Skip to main content

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 will 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're 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?

Payroll software uses automation to streamline the payroll process and ensure regulatory compliance. Using information such as salaries, hours worked, and tax and labor laws, the system can calculate wages, tax contributions, and deductions.

Some packages can also track attendance and time-off balances and generate reports and pay stubs.

Ultimately, this creates a more efficient and compliant payroll process that keeps employees happy too.

Needless to say, your payroll system 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

There are several factors to be aware of that contribute to the overall cost of payroll software.

For example, 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 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.

Software-as-a-Service model

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. 

However, these solutions have limited functionalities and are ideal for startups and small businesses with a limited workforce.

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.  

Related Read: Best Payroll Services for Small Businesses

Download our 2024 Workplace Trends Report to stay ahead in a transforming HR landscape. Get insights from leaders on trends that will define your strategies in AI, talent dynamics, and DEI.

Download our 2024 Workplace Trends Report to stay ahead in a transforming HR landscape. Get insights from leaders on trends that will define your strategies in AI, talent dynamics, and DEI.

  • By submitting this form, you agree to receive the requested content, our newsletter, and occasional emails related to People Managing People. You can unsubscribe at any time. For more details, please review our privacy policy. We're protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
  • This field is for validation purposes and should be left unchanged.

Free payroll software/freemium plans

Payroll software vendors 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: 

Setup fees

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.

Data integration

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 fail to provide value for money. 

Besides this, several full-service payroll solutions offer core HR functionalities along with their payroll plans.

Training costs

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.

Cancellation 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 24 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 payroll processing.

These services simplify payroll administration and compliance with tax and 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.

How To Lower Payroll Software Costs

It’s a fact that the payroll function costs money to set up and run, but use these tricks to ensure you get the most value from your payroll software:

Evaluate your current software needs

  • Assess features: Review the features of your current payroll software to determine if you are paying for functionalities that you do not use. Downsizing to a plan with fewer features that still meets your core requirements can reduce costs.
  • Usage analysis: Determine if all licensed users are necessary. Reducing the number of licenses or users can also decrease expenses.

Consider alternative providers

  • Market research: Research and put out some RFPs to other payroll software options available in the market. There may be newer, more cost-effective solutions that offer similar features at a lower cost.

Negotiate with your current provider

  • Renegotiate terms: Contact your current software provider to discuss any available discounts, especially if you have been a long-term customer or are considering extending your contract.
  • Volume discounts: If your business has grown, or if you can commit to a longer subscription period, ask for volume discounts or extended contract discounts.

Switch to cloud-based solutions

  • Cost-effectiveness: Cloud-based payroll solutions often have lower upfront costs compared to on-premise software. They also reduce the need for internal IT maintenance and hardware updates.
  • Scalability: Cloud solutions are scalable, meaning you can adjust your subscription as your business needs change, potentially reducing costs.

Optimize software integrations

  • Integration Capabilities: Ensure your payroll software integrates efficiently with other systems (like HR and accounting software). Effective integration can reduce the need for multiple platforms and the associated costs.

Food for Thought While 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?

Compare Costs Vs. Features

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 30 best payroll software of 2024.

By Kim Behnke

Kim Behnke is an HR Tool Expert & Writer for People Managing People. She draws on her 9 years of human resources experience and her keen eye for systematic processes to support her analyses of the top HR tools on the market. She is passionate about maximizing efficiencies and streamlining workflows to ensure internal systems run smoothly. Kim's HR experience includes recruitment, onboarding, performance management, training and development, policy development and enforcement, and HR analytics. She also has degrees in psychology, writing, publishing, and technical communication, and recently completed a Certified Digital HR Specialist program through the Academy to Innovate HR. When away from her desk, she can usually be found outside tending to her ever-expanding garden.