How Much Do Payroll Services Cost for Small Business?

One of the most important aspects of running a business is accounting, which is under the finance department of a company. Typically, accounting, in conjunction with the HR department, handles payroll accounting. For a small business that does not have a rigid office structure with a full complement of staff, payroll may be handled by the business owner or by a staff trained to process payroll payments.

However, if the small business owner only has a few staff under him, it is better to fully utilize their skills to attend to customers and help the business grow. The owner can also concentrate on running the business and getting it established by hiring a payroll service firm to take care of employee’s salaries.

The cost of payroll services for a small business varies, depending on the number of employees as well as the types of services that will be included in the service package. Payroll services, also called payroll accounting, covers the recording of the company’s compensation for its employees, such as:

  • Salaries, gross wages, commissions and bonuses, etc. earned by each employee
  • Withholding of payroll taxes, including federal income taxes, Medicare taxes and Social Security taxes. If applicable, the service can also include state income taxes
  • Withholding the employees’ contribution to savings plans, health insurance premiums, garnishments of wages and salaries, etc.
  • Employer’s share of fringe benefits such as dental and health insurance, paid holidays, sick days and vacations, worker compensation insurance, savings and pension plan contributions and more

Items affecting payroll cost

The cost of a payroll service depends on your needs. Items affecting cost of a payroll service include:

  • Frequency of payroll payment
  • Actual number of employees
  • Need for direct deposit
  • Need for tax filing
  • Location of employees (if there are branches in different states)

Basic payroll service charges

As a business owner, understand that there are many payroll service firms in the market, which keeps pricing very competitive. Many of them offer packages that are tailor fit for small or medium sized businesses. A basic payroll processing fee is computed on a per check or per employee plus the base account fee, which also varies among different providers. It can be between $0.80 and $2.00 per check. Thus you can expect to pay around $20 to $100 each month. To this, you add between $1.50 and $5.00 per payroll period per employee. If you need advanced services such as tax filing and direct deposit, it would cost from $4 to $9/payroll period.

It is usual for a payroll service firm to offer introductory pricing for six months, after which they will have a substantial rate increase. Before you commit to a payroll service firm, make sure to check if they have planned rate increases. Also keep in mind that other services, such as direct deposit, automatic check signatures, printing and check delivery, 1099 and W2 processing as well as federal and state tax filing require separate fees. Make sure you define your exact needs for a payroll service before making a commitment or the service might become too costly for you.

February 28, 2017
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