Payroll is an essential function for any business owner. Payroll is an important function for business owners. It not only improves employee satisfaction but also helps you to stay in compliance and avoid fines. There are several things to consider for outsourced payroll service cost, including obtaining the correct employee information and tax withholdings. Outsourcing payroll to shelter services Mexico has become increasingly popular among US companies due to the country’s favorable tax environment, skilled workforce, and relatively low labor costs.
If you have a small business with a few employees and only a few needs, managing payroll may not be difficult. It doesn’t matter how big your company is, however, it can quickly become more complex as you have employees in multiple states or are subject to the legislative requirements for payroll, HR, and benefits.
Complete Payroll Solutions was founded in 2003 to assist businesses of all sizes, all industries, with their payroll process automation and average payroll cost per employee. This allows for greater precision, happier employees, and more productivity.
We get a lot of questions from companies asking us: What is the cost of outsourcing payroll service? The short answer is: It’s very affordable. It’s also surprisingly inexpensive.
How Much Does a Payroll Service Cost?
While prices depend on many factors, you can expect to pay between $150-$200 per year per employee. We’ll explain what drives this number up and down so you can find a solution that suits your needs, regardless of who you choose to partner with.
How is Payroll Pricing Structured?
There are many ways payroll companies can charge their customers for their services. However, you will likely find three main approaches. We’ll calculate the average cost for a company that pays 10 employees bi-weekly.
Payroll companies typically charge fees based on the frequency of pay. This means that regardless of how often employees are paid (weekly/bi-weekly/semi-monthly/monthly), you will be charged a base charge and a fee for each employee.
This is a good option for businesses that have predictable payrolls and don’t need to make any changes. This is the right approach for you. You can expect individual employee fees to range from $1.50-$3 per employee, and base fees per pay period to be between $20 and $40. This would mean that you would be paying approximately $140 per month, assuming a $3/check fee and a $35 base fee.
Per Employee Per Month (PEPM) Payroll Service Cost
Employers often save money by using this pricing structure. This pricing structure is growing in popularity. Instead of paying fees per payroll, PEPM allows unlimited payrolls and you only pay one monthly fee plus the fixed rate for the number of employees.
PEPM is an excellent choice for companies that may need additional payroll runs, such as bonuses or commissions. This option would cost you about $75 plus $6 per employee. Your total monthly charge would be approximately $135, plus shipping fees.
A fixed-rate is charged by a payroll company per month for certain situations, such as Do-It-Yourself online solutions. This covers a specific number of employees, or a range, such as $65 for 1-9 workers and $125 for 10-20.
This is the only fee for payroll processing. It doesn’t matter how often you pay your employees. Some companies have a limit on the number of employees they can process payroll for. This may not be an option for all businesses. This can be an easier and more cost-effective way to outsource payroll if your company is small with a steady employee base.
In most cases, the fees discussed above only cover payroll processing. Business owners may also need additional services, which are not included in the above fees. These services will be discussed next.
It is important to know exactly what you are paying when comparing payroll costs. This will allow you to compare companies accurately and get a clear idea of the cost you will be paying.
Many times, the costs quoted are for processing payroll. Additional payroll outsourcing costs may apply for any ancillary services or products you require. It’s like an a-la-carte menu in a restaurant. This is where the costs can quickly mount up.
Some common services businesses to include with payroll include:
- Tax filing (the cost of which can rise depending on how many states you are operating in)
- General ledger interface
- Options for employee pay include direct deposit, pay card, and paper checks.
- Delivery and courier charges
- Make sure you seal the package properly
- File transfers customized for workers’ compensation reporting and 401(k).
- Quarterly and annual reporting
- W-2/1099, 1095 processing
- Affordable Care Act (ACA), reporting
Some payroll companies might include these services as part of their base fees. Complete Payroll Services includes tax filing, payroll cost per employee options, check to stuff, sealing, quarterly reporting, year-end reports, customized file transfers, and check to stuff and sealing as part of its standard base fee. Most often, however, each add-on is charged separately or you need to purchase a package with several services.
These extras, depending on which services you outsource or which you manage yourself, can add up to hundreds and increase your total payroll service costs. To avoid any surprises, it is important to clarify what is included and not in the price quote.
If you add additional solutions to your HR functions, such as:
- Attendance and time
- Tracking and recruiting applicants
- Benefit enrollment
- Performance Management
Each solution will usually have its own fee structure, which you’ll pay in addition to your payroll processing cost.
In most cases, you can cancel your payroll service at any time with very little notice. If the cost of your service is more than you anticipated or is not affordable, you can cancel the contract and make a request for a refund.
Are There Ways to Save on Outsourcing?
There is so much variation in pricing that you might be curious if there are any ways to save money on payroll. Do-It-Yourself (DIY), online payroll software has been gaining popularity due to the desire for lower-cost options. DIY solutions can be as low as 50% on a payroll service cost per employee.
This is because you, as an employer, take on more responsibility for payroll service pricing details entry and production. These solutions can also be done electronically so you don’t have to pay for check delivery.
The DIY option is a great way to save money for many businesses. As long as you are comfortable using web- and mobile-based systems, and have limited interaction with your provider, it can work well. This is also convenient if you don’t have the time or ability to contact your payroll company during business hours, and you prefer to pay payroll either before or after their office hours.
It is important to realize that you will have to give up some things in this way.
Many software solutions do not offer support and assistance if you need it. If you are looking for a relationship with your vendor, or a call-in/call-out service, a payroll company will be a better choice. They allow you to report the hours of your employees and let them handle everything else.
What Will My Total Price Be?
There are many factors that could impact the cost of payroll processing. While it is estimated that the average cost for payroll services is between $150-$200 per employee for a year, the actual price will depend on the extent of your relationship with your company. How much do payroll companies charge?
This is a small price to pay compared to the risks associated with doing it yourself, such as errors, late payments, or compliance issues. You could actually be costing your company more each time you pay for a provider than you would pay for them.
There are several things to consider when outsourcing payroll service cost. Learn more about the top regional and national payroll providers. Complete Payroll Solutions may be right for your business. Learn more about our payroll packages to find the one that is best suited for your company.