Small Business Payroll Cost [Update]
When evaluating payroll services, the numerous options can be overwhelming. Ultimately, the price you pay will depend on your company’s specific needs. To get a better understanding of what to expect before contacting providers, let’s examine some typical services and fees associated with the cost of payroll.
Some Common Factors that can Affect Payroll Cost include:
- How often employees are paid
- The total number of employees
- Whether or not you require direct deposit
- How many employees reside in more than one state
- The need for additional tax filing services
The market for payroll services is very competitive, with many providers offering packages geared specifically toward small or mid-sized companies. On average, basic payroll processing has a per-employee or per-check fee, in addition to the base account fee. While base account fees vary widely from one provider to the next, you can expect to pay anywhere from $20 to $100 per month, plus an additional $1.50-$5.00 per payroll run for each employee. For an example just check out our payroll pricing page.
Add-ons and Additional Fees
When utilizing a payroll service, you'll be charged a fee to set up your account, and again whenever you add or drop an employee. In addition, there are many payroll-related services that may warrant separate fees, including:
- Automatic check signatures
- Direct deposit
- State and federal tax filing
- Printing and check delivery
- W2 and 1099 processing
To keep expenses under control, it's best to define your needs ahead of time and search for a provider with an-all inclusive package that will address your requirements. Otherwise, adding a la carte options can quickly send the payroll costs skyrocketing.
It's common practice for payroll service providers to offer low introductory pricing for the first six months and then to increase rates substantially, so be sure that you're aware of any pre-scheduled rate increases before you commit.
New Hire Reporting
Another important function a payroll service provides, often at no additional cost, is new hire reporting.
Employers are required to report all new hires in accordance with federal requirements to the new hire directory of their state. The following information must be included: 1) employee name, address and Social Security number, 2) employer's name, address, and Federal Employer Identification Number (FEIN) and the employee's first day where services were performed.
It is your responsibility as a business owner to report all new employees, generally within 20 calendar days of the hire date. You do not need to report independent contractors though some states require it.
Rehired employees may also need to be reported depending on how long they've been absent. If former employees are absent for more than 60 days, they'll need to be reported with your state's new hire directory. This may include employees on a leave of absence, laid off or those simply rehired.
An employer may face fines for improper reporting: $25 for failing to comply and up to $500 should the employer and employee conspire to avoid filing.
New hire reporting is the very first step in the payroll process. All employees need to be properly registered with the IRS and Social Security Administration to ensure proper withholding of payroll taxes.