A businessman consulting with a businesswoman on how much she should be paying for payroll processing services.

How Much Should You Be Spending On Payroll Processing?


Finally, an article written for the budget-conscious small business owner who wants a simple answer to the question, “How much do payroll services cost?”

Sort of…

We hate to break it to ya, but as is often the case, the answer is not so simple. 

That’s because payroll processing fees depend on multiple factors that are unique to each individual company, such as how many employees there are, what state(s) employees reside in, the frequency in which employees are paid, and more. With that being said, this article can help you arrive at a ballpark figure based on the average cost of payroll services. And if you’re looking for more of an exact figure, you can always contact us for a free custom quote. 

Let’s begin by looking at a baseline price for ongoing payroll services.

How Much Do Payroll Services Cost?

Standard payroll processing is usually priced on a per-employee or per-check basis, in addition to a base account fee. While base account fees vary widely depending on the provider, you’re looking at anywhere from $20–$100 per month. Typically, you’ll also be charged a one-time account setup fee. 

Do note the use of the word typically, as not all payroll services use the same pricing structure. At CapForge, for example, we don’t charge a setup fee at all. We prefer to keep things simple by charging a flat $49 per month fee that covers from one to three employees and then just $10 more for each additional employee from four up. That includes access to direct deposit, payroll tax deposits, along with a portal where you can log in to report hours and download paystubs, etc. Not to toot our own horn, but you’ll appreciate how straightforward our pricing structure is when you learn just how complicated other companies’ are. 

Conditions That Can Affect Payroll Cost

Generally speaking, these are the main factors that will determine how much you will spend on payroll services:

  • The number of employees
  • How often staff are paid (weekly, bi-weekly, or monthly)
  • Direct deposit vs. paper checks
  • If you have employees in multiple states 
  • Whether you choose to add on tax filing services

In the next section, we’ll go over how to add these factors together so you can get an idea what your total cost will be.

Calculate the Average Cost for the Service

This is the part where you get to do math. Yay!

Take a look at the average cost for each of the services below and add them together to calculate your total estimated spend.

Initial Cost to Outsource a Payroll Company

When you outsource a payroll company, you’ll be charged a fee to set up your account and another fee whenever you add or drop an employee. Find out what the provider’s fees are and write them down.

Account setup fee + add fee (number of employees) = initial cost to outsource payroll

Let’s say, for example, that your account setup fee is $50 and it costs $1.50 whenever you add or drop an employee. You currently have 10 employees on staff. Using the formula outlined above, your initial cost to outsource payroll is $65.

50 + 1.50 (10) = 65

Estimate the Cost of Each Service You Are Hiring For

Because the payroll service industry is competitive and dependent upon local market conditions, the price of each service can vary widely. For example, earlier in the article, we mentioned that payroll service providers usually charge an ongoing base account fee, which can range anywhere from $20–$100 per month. You’ll also be charged a fee per check or pay period, which averages between $0.80 and $2.00 per stub

If you want to include direct deposit and tax filing, you can expect an additional charge between $4 and $9 per pay period. With direct deposit, there is usually a nominal transaction fee per check on top of the base fee.

Account For Extra Charges

Nobody wants surprises popping up in their budget. That’s why it’s good to be aware of sneaky little charges that can creep up on ya, such as:

  • Automatic check signatures
  • Printing and mailing checks
  • 1099 and W2 processing
  • Errors

Another thing to keep in mind is that many payroll service providers will offer low introductory pricing for the first six months and then hike up the price. It’s crummy, it’s deceitful, it’s sleazy; we know. But it is common, so make sure you inquire about any pre-scheduled rate increases before you commit. 

If your head is spinning trying to tally up all these various fees and charges, you’re not alone. We find it way too complicated as well, which is why we opted for a simple payroll pricing structure of $49/month for one to three employees and $10 more for each additional employee. There is no extra charge for set up, cancelling, or printing W2s at year end. Transparent pricing through and through. That’s what we’re all about.

We encourage you to compare not only our prices, but our customer service, with those of some of the leading payroll processing companies, like ADP and Paychex. We’ll tell you right now that we often charge about half of what these companies do for the same service. Many of our clients tell us that we’re a lot more accessible and accommodative, too. But don’t take our word for it. Get a quote from each and then compare them side-by-side with us.

Ask the Right Questions

Listed below are some questions to ask when you’re interviewing payroll service providers.


  • What is included in your basic level of service?
  • If there is a mistake, how quickly can you re-run payroll?
  • On average, how long do clients stay with you?


  • Can you help me file local taxes?
  • How much do you charge to file taxes in more than one state?
  • If I sign up for your payroll tax filing service, will you cover the cost of any penalties and/or interest fees?


  • How much is your service for one year, with year-end W2 forms included?
  • Do these rates expire? If so, how much can I expect to pay after they expire?
  • If a mistake is made, how long will it take to fix and what will it cost?

 Questions to Ask Yourself:

  • How quickly does the provider respond to your inquiries?
  • Have you had any issues regarding accuracy?
  • Are you switching from another payroll service? If so, why?

List the Service Required from Payroll Service Provider

As you can see, a little bit here and a little bit there adds up. One tip for keeping costs under control is to make a list of all your needs and search for a provider with an all-inclusive bundle that will meet your requirements. Otherwise, selecting options a la carte can shoot costs through the roof.

Should You Save Money By Running Payroll Yourself?

The short answer is NO!

According to the IRS, approximately 40% of small to medium-sized businesses are fined for miscalculating taxes, submitting incorrect filings, or failing to deposit withholdings. And according to SurePayroll, the average penalty last year was $845. In other words, you may end up costing yourself more money by trying to do it yourself than hiring a professional to begin with!

Besides, running payroll is a lot more complex and challenging than many business owners anticipate. If you don’t have the proper knowledge and skills, you’ll have to invest a significant amount of time, money, and resources into learning how to do it correctly, otherwise you risk incurring a fine.


Now that you know about what you can expect to spend on a payroll service provider, you’re better equipped to start interviewing various firms and deciding which is the right fit for you. Remember: it’s not just about price. You also want to evaluate the firm based on friendliness, responsiveness, and customer reviews. 

If you’re looking for a good place to start, why not begin by contacting us! We’d be more than happy to provide you with a custom quote. It’s free of charge and there is absolutely no obligation to hire us. You can reach us by email at info@capforge.com or via phone at (858) 633-3573. We look forward to speaking with you!

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