How Much Does It Cost to Run Payroll for Small Business?

The cost of running payroll for a small business varies widely based on factors such as the number of employees, the payroll service provider, and the specific services required. Generally, businesses can expect to pay a monthly base fee ranging from $20 to $150, with additional per-employee fees typically between $2 and $12. 

For example, basic payroll services may start at approximately $39 per month plus around $5 per employee, while more comprehensive services with added features could cost up to $99 per month and $10 per employee. 

In addition to these direct costs, businesses should consider the total payroll costs, which can be 1.25 to 1.4 times the employee’s salary when accounting for payroll taxes, benefits, and other related expenses. 

For instance, if an employee earns $35,000 annually, the total cost to the business could range from $43,750 to $49,000, factoring in additional costs like workers’ compensation and health insurance. 

Number of Employees

The size of your workforce is a primary determinant of payroll costs. Most payroll providers charge a base fee plus a per-employee fee, meaning that as your number of employees increases, so do your costs. This per-employee fee can range from $2 to $15, depending on the provider and the services included.

Payroll Frequency

How often you run payroll significantly affects costs. Providers may charge per payroll run, so opting for more frequent pay periods (e.g., weekly) can lead to higher fees compared to less frequent schedules (e.g., monthly). Businesses should balance their payroll frequency with cash flow considerations and employee preferences.

Required Features

The complexity of services needed also impacts costs. Basic packages may cover essential payroll functions, while more comprehensive services that include tax filing, benefits administration, and HR support will typically cost more. Businesses should evaluate their specific needs to avoid paying for unnecessary features.

Direct Deposit Options

While many payroll services include direct deposit in their packages, there may be additional costs associated with setting up and maintaining this feature. Direct deposit is generally preferred for its convenience, but businesses should be aware of any associated fees.

Geographic Location and Industry

Payroll costs can vary based on the state and industry in which a business operates. For example, businesses in industries with higher risks, such as construction, may incur higher workers’ compensation insurance costs, which can affect overall payroll expenses. Additionally, businesses operating in multiple states may face increased complexity and costs due to varying tax laws and regulations.

Additional Services and Compliance Fees

Many payroll providers offer add-on services, such as advanced reporting or compliance management, which can increase overall costs. Compliance with local, state, and federal regulations often requires additional fees for services that ensure accurate tax filings and adherence to employment laws.

By understanding these factors, business owners can make informed decisions to choose a payroll service that fits their budget and operational needs.

To help you navigate the software jungle with ease and find the right tools for your business, check out our software guides, reviews, and recommendations: 

• Timeero Review
• Contractor Foreman Review
• Service Fusion Review
• Field Service Scheduling Software

References