If you are paying employees, payroll is one of the most time-consuming and high-stakes tasks in your business. Get it wrong and you face IRS penalties, state fines, and unhappy staff. Get it right every time and payroll quietly runs in the background while you focus on growing your business. The question most small business owners ask before outsourcing: how much do payroll services actually cost?
The honest answer depends on how many employees you have, how often you run payroll, and what you need included. This guide breaks down every cost tier so you can compare your options clearly.
What Payroll Services Typically Include
Before comparing prices, it helps to understand what you are actually buying. A full-service payroll provider handles the following on your behalf:
- Wage calculations — Regular pay, overtime, bonuses, and deductions for each employee or contractor
- Federal and state tax withholding — Federal income tax, Social Security, Medicare (FICA), and applicable state income taxes withheld from each paycheck
- Employer tax deposits — Your share of FICA, FUTA, and state unemployment taxes deposited on time to avoid penalties
- Quarterly payroll tax filings — Form 941 (federal) and state equivalents filed on your behalf
- Year-end W-2s and 1099s — Prepared, delivered to employees, and filed with the SSA and IRS
- Direct deposit — Funds transferred directly to employee bank accounts on payday
- New hire reporting — Reported to your state as required by law
Premium tiers also include HR features, benefits administration, and garnishment processing. For most small businesses, you only need the core payroll and tax filing functions.
The Three Payroll Pricing Models
1. Per-Employee, Per-Month (Most Common)
The dominant pricing model: you pay a base monthly fee plus a per-employee fee. This is how Gusto, ADP Run, Paychex Flex, and most modern providers structure their pricing.
| Provider Tier | Base Fee/Month | Per Employee/Month | 5 Employees Total |
|---|---|---|---|
| Budget (Wave, Patriot) | $20–$37 | $4–$6 | $40–$67/mo |
| Mid-range (Gusto Simple) | $40 | $6 | $70/mo |
| Standard (Gusto Plus, ADP Run) | $60–$80 | $9–$12 | $105–$140/mo |
| Premium (Paychex, ADP) | Custom | $15–$25+ | $150–$205/mo+ |
For a business with 5 employees running bi-weekly payroll, expect to pay between $70 and $140 per month for a solid, full-featured service.
2. Per-Payroll-Run Pricing
Some providers charge per payroll run rather than a flat monthly fee. This works well if you run payroll infrequently — monthly or semi-monthly — but gets expensive fast if you pay employees weekly.
Typical per-run pricing: $29–$59 per payroll run plus $2–$5 per employee. At weekly frequency with 5 employees, that is $41–$79 per run × 52 runs = $2,132–$4,108 per year. Per-month pricing is almost always cheaper for businesses with regular payroll schedules.
3. Full-Service Outsourced Payroll (Accountant or Bookkeeper)
Working with a local bookkeeper or accounting firm for payroll means you are not dealing with software at all — your provider manages everything and delivers the payroll to you. Costs are typically $50–$200 per month for small businesses (1–10 employees), depending on complexity and how frequently payroll runs.
The advantage: your payroll provider already knows your books. There is no data entry gap between what your employees earn and what hits your financial statements. At Simple Books Now, payroll services are integrated with bookkeeping so your P&L reflects accurate labor costs every month without reconciliation headaches.
Hidden Costs to Watch For
The advertised base price rarely tells the full story. These add-on fees catch small business owners off guard:
- Year-end W-2/1099 filing: Some providers charge $50–$150 extra to file year-end forms, even if they handle monthly filings.
- Off-cycle payroll runs: Need to run a bonus or correction outside your normal schedule? Many providers charge $25–$75 per off-cycle run.
- State tax registration assistance: If you hire in a new state, filing for a new state withholding account can cost $100–$300 extra through a payroll provider.
- Workers' comp integration: Pay-as-you-go workers' comp integrations are available from some providers but cost extra.
- Direct deposit speed: Next-day direct deposit often costs more than standard 2-day processing.
- Contractor 1099 filings: Not all payroll plans cover contractor payments. Verify that 1099-NEC filing is included before assuming it is.
Payroll Software vs. Payroll Service: What Is the Real Difference?
Payroll software (Gusto, QuickBooks Payroll, ADP Run) automates calculations and filings, but you are still responsible for reviewing everything, approving payroll, and catching errors before they hit. You are the operator.
A payroll service — where an actual person manages your payroll — shifts that burden off your plate entirely. You provide hours worked and any changes to compensation; they handle the rest and are accountable for accuracy.
For business owners who do not want to log into a dashboard every two weeks to approve runs and review exceptions, outsourced payroll is worth the modest cost premium. Most small businesses with 1–10 employees pay $75–$175 per month for a fully managed payroll service.
What Payroll Costs Based on Employee Count
Here is a practical breakdown of what to expect at different company sizes, assuming bi-weekly payroll with a full-service provider:
| Employees | DIY Software (est.) | Outsourced Service (est.) |
|---|---|---|
| 1–2 | $40–$55/mo | $50–$90/mo |
| 3–5 | $60–$80/mo | $80–$130/mo |
| 6–10 | $90–$130/mo | $120–$200/mo |
| 11–20 | $150–$220/mo | $200–$350/mo |
| 21–50 | $250–$400/mo | Custom pricing |
Do You Need a Separate Payroll Provider if You Have a Bookkeeper?
Not necessarily. Many bookkeeping practices that serve small businesses also offer payroll processing as a bundled service. This is actually the more efficient setup: your bookkeeper already has access to your bank accounts, already categorizes labor costs, and already knows your business structure.
When payroll and bookkeeping live in separate systems managed by separate vendors, you get reconciliation problems. The hours your payroll software records do not automatically match what hits your books. When they are managed together, labor costs land correctly in your financials every pay period without manual cleanup.
As a Federally authorized Enrolled Agent, Luisa N. Victoria at Simple Books Now handles payroll alongside bookkeeping so your labor costs, employer tax liabilities, and net pay always reconcile cleanly.
What Happens When Payroll Goes Wrong
Payroll errors carry real financial consequences. The IRS charges a failure-to-deposit penalty of 2–15% of the tax deposit amount depending on how late the deposit is. State penalties vary but are similarly punishing.
Common payroll mistakes that trigger penalties:
- Missing a 941 deposit deadline
- Miscalculating FICA (especially on tips or bonuses)
- Misclassifying employees as independent contractors — the IRS scrutinizes this aggressively
- Forgetting to account for a new state tax obligation when an employee moves or works remotely in another state
- Late W-2 or 1099 delivery (penalties begin at $60 per form for delays up to 30 days)
A solid payroll provider — whether software or a managed service — eliminates these risks. The cost of payroll services is almost always far less than the cost of a single penalty notice.
The Bottom Line on Payroll Costs
For most small businesses:
- 1–5 employees, DIY software: $50–$80 per month
- 1–5 employees, outsourced service: $80–$130 per month
- 6–15 employees, outsourced service: $150–$275 per month
The premium you pay for a managed payroll service over DIY software typically works out to $30–$75 per month for a small team. For most business owners, having payroll simply handled — without logging in, reviewing, and approving every cycle — is worth far more than that.
If you are still running payroll yourself or patching together a solution that is not quite working, contact Simple Books Now to see what a fully managed payroll setup looks like for your business.
