Costs of Outsourcing Payroll

Payroll services compute costs differently.  Some charge “per check” or per deposit.  Others charge per feature, such as making deposits to employee savings accounts, or allowing online access.  Most use a hybrid of both, charging per month for a standard list of features, and then more for add-ons. 

The following are usually included in a basic payroll package:

  • Paycheck Processing
  • Online access for employees/employer
  • Basic tax filing
  • Direct deposit

Costs are impacted by a few factors. The number of employees you have, the frequency of pay periods, the complexity of tax calculations, and the state you live in all have a significant impact on the amount you pay. 

Depending on how many employees you have, this basic package can run as little as $25 to as much as $200 a month.  Businesses with up to 10 employees usually end up paying more per person, as payroll vendors will offer discounts to larger offices.  Then again, businesses with more employees are also subject to different, more complex tax regulations, so the cost savings might not turn out to be much.  Most payroll outsourcing services will charge extra for end of year reporting functions such as processing and mailing W-2 forms to employees.  Charges for additional features can run as much as $50 per employee, depending on the complexity of the pay structure, whether the employee took an advance on any tax credits, and whether the employee or employer contributed to any tax deferred savings or retirement plans.  Payroll processing companies often charge for adding employees or adjusting information, so make sure you are aware of any additional fees beyond just those for services.

Another factor that will affect cost is the frequency of check writing.  Businesses usually pay weekly, bi-weekly, or monthly.  The more often you pay your employees, the more the services will cost.  Some payroll companies even charge more for writing a paper  check, and less for direct deposit.

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