Tired of punching the buttons on your calculator? Payroll software can streamline your payment processes, file taxes and even help manage HR benefits for employees. But be mindful of incremental cost increases with each employee you hire.
Organize, calculate and pay state and federal taxes
Sometimes payroll software comes with other perks, like tax penalty protection and dedicated HR advisors. For small businesses, investing in a solid payroll software can eliminate the need to hire a full-time bookkeeper or accountant. It’s worth looking into if you want to digitally manage the finances involved in running your biz.
How much does payroll software cost?
Most payroll software will bill you monthly according to the membership tier you choose and the number of employees you add to its system. Here’s a snapshot of the fees involved:
Monthly base price
This is what you pay for general product usage.
$10 to $45 for a basic plan. You’ll pay more for an upgraded membership.
Monthly fee per employee
With each employee you hire, this fee will be added to your monthly bill to cover services like direct deposit.
$2 to $6
Tax filing cost
Some business software providers include tax filing in the price, while others charge extra.
Usually free. Otherwise, around $30 per month, plus $5 per employee.
Prices obtained April 2020 and are based on the rates from 10 major US business software providers. Keep in mind that exact costs can vary depending on when you sign up, and that some business software providers will work with you to provide a custom quote.
Best payroll software for small businesses
To find the best payroll software for your business, you’ll want to decide which features are important to you. For example, do you want tax filing to be included in the price? Do you want bonus HR tools, or are you looking for bare-bones payment software?
Here are our top picks, according to your needs.
Best for businesses with fewer than 10 employees: Gusto
Cost. From $19 per month plus $6 monthly per employee.
Gusto’s user experience is intuitive and non-intimidating, which will be refreshing especially if you’re a small business owner that has a lot on your plate — and if you’re reading this, you probably do. It’s an all-in-one payroll software that also includes HR services like benefit tracking and workers comp administrators.
It offers medical, dental and vision insurance administration, and can help manage 401K and 504 college plans for your employees. It can also connect you with licensed advisors and compliance support throughout the tax filing process.
Gusto is best for businesses that want to use direct deposit, as it won’t print and mail checks for you. Also, it can get pricey for companies with more than 10 employees.
Best for companies with more than 10 employees: Intuit QuickBooks Payroll
Cost. From $23.20 per month plus $2 monthly per employee.
Quickbooks Payroll’s Core plan is much cheaper than Gusto as you scale up, and offers automatic tax form filing, payroll management and a workforce portal where employees can track PTO and download their W2 forms. The interface integrates beautifully with the accounting software from Quickbooks, so if you’re a business that handles its own bookkeeping this is a super cost-effective way to manage your expenses and payroll all in one place.
That said, Quickbooks payroll doesn’t allow for 401K tracking, and lacks some of the other HR perks that Gusto provides. And only the top-tier plan, Assisted Payroll, includes tax filing in the price — which costs $65.40 monthly plus $2 per paycheck for each employee.
Cost. From $10 per month plus $4 monthly per employee.
Patriot Software’s $10 monthly basic plan includes direct deposit, expert support, an employee portal, time-off accruals, printable W-2s and more. It’s an excellent option for businesses that don’t need tax filing or benefits management lumped in with their payroll software.
Plus, it comes with a 30-day free trial so you can try it out before committing. But keep in mind that it doesn’t offer some of the bells and whistles that Gusto and Quickbooks provide, and it only has two membership tiers to choose from.
To calculate these prices, we used the rates posted by each company in April 2020.
When choosing the best payroll software, we first confirmed each provider’s legitimacy, business practices and website security. We also looked at customer reviews from the Better Business Bureau and Trustpilot.
We then analyzed and compared each company based on factors like how much each membership tier costs and which features are included. Finally, we looked at discussions in business forums around the web to understand how business owners use each payroll software, and their overall level of satisfaction.
Pros and cons
Payroll software can be a valuable asset to business owners looking to simplify their processes.
Affordable. Compared to hiring a full-time accountant or payroll manager, purchasing this type of software is very affordable. It’s a great way for small businesses to pay their employees and take care of many standard HR tasks, without a huge investment.
Fast and efficient. Instead of spending hours working over complex calculations, you can plug your numbers into the payroll software and it’ll calculate how much to pay each employee based on their hours, overtime, vacation time and more.
Reliable. Payroll software minimizes human error, which will save you time and money in the long run — plus, it’ll help establish trust between you and your employees. And you can schedule direct deposit payments so your employees will be paid at the same time each month. It can also help you meet tax deadlines, which means you’re less likely to be dinged by the IRS down the line.
Electronic records. Filing cabinets, be damned — you’ll have a digital record of payments, including employees’ W2s, for easy access whenever you need. This documentation will also be valuable during tax season, especially if you’re planning on filing them for yourself.
Still, weigh the drawbacks too before committing to a specific payroll software brand.
Incremental cost increase. Of course, the biggest drawback is that the price will increase as your company grows, so if you scale quickly the cost of your payroll software could get pricey.
Errors can be tricky to fix. If an employee makes a mistake clocking in, or their PTO isn’t recorded correctly, you might experience frustrations trying to straighten it out. In some cases, you may even have to call customer service to fix similar human errors.
You might have to pay for features you won’t use. Since payroll software for small businesses typically bundles its services, you’ll want to carefully decide whether you’ll use it enough to warrant the price. For example, if you already invest in HR business software, using Gusto could prove redundant.
Compare payroll software
Payroll software can be instrumental in helping small businesses pay their employees and otherwise track expenses related to their workforce. But if that’s not quite what you’re looking for, or you simply want to see what else is out there, compare other business software solutions.
Frequently asked questions
Yes — sort of. There are payroll software providers that advertise themselves as “free,” such as Payroll4free.com. However, keep in mind that though they may be free up front, you’ll likely be charged fees for various tasks, like sending direct deposit payments, for example.
Yes. Some banks, such as Wells Fargo, let you send direct deposits through a business account — though you’ll still have to pay fees.
Usually, yes. The money you spend on payroll software should be tax deductible, since it’s a business expense.
Amy Stoltenberg is a staff writer covering all things travel, shopping and lifestyle. After earning a BA at Savannah College of Art and Design, she worked as technical designer in corporate fashion before opting for a career with unlimited travel time. When her laptop's closed, you can find her wandering around Los Angeles looking for hole-in-the-wall eateries and plotting her way to all 50 states (she's currently at 28).
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