Update: After this blog post was published the fees that payroll processors charge small businesses rose several times so that the fee is now actually about $26.50 per week for 2019. The pricing information below is now obsolete. The key to value is in the service performance agreement.
I frequently promote the benefits of full service cloud-based automated payroll services for small business and nonprofit organizations. The services can be offered remotely with greater efficiency and offer fantastic value to employers compared to the older payroll service options. Compared to the high risk of payroll accounting mess-ups in systems that lack automation, these services are a natural choice.
The first question that usually comes up from small employers is “How much does it cost?”. Of course price should not be the only or even the primary consideration but it seems to be the question that always comes up first.
Different vendors have different pricing structures and entry points. The basic price of the payroll service that I use most often for small employers is $15 per week. This includes all tax filings, W2s and automatic deposit for employees. Increasing the number of employees or adding other services may increase the price.
Equally important is the service and the strength of the assurance offered. I won’t endorse a service that does not have a strong clear statement about liability for response to tax agencies and correction of errors. We also look for contracts that include residual benefits that extend beyond the termination of the contract. With more than 40% of employers incurring payroll tax penalties – often occurring after a change in payroll service companies – this is an important consideration.
This service can be added seperately but I recommend that it be included in a comprehensive accounting service agreement.
Update: Yesterday (8/31/2016) I met with representatives of a major national payroll service company to discuss their small business service pricing and was surprised to learn that they also rely on this same $15 per week base price of payroll services despite the much wider range of services offered. This base price is the cost of their technology only, and does not include the price of any human service to process payroll so accountants’ charges are added to that amount. In contrast, some simpler payroll systems might be priced to include the accountant’s service at this rate. Our discussion included my observation that all of these automated payroll services have performed flawlessly for my clients.