How Much Does Payroll Cost for Small Businesses?

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How Much Does Payroll Cost for Small Businesses?

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How Much Does Payroll Cost for Small Businesses?

Running a small business is not that easy, especially when you then have employees that need to get paid. If your payroll and accounting systems are not up to par, things can get complicated very quickly. When you are doing payroll, the last thing you will want is to run into tax problems or incorrectly pay your workers.

Payroll cost can then vary simply depending on the type of system you make use of and also whether you can outsource these activities to a payroll company, or if you then are paying an employee to process payroll in-house. First, you should consider the tasks involved in running payroll:

  • Employee forms.
  • Hours worked
  • Overtime costs
  • Payroll and income taxes
  • Employer taxes.
  • IRS deposits
  • Payroll service.

Average Costs of Payroll

Whether a business is simply using an in-house employee or a service, there are simply costs that are associated with running a smooth payroll. There are even typically based monthly fees, fees for each employee on the payroll (costs of calculating payroll taxes, deposits, and also cutting the check), and even employer-paid taxes when using a payroll service solution.

Many payroll providers then have fixed package pricing with a base fee that will then vary from $30 to over $150 a month, in addition to the cost of each employee, which could then run from $2 to $15.

Depending on the type of payroll solution that is used, there are also additional costs that might come up that are not included in the initial package. These costs include:

  • 401(k) distribution.
  • Tracking employee time.
  • Workers’ compensation
  • Direct deposit, state and federal tax filings.
  • Check delivery.
  • Processing yearend payroll and tax forms.

Payroll costs can then often increase with the frequency with which the employees are paid. Every pay period, there is a cost for checks to be sent out, whether they are simply paper checks or even electronic ones. If the cost of doing this per person is about $2 each pay period and the total number of employees you pay bi-weekly is 20, that is $4 per month (some months $6).

Employees are paid weekly, that cost is at least $8 per month. Multiply that by 20 employees and then the cost is $80 or $160 per month. When you then look at it from that perspective, it simply comes as no surprise that so many have even looked for alternatives after TSheets pricing increased, even though they were already QuickBooks users.

Direct deposit is also a convenient employer and employee benefit, but it is an additional cost. Setting up the direct deposit and some other variables can add to the monthly cost, in addition to any direct deposits of employer fees.

One of the biggest payroll costs for employers is when having different locations and also states. Each state has its own local tax laws, which makes things tricky to navigate. When you are using a payroll provider, things might be a little easier, but the payroll expenses could exponentially increase.

The Most Common Payroll Options to Consider

You can also even consider doing it yourself, but you might then not realize just how time-consuming it is to the work and also the time that goes into making ensure everyone’s deductions are correct, payroll is simply disseminated on time, and also the taxes are accurate. It’s not as easy as it may sound.

In-house bookkeeping

Payroll and its nuances need dedicated experts to successfully handle things. You can simply then hire a bookkeeper, who is someone who can then handle your payroll process, but you are looking at about $75,000 a year if they are an employee on staff.

Outsourced bookkeeping

You can also outsource a professional bookkeeper. However, the outsourcing costs might even outweigh the advantages because of overhead costs that can be compared to those of a dedicated payroll solutions service.

Online payroll providers

An online payroll service provider solves the problem of knowing the tax laws, also making the correct deductions, and even then handling all payments, filings, and some other payroll items you might not even have realized you needed. This may actually be the most cost-effective option that can help small business owners stay in compliance and also scale as needed.

Automated payroll software.

When you are considering the overall payroll costs, time, and manpower needed, think about the tasks, the number of employees you have, and also the type of service you will need. Payroll software like Homebase then makes things easier with its payroll system for hourly teams.

With an employee app that can then make information accessible at the click of a button and also a painless process that easily converts timesheets into hours and wages, everything can then be processed on time with no hassle.

Manually inputting timesheets can simply leave room for error. With an automated payroll system like Homebase, employees electronically clock in and out, so their breaks, overtime, time off, and accumulated time all live in one place. Any payroll or changes to their tax information can then be confidentially changed online by the employee.

At a reasonable price, it is also easy to make payroll for your business work for you. Sign up for Homebase today and see how effortless payroll can be.

FAQs

How Much Does Payroll Cost Per Employee?

Most payroll providers can then have a base fee of $30 to $150 per month which increases by $2 to $15 per employee. There are also additional costs to add on depending on how regularly you can pay employees and also whether you are using basic payroll services or a full-service payroll provider.

What Costs Are Included In Payroll?

Payroll costs can then also encompass wages and even payroll taxes, as well as bonuses and paid leave. There may be additional costs associated with paycheck delivery, time tracking, and 401(k) contributions.

Can You Do Payroll Yourself?

If you cannot afford in-house bookkeeping and outsourcing payroll is off the table, you can then do payroll yourself. You would have to then calculate your employees’ gross pay and also deduct taxes to find their net pay for the period. This does, however, come with great risk, as mistakes can also lead to false payments and even the involvement of the IRS.

How Much Do Companies Charge For Payroll?

The vast majority of the outsourced payroll companies can then charge a basic package fee, ranging from $20 to $250 per month. The cost of outsourced payroll then includes direct deposit, paycheck processing, standard tax filing, and an online portal accessible by both employers and employees.

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