Paying for software that assists in paying your staff may feel paradoxical. However, payroll software offers much more than cutting regular paychecks for your employees.
Implementing the right payroll system for your business can help automate payroll and tax calculations, navigate tax compliance, enable direct deposits, and more — all of which can positively impact organizational efficiency.
But how do you choose the payroll software that provides value for money? What are the different kinds of costs involved? If you are on the hunt for payroll software, read along.
In this article, I’ll walk you through a breakdown of payroll software costs and other critical factors for you to make an informed decision.
What is Payroll Software?
HR tools like payroll software streamline payroll management by automating employees’ compensation disbursements. Payroll software also tracks attendance and time-off balances for human resources professionals and calculates staff pay to generate monthly pay stubs.
Payroll software provides helps businesses save time and minimize payroll errors, which leads to efficient payroll compliance, happier employees, and optimized business development.
Using payroll software for your business can have a lot of employee benefits, whether you’re a small company or a large corporation. However, choosing the ideal payroll software is influenced by several factors. The right payroll system for your business needs to be reliable, customizable, and adaptable to the scaling needs of your organization. But how much will it cost you? Here’s a breakdown of payroll software costs, including pricing models and hidden costs.
Payroll Software Costs: A Breakdown
Several attributes factor into the cost of payroll software. The pricing varies based on the specific services required by your organization, the size of your company, and the level of training and support you seek. Base plans for payroll software can start as low as $17 per month (Patriot Software), while more established payroll service providers like Intuit Quickbooks provide enterprise plans starting at $140 per month.
Here are the major payroll software pricing models you should know about:
Payroll Pricing Models
Payroll software worldwide typically follows these three main types of pricing models: the monthly SaaS model, a fixed-pricing model, or a free/freemium plan. Add-ons such as tax filing, direct deposits, and HR services may increase costs. While you’re researching, evaluate multiple quotes from providers before committing.
Businesses subscribed to the software-as-a-service (SaaS) pricing model pay a monthly charge to access cloud-based payroll applications. The subscription plans for such payroll software include charging a monthly fee per employee in addition to the base fee.
One good example of a payroll software provider following this model is Gusto, which charges businesses a base fee of $40 per month plus $6 for every employee. Thus, a company with 100 employees would pay $640 per month.
Many monthly subscription plans include multiple tiers, each offering different payroll features and services. The expensive plans might include extra technical help, extra HR support, and a personal accountant to prepare and submit taxes.
This model is best-liked by businesses, irrespective of their sizes, because of the cheap monthly charge and scalability options.
Fixed Pricing Model
Some payroll software charges a fixed monthly fee, irrespective of your number of employees. The fee generally depends on predetermined variables like the features provided and the number of employees it can support. Such solutions, however, have limited functionalities and are ideal for startups and small businesses with a limited workforce.
Related Read: Best Payroll Services for Small Businesses
One good example of payroll software implementing this pricing model is Deel. It offers flat-rate user pricing, with a free plan for businesses with up to 200 employees. Heartland Payroll is another option offering pricing plans for a fixed number of employees. Prices start at $89 per month for 1-5 employees.
Free Payroll Software / Freemium Plans
Payroll software offering freemium plans are rare, but options like Homebase exist that offer a free basic services plan for unlimited payroll at one work location, making it perfect for small businesses.
However, software employing this pricing model provides the bare minimum features to give you a glimpse of how the software works. The goal is to hook customers into liking their software and then convince them to try out the paid plans. I recommend using one of these plans only as a jumping-off point or if you are a small business owner with a couple of employees and have a tight budget.
Other Payroll Costs
Here are some additional costs that you may have to incur when you sign up to run payroll using software:
You might incur a one-time setup fee when transferring previous payroll information from an old or historical system to a new one. This data migration is critical to ensure the accuracy of your employees' year-end forms.
For some software like Quickbooks Payroll, the setup costs are only included in the highest plan (i.e., the Advanced tier). On the other hand, bespoke programs like ADP RUN usually include the setup charges in the prices they quote.
This includes extra costs for establishing data integrations with time-tracking apps, accounting software, or HRMS systems. Furthermore, you could face additional charges for utilizing an API providing HR functionalities like generating payroll reports and analytics.
While payroll integrations bring in more flexibility and efficiency, they often do not provide value for money. Besides this, several full-service payroll solutions offer core HR functionalities along with their payroll plans.
You would expect that after paying for the software, training would be complementary. However, that is not always the case. Software like Ceridian Dayforce and Heartland Payroll charge for training your employees.
Even if the software provider doesn't charge for their training, you still pay your staff's wages for hours they spend getting up to speed with the new software. This is why you should sign up for software that offers complementary training without charging any additional fees.
Some payroll software providers have a cancellation fee or a lock-in subscription pay period. As a result, look out for such hidden costs to avoid unavoidable expenses. However, there are options like Sage HR and Intuit Quickbooks that refund purchase costs within 30 and 60 days, respectively.
This is why you should always choose a payroll system that offers a free trial. Check out this list of the best payroll software offering freemium plans and free trials.
Customer Support Fees
In certain rare scenarios, payroll software companies charge customer support fees. One example is Quickbooks Online, which only offers 24/7 live support as part of its higher-tier plans.
However, with most HR software options, basic payroll plans offer limited help (such as email and knowledge base support). However, the higher-priced plans typically come with access to a personal customer service manager, avoiding the likelihood of extra fees.
Other Payroll Options to Consider
Besides the pricing models highlighted above, here are two more options for choosing the right payroll software for your business.
Full-Service Payroll Outsourcing
From employee onboarding to filing tax forms and monitoring compliance, a full-service payroll outsourcing solution is an online payroll services provider that handles all aspects of the payroll process for businesses. Such software simplifies payroll administration and compliance with tax & labor regulations.
Here are some helpful pros and cons to consider when using an outsourced full-service payroll solution.
Overall, it’s a good idea to delegate payroll operations to a third-party services provider. Implementing a full-service payroll software can streamline tax payments, simplify HR operations, and improve employee satisfaction.
Such software also provides additional HR features like time and attendance, bookkeeping, paid time-off (PTO) tracking, benefits administration, payroll compliance, payroll data reporting, and employee self-service portals. Some notable examples of full-service payroll outsourcing companies include Paychex Flex, Workday HCM, and Onpay.
Related Read: Best Payroll Companies: Reviewed & Compared
Global Payroll Services
Firms operating internationally can outsource payroll administration to global payroll service providers that manage all aspects of payroll administration for multinational corporations. These services oversee tax law intricacies, exchange rate concerns, and regulatory obligations to process payroll compliantly.
By implementing global payroll services, businesses can save time and money while steering clear of potential legal penalties. Additionally, global online payroll services providers help their clients create customized payroll processes to meet your unique requirements.
Global payroll services also enable companies to manage currency risks by automatically translating salaries into local currencies. Some examples of global payroll service providers include Rippling, Papaya Global, and Deel.
Other Payroll Resources and Best Practices
If you're keen on mastering payroll management, I’d encourage you to delve into these insightful articles too. They offer practical advice for marching toward successful payroll management.
- Payroll Administration: A Complete Guide
- Payroll Costs: A Comprehensive Breakdown and Tips to Reduce
- Understanding Payroll Taxes: An Employer’s Guide
- How to Run a Successful Payroll (Checklist)
- Who Should Handle Payroll in Your Organization?
- 8 Key Payroll Software Features + 3 Bonus
- How to Manage Payroll for Small Business
Factors to Consider When Shortlisting Payroll Software Providers
Besides considering costs, you should ask yourself the following questions before choosing any payroll system solution:
- Is the software interface user-friendly and does it meet the skill level of your in-house HR team?
- Can the software accommodate your organization’s changing payroll needs?
- Does the software comply with local and global tax compliance requirements?
- Can the software seamlessly integrate with other existing HR and accounting systems?
- What kind of training and support does the software provider offer?
With HR workload going through the roof, embracing payroll software improves accuracy and efficiency while cutting down costs.
Payroll software providers sometimes have complicated pricing models. In this article, I’ve attempted to unravel the various hidden costs to paint a complete picture of the financial implications behind implementing new payroll software.
If you’re looking to choose payroll software for your business, check out this guide highlighting the best payroll software of 2024.
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