How much does payroll service cost for a very small business?

How much does payroll service cost for a very small business? This is a simple question without a simple answer. As we might suspect, the answer is wrapped up in the details.

1. Service contract – Who pays penalties for screw-ups and responding to an audit? How reliable is the provider’s assurance? Keep in mind that a high percentage of companies are eventually audited and many wind up paying penalties for inadvertent errors.

2. Personal service – When a question comes up who handles it? Do you have access to their cell phone number? How speedy and reliable are they based on reputation and past performance? Do they have the ability and the authority to ‘get it done’?

3. Local taxes – Handling local tax issues can be more demanding and time-consuming that state and federal wage tax issues. Is this considered in the fee?

The range of market prices I see for very small businesses is $0 to $120 per month. I recently developed a customized proposal for a new 2 employee client at $65* per month that includes strong guarantees, professional service and all local tax services. IMO, that is likely the lowest amount that a CPA could charge for the highest quality payroll service.

*In August 2017 I raised the minimum fee to $75 per month


3 responses to “How much does payroll service cost for a very small business?”

  1. I converted one payroll processing quote from a reliable firm to a total annual cost and then to a monthly cost simply for comparative presentation. I am presuming a two person company with direct deposit. The cost is $45 for each processing but worked out to be considerably higher than in my original post so I wonder if I might have low-balled my assessment in the blog post.
    If biweekly payroll:
    26×45=1,170 1170+55+5.50+5.50=1236 total annual cost 1236/12= $103 per month
    If weekly payroll:
    52×45=2,340 2340+55+5.50+5.50=2406 total annual cost 2406/12= $200.50 per month

  2. […] service to handle the required record-keeping and tax payment transactions. These services are inexpensive, typically $500 to $1,000 per year, considering the larger savings of time and money derived as a […]

  3. This month I posed the question to a group of accountants: “What is the lowest price of full service payroll processing and payroll tax services?”. After a sampling of responses and some online discussion, my estimate of $65 per month as a low range market fee is affirmed.

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