee, you’ll only have to pay for the amount of services you need.

How Much Does Self-Service Payroll Cost?

You might choose to use a self-service payroll because it provides tax and legislation compliance while keeping your costs down. Wave, for example, provides full-service payroll and tax services in 14 states, priced at $35 per month, whereas the self-service option is priced at $20 per month. 

Many providers that offer full-service payroll also offer self-service. With self-service, the provider will take on many of the more complex and time-consuming tasks while your in-house team deals with the simpler admin. 

Self-service payroll is great for businesses that have a payroll team but need to outsource some tasks to ease their workload, or that want to downsize their current team. You may find it a more efficient way to outsource certain tasks while also keeping control over other aspects. 

Can I Manage Payroll In-House?

You certainly can, however you might find it to be a hassle. If you do go for this option, you’ll need dedicated staff with experience in payroll, or you’ll need to have the expertise yourself. 

Outsourcing payroll is much more reliable than managing it in-house. If your payroll head calls in sick or has to run out for an emergency, your business could be left without anyone to run things. Using a payroll provider guarantees that you’ll always have payroll services on hand. 

Plus, as your business grows, you’d have to grow an in-house payroll team alongside it – which means paying more wages, offering more benefits, and managing more people. This can be an overwhelming task compared to just using a payroll provider that will carry out all your payroll needs. 

Let’s take a look at the pros and cons of in-house payroll management:

Who Is In-House Payroll Management For?

Super small businesses, with less than four or five employees, generally run payroll in-house. But, payroll providers can still be used by businesses of this size, and in fact it’s probably a good idea because they guarantee compliance and accuracy. 

Larger businesses sometimes choose to run payroll in-house because they have the resources to do so, and may want to keep a close eye on the process. 

If your business is in between these two sizes, we’d also recommend outsourcing payroll, although outsourcing works for businesses of any size. 

How Much Does In-House Payroll Management Cost?

Running in-house payroll means having a payroll system designed for your business by a dedicated tech team. The average payroll specialist salary in the United States is around $46,816 a year. This can all rack up depending on how many specialists or administrators you need, and it’s less reliable than using a provider because your payroll team may call in sick or have to be downsized due to budget reasons. 

Is In-House Payroll Management Worth It?

In short, no. In-house payroll management is expensive, complex, and time consuming. Outsourcing payroll makes it easier to ensure the accuracy and efficiency of running payroll and is much less riskier when it comes to taxes. Larger businesses may find it worthwhile to run payroll in-house, but for small to medium-sized businesses, outsourcing is often a better option. 

Managing payroll in-house makes you more vulnerable to penalties and fines, while some providers offer a tax penalty protection – meaning they’ll take care of any penalties if the system messes up. 

Next Steps

The cost of outsourcing payroll varies depending on the size of your business, the services you want, and the provider you choose. Generally, outsourcing payroll is the best option – we don’t recommend running payroll in-house because it can be expensive and increases your risk of incurring penalties or fines. The IRS has revealed that one out of three employers has been hit with financial penalties due to payroll mistakes. 

On average you’ll most likely be paying around $20 to $149 as a base fee, plus $4 to $12 per employee, per month. 

Use our guide to the best payroll providers to help you narrow down the right provider for your business. You can also use our free quote tool to be matched up with trusted payroll providers. You just need to give us a few brief details such as the size of your business and whether you currently have a payroll provider, and you’ll then be contacted by the best providers for you with no-obligation quotes.