Best cheap payroll service

When it comes to finding the “best cheap payroll service,” it’s crucial to understand that “cheap” often comes with trade-offs, especially in the world of financial services.

While many businesses seek cost-effective solutions for managing employee payments, the true value lies in balancing affordability with reliability, compliance, and comprehensive features.

The goal isn’t just to find the lowest price, but a service that offers exceptional value without compromising accuracy or exposing your business to unnecessary risks.

This article will delve into what makes a payroll service “cheap” yet effective, exploring key providers, essential features, and how to make an informed decision that aligns with your business’s financial health and operational needs.

Understanding “Cheap” in Payroll Services: Value vs. Price

When we talk about “cheap” in the context of payroll services, it’s not simply about the lowest dollar amount. It’s about value for money. A truly cheap payroll service offers a strong feature set, compliance assurance, and reliable support without breaking the bank. It’s about getting the most bang for your buck. Many small businesses, especially startups, operate on tight budgets, and every dollar counts. According to a 2023 survey by the National Small Business Association NSBA, over 60% of small businesses cited financial concerns as their top challenge, highlighting the need for cost-effective solutions like payroll.

What Defines an Affordable Payroll Service?

An affordable payroll service typically comes with:

• Transparent Pricing: No hidden fees, clear monthly or per-payroll costs.
• Scalability: Plans that grow with your business, avoiding costly upgrades for minor changes.
• Essential Features: Basic payroll processing, tax filing, direct deposit, and basic reporting.
• Self-Service Options: Employee portals that reduce administrative burden on the employer.

The Pitfalls of “Too Cheap”

While affordability is good, “too cheap” can be detrimental. Be wary of services that:

• Lack Compliance Features: Incorrect tax filings can lead to hefty penalties. The IRS levied over $5.6 billion in penalties for payroll tax errors in 2022.
• Offer Poor Customer Support: When issues arise, quick and effective support is crucial.
• Have Hidden Fees: What seems cheap upfront can accumulate costs rapidly with add-ons.
• Lack Security: Payroll involves sensitive employee data. A breach can be devastating. Data breaches cost businesses an average of $4.45 million in 2023, according to IBM.

Key Considerations When Choosing a Cheap Payroll Service

Selecting the right payroll service involves a careful evaluation of several factors beyond just the price tag.

You need a solution that aligns with your business size, complexity, and growth trajectory.

Pricing Models and Structures

Payroll services typically offer various pricing models.

Understanding these can help you predict costs accurately.

• Per-Employee Per-Month PEPM: This is the most common model. You pay a base fee plus a fixed amount for each active employee per month. For example, a base fee of $20/month plus $5/employee. For a company with 10 employees, this would be $20 + 10 * $5 = $70/month.
• Per-Payroll Run: Less common for comprehensive services, this model charges you each time you process payroll.
• Tiered Pricing: Services offer different packages e.g., Basic, Premium, Enterprise with escalating features and costs. The “Basic” tier is often the cheapest.
• Annual vs. Monthly Billing: Some providers offer discounts for annual commitments, but this locks you in.

Essential Features for Small Businesses

Even a cheap payroll service must offer core functionalities to be useful.

• Automated Payroll Processing: The ability to automatically calculate wages, deductions, and taxes.
• Direct Deposit: Essential for convenience and reducing administrative time. Over 93% of employees use direct deposit.
• Tax Filing and Remittance: Automatic calculation, filing, and payment of federal, state, and local payroll taxes. This is a non-negotiable feature for compliance.
• New Hire Reporting: Compliance with state new hire reporting requirements.
• Year-End Tax Forms W-2s, 1099s: Automated generation and distribution of these crucial documents.
• Basic Reporting: Access to payroll summaries, tax reports, and employee lists.
• Employee Self-Service Portal: Allows employees to access pay stubs, W-2s, and update personal information, significantly reducing HR inquiries.

Scalability and Growth Potential

Your business isn’t static.

The payroll service you choose should be able to grow with you. Direct deposit providers free

• Adding Employees: Can the service easily accommodate new hires without a significant jump in cost or complexity?
• Feature Upgrades: If you eventually need time tracking, HR features, or more advanced reporting, can you upgrade seamlessly within the same provider?
• Multi-State Payroll: If you hire employees in different states, ensure the service can handle multi-state tax complexities. Only about 25% of small businesses currently operate in more than one state, but this number is growing.

Top Contenders for Best Cheap Payroll Service

Several providers consistently rank high for offering competitive pricing combined with robust features.

Each has its own strengths, catering to different business sizes and needs.

Gusto: Best for Small Businesses & User-Friendly Interface

Gusto is widely praised for its intuitive interface and comprehensive features, making it a favorite among small businesses.

Its pricing structure is transparent and scales well.

• Pricing: Starts around $40/month base fee + $6/employee per month for the “Simple” plan. They also offer a “Contractor Only” plan for $0 base fee + $6/contractor per month, which is incredibly cost-effective for businesses primarily relying on contractors.
• Key Features:
  • Full-service payroll for W-2 and 1099 workers.
  • Automated tax filing and remittances federal, state, local.
  • Unlimited payroll runs.
  • Direct deposit 2-day standard, next-day available for higher tiers.
  • New hire reporting.
  • Employee self-service portal.
  • Basic HR features, including onboarding checklists and employee directories.
  • Integrations with popular accounting software like QuickBooks, Xero, and FreshBooks.
• Pros:
  • Extremely user-friendly dashboard.
  • Excellent customer support.
  • Robust features even at the basic tier.
  • Highly automated tax compliance.
• Cons:
  • Can become pricier as you add more employees compared to some bare-bones options.
  • Next-day direct deposit is not available on the cheapest plan.

Patriot Payroll: Strong Value for Budget-Conscious Businesses

Patriot Payroll is known for its straightforward, affordable pricing and reliable service, particularly for businesses that want to handle some payroll tasks themselves.

• Pricing: Two main plans:
  • Basic Payroll: Starts at $17/month base fee + $4/employee per month. This plan requires you to file your own payroll taxes.
  • Full Service Payroll: Starts at $37/month base fee + $4/employee per month. This plan handles all tax filings for you.
  • Direct deposit or print checks.
  • Employee portal.
  • W-2 and 1099 preparation.
  • Integrations with Patriot’s accounting software.
  • Very competitive pricing, especially for the “Basic Payroll” plan if you’re comfortable with manual tax filing.
  • Simple, no-frills interface.
  • Good for businesses that are comfortable with a more hands-on approach to tax compliance if choosing the basic plan.
  • The “Basic Payroll” plan requires manual tax filing, which can be a compliance risk if you’re not diligent.
  • Fewer HR features compared to Gusto.
  • User interface is less modern than some competitors.

OnPay: All-Inclusive Features at a Reasonable Price

OnPay offers a single, comprehensive plan with transparent pricing, making it a strong contender for businesses that want an all-in-one solution without jumping through tiered pricing hoops.

• Pricing: A flat fee of $40/month base fee + $6/employee per month. This single plan includes all features.
  • Automated tax filings and remittances federal, state, local.
  • Multiple pay rates, tips, bonuses, and commissions.
  • Garnishment payment services.
  • HR and benefits integrations health insurance, 401k, workers’ comp.
  • Advanced reporting.
  • Integrations with QuickBooks, Xero, When I Work, and more.
  • All-inclusive features in one simple pricing plan.
  • Strong HR and benefits administration capabilities.
  • Flexible payroll options pay frequency, pay rates.
  • Base price is slightly higher than Patriot’s cheapest option.
  • May be overkill for extremely small businesses with very basic needs.

Wave Payroll: Best for Businesses Already Using Wave Accounting

Wave Payroll is an excellent option for businesses already using Wave’s free accounting software.

It integrates seamlessly, offering a unified financial management solution.

• Pricing:
  • Tax Service States: $20/month base fee + $6/employee per month includes tax services.
  • Self-Service States: $20/month base fee + $6/employee per month you file your own taxes. This is less “full-service.”
  • Integrated with Wave Accounting.
  • Direct deposit.
  • Year-end W-2 and 1099 preparation.
  • Basic payroll reports.
  • Seamless integration with Wave’s free accounting software, making it a very cost-effective overall solution for small businesses.
  • Very competitive pricing in states where they offer tax services.
  • Tax services are not available in all 50 states, requiring manual tax filing in some areas.
  • Limited HR features compared to other providers.
  • Customer support can be slower due to their focus on free accounting software users.

Essential Features to Look for in a Cheap Payroll Service

Beyond the basic requirements, certain features can significantly enhance efficiency and compliance, even in a budget-friendly service.

Tax Filing and Compliance Automation

This is arguably the most critical feature. Local payroll companies near me

Errors in payroll tax can lead to severe penalties from federal and state agencies.

• Automated Calculation: The service should accurately calculate federal income tax, Social Security, Medicare, FUTA, SUTA, and state income taxes.
• Automatic Filing and Remittance: The provider should file all necessary payroll tax forms 941, 940, state unemployment, etc. and remit payments on your behalf.
• New Hire Reporting: Compliance with state-specific new hire reporting laws is crucial to avoid penalties.
• Garnishment Management: Ability to accurately calculate and process wage garnishments for child support or other court orders. According to the U.S. Department of Labor, over 7 million wage garnishments were issued in 2022.

Employee Self-Service Portals

An employee portal is a must for reducing administrative burden.

• Access to Pay Stubs: Employees can view and download current and past pay stubs.
• W-2 and 1099 Access: Employees can access and print their year-end tax forms.
• Personal Information Updates: Allows employees to update their address, banking information, or tax withholdings, reducing manual data entry for employers.
• Time-Off Requests Optional: Some advanced portals allow employees to request and track time off, though this is less common in very basic, cheap plans.

Direct Deposit and Payment Options

While direct deposit is standard, flexibility in payment options is a plus.

• Direct Deposit: Should be standard, with options for 2-day or next-day deposits.
• Printable Checks: For employees who prefer paper checks, the service should allow you to print them.
• Pay Cards Less Common in Cheap Services: Some services offer pay cards for unbanked employees, though this is typically a premium feature.

Reporting and Analytics

Even basic reporting can provide valuable insights into your payroll expenses.

• Payroll Summary Reports: Overview of total wages, taxes, and deductions for a given period.
• Tax Liability Reports: Details of all taxes due and paid.
• Employee Earning Reports: Breakdown of individual employee earnings.
• Customizable Reports Optional: Ability to generate reports based on specific criteria, useful for budgeting and financial planning.

Integrating Payroll with Your Existing Systems

Seamless integration with other business software can save hours of manual data entry and reduce errors, even with a cheap payroll service.

Accounting Software Integration

This is the most common and beneficial integration.

• Popular Integrations: Look for services that integrate directly with QuickBooks Online, Xero, FreshBooks, or whatever accounting software you use. According to Intuit, 80% of small businesses using accounting software rely on QuickBooks.
• Automated Journal Entries: This means payroll data wages, taxes, deductions is automatically posted to the correct accounts in your general ledger, eliminating manual entry.
• Reconciliation: Makes reconciling bank accounts much easier, as payroll expenses are accurately categorized.

Time Tracking Software Integration

If your employees clock in and out, integration with time tracking software is invaluable.

• Automated Timesheet Import: Hours worked are automatically pulled from your time tracking system into the payroll system, eliminating manual data entry for hourly employees.
• Accuracy: Reduces errors that can occur with manual time entry.
• Popular Integrations: Look for integration with tools like When I Work, Homebase, TSheets now QuickBooks Time, or Deputy.

HR Software and Benefits Administration

While less common for the cheapest plans, some providers offer integrated HR functionalities or benefits administration.

• Employee Onboarding: Streamlined new hire paperwork.
• Benefits Deductions: Automated deductions for health insurance, 401k, or other benefits.
• Workers’ Compensation: Some services can integrate with workers’ comp providers, simplifying premium calculations.

The Importance of Customer Support and Security

Even the cheapest service needs reliable support and robust security measures.

When things go wrong with payroll, they can go very wrong, very quickly. International payroll solutions

Customer Support Accessibility and Quality

When selecting a payroll service, consider:

• Availability: What are their support hours? Do they offer phone, email, or chat support?
• Response Time: How quickly do they typically respond to inquiries?
• Knowledge Base: Do they have a comprehensive online knowledge base or FAQ section for self-help?
• Dedicated Support for higher tiers: While unlikely with the cheapest plans, some providers offer dedicated account managers for premium tiers.
• User Reviews: Check independent review sites Capterra, G2, Trustpilot for insights into real user experiences with customer support. A survey by Zendesk found that 80% of customers consider customer service as important as a company’s products or services.

Data Security and Privacy

Payroll involves highly sensitive information Social Security numbers, bank accounts, addresses.

• Encryption: Ensure data is encrypted both in transit e.g., TLS/SSL and at rest e.g., AES-256.
• Two-Factor Authentication 2FA: A must-have security layer for user logins.
• Regular Audits: Providers should undergo regular security audits e.g., SOC 1, SOC 2 compliance.
• Data Backup and Recovery: What measures are in place to prevent data loss?
• Compliance with Regulations: Adherence to data privacy regulations like GDPR, CCPA, etc., even if you operate solely in the US, indicates a strong security posture. Over 60% of small businesses experienced a cyber attack in 2022, emphasizing the need for robust security.

What to Avoid When Choosing a Cheap Payroll Service

While the pursuit of cost savings is natural, some “cheap” options come with significant drawbacks that can end up costing you more in the long run.

Hidden Fees and Opaque Pricing

This is perhaps the biggest pitfall. A low advertised base price can quickly escalate.

• Setup Fees: Some services charge a one-time fee to get started.
• Per-Payroll Run Fees: Beyond the base fee, some charge extra for each payroll run, which adds up if you pay weekly.
• Off-Cycle Payroll Fees: Need to run an extra payroll for a bonus or correction? Some charge for this.
• Year-End Fees: Additional charges for W-2 or 1099 processing.
• Support Fees: Some providers charge extra for phone support or priority service.
• Tax Amendment Fees: If they make a mistake and need to amend a tax filing, some charge for it. IRS penalties for incorrect filings can start at 5% of the underpaid tax.

Lack of Compliance Guarantees

If the payroll service makes a mistake in tax calculations or filings, who is liable?

• No Tax Penalty Guarantee: A reputable full-service payroll provider will typically offer a tax penalty guarantee, meaning they will pay any penalties incurred due to their errors. Without this, you’re on the hook.
• Outdated Tax Knowledge: Tax laws change frequently. A cheap, bare-bones service might not keep up, leading to errors.
• Incomplete Filings: They might only file federal taxes, leaving you responsible for state and local filings.

Poor User Experience and Limited Features

A difficult-to-use system negates any cost savings through increased time spent on payroll.

• Clunky Interface: If the dashboard is not intuitive, you’ll spend more time navigating and troubleshooting.
• Limited Customization: Inability to handle various pay rates, commission structures, or unusual deduction types.
• No Employee Self-Service: This significantly increases administrative burden on the employer, as employees will constantly ask for pay stubs or W-2s.
• Lack of Reporting: Without basic reports, it’s hard to track expenses, manage budgets, or respond to audits.

Best Practices for Implementing a Cheap Payroll Service

Once you’ve chosen a service, a smooth implementation process ensures you get the most out of your investment.

Data Collection and Setup

• Gather Employee Information: Collect all necessary employee data: full legal names, addresses, SSNs, dates of birth, hiring dates, pay rates, W-4s, and direct deposit information.
• Company Information: Have your EIN, state tax IDs, and bank account information ready.
• Past Payroll Data: If migrating from a previous system or manual payroll, you’ll need year-to-date earnings and tax information for all employees. This is crucial for accurate year-end reporting.
• Set Up Pay Schedules: Define your pay periods weekly, bi-weekly, semi-monthly, monthly.

Initial Payroll Run and Verification

• Run a Test Payroll: Many services offer a test run feature. Utilize it to ensure all calculations wages, taxes, deductions are correct before processing live payroll.
• Verify Tax Settings: Double-check that all federal, state, and local tax rates and withholding allowances are correctly set up.
• Review Direct Deposit Information: Ensure all bank account numbers and routing numbers are accurate for direct deposit.
• Distribute Employee Access: Once confident, invite your employees to the self-service portal.

Ongoing Management and Maintenance

• Regular Review: Periodically review your payroll reports for any discrepancies.
• Update Employee Data: Promptly update the system for new hires, terminations, pay rate changes, and W-4 updates.
• Stay Informed: Keep an eye on communications from your payroll provider regarding tax law changes or service updates.
• Utilize Support: Don’t hesitate to contact customer support if you encounter any issues or have questions.