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Payroll management is a key business process—and it’s easy to get it wrong. Small mistakes can have big consequences, and people need their pay on time. Invest in a good service and avoid mistakes.
The catch is that payroll services cost money. But depending on which one you choose, you can minimize expenses and keep payroll running smoothly without breaking the bank.
Here’s a guide to payroll services, how much they cost, and how to navigate every fee.
What is a payroll service?
A payroll service provider manages payroll on your behalf. Most options have additional HR services included, which could be:
- Payroll calculation
- Direct deposits
- Tax compliance
- Employee attendance tracking
- Benefits administration
- Reporting
With a provider handling these tasks for you, you save time and rest assured that employees are getting paid correctly and punctually.
How much do payroll services cost?
Payroll service costs start at around $39 per month, but it varies according to your needs—how many employees you have, how often you pay them, and any additional services you might opt into.
Here are five standard payroll expenses:
- Base subscription fees: This is the regular monthly or annual fee for access to the payroll service.
- Setup and support fees: Most payroll systems require initial setup costs and ongoing support fees.
- Compliance fees: You’ll pay an additional fee for managing payroll and compliance.
- Per-employee or per-transaction fees: Payroll processing fees vary depending on the number of employees and transactions your business needs processed.
- Add-on fees for additional features: For an added fee, some payroll services offer extra services (e.g., advanced payroll reports, HR support, HR software, direct deposit, tax forms, and tax filing).
Always check different providers’ offerings to find the best deal. For example, if you have over a certain number of employees, some options might give you a discount.
How is payroll pricing structured?
Understanding how payroll pricing works can help you find the best option—one that balances quality with cost. Here are a few common pricing structures:
Per transaction
Many service providers charge based on how often you make transactions, or pay employees. The more transactions you make, the more you pay, so if you have many pay periods in a year, you might have to pay more.
Let’s say you pay employees biweekly. You might get charged a base fee plus a set payroll cost per employee every other week. But if you paid people monthly, you’d pay every month instead of every other week, which means fewer transactions and a lower cost.
Per employee per month (PEPM)
With the PEPM pricing structure, you pay a flat fee for the payroll service and a fixed rate per employee. This means the cost doesn’t change depending on your pay frequency, and you can pay employees more often without worrying about higher fees.
This structure is great for companies that prefer biweekly or weekly pay schedules or regularly pay out commissions and bonuses. The catch is that the more employees you have, the more you pay.
Fixed pricing
Some payroll providers have a fixed monthly rate with no per-transaction or per-employee fee. This format is less common, but it’s a good option if you want to simplify budgeting. It’s most common for smaller companies with limited employees. Certain providers even give you a discount if you pay annually.
Software fees
If you have the resources for a do-it-yourself approach, you can save money by purchasing payroll software and paying employees on your own. Typically, this software has a monthly or annual fee plus extra costs per transaction or employee. This is much more resource-intensive than the other options above, so it should only be an option if you have the time and money.
What influences the cost of payroll services?
Here are a few of the factors that can drive up payroll costs:
Number of employees
A per-employee fee means the more people you pay, the higher the cost. That means you typically have to pay more for payroll software every time you hire—which adds up. Look for a scalable solution that minimizes price hikes.
Payroll frequency
Depending on the service’s pricing model, you might have to pay per-transaction, so frequent paydays add up. Think about if you want to pay staff weekly, biweekly, or monthly, and choose a pay schedule that matches your business’s cash flow.
Required features
Payroll services might seem affordable, but what if you need extra features? Automated tax filing, benefits administration, and HR support all add to the bill. Avoid overspending by prioritizing only the features you need.
Direct deposit costs
Direct deposit is the standard for paying employees, but it comes at a cost. You might need to pay extra to set up direct deposit and make the transactions every payday, which adds up. Consider other payment methods that cost less or choose a provider that doesn’t charge extra for convenience.
3 ways to reduce payroll costs
Here’s how to optimize payroll and lower your bill:
1. Automate tasks
Payroll automation saves time, and that means it saves money too. Automate as many tasks as possible, like time tracking, tax calculation, and wage dispensing, to avoid wasting time. Automation also lowers the opportunity for human error, which means less backtracking and a streamlined experience.
2. Give team members access to their information
Employee self-service is another way to save time. Instead of going through supervisors and jumping through hoops to access and update their payroll information, employees can do it themselves. This gives HR teams more space to work on other tasks and boost productivity.
3. Carefully select your payroll provider
Not all providers are created equal—especially when every business has different needs. Compare your options and choose one that has the features you’re looking for, whether that’s employee benefits management and HR services or simply payroll. Just keep in mind that using one service for everything saves time and money in the long run.
Maximize payroll efficiency with Oyster
If you’re hiring distributed teams from across the world, Oyster has your back. Oyster’s global payroll services give you all the tools you need to manage your company’s payroll, consolidate tasks, and pay employees on time (wherever they are). Whether you work with full-time employees or contractors, you can process payroll in 140+ currencies with over 99% accuracy.
A G2 guide to best EOR Platforms named Oyster as the “Best for software companies looking for global HR operations with automation.” This highlights Oyster's industry-leading, compliant, and scalable international hiring solutions.
Try Oyster and streamline your payroll process today.
Frequently asked questions
What is decentralized payroll?
Most payroll systems are managed centrally in one place, but decentralized payroll systems spread out different responsibilities across departments or entities. This makes it easier to pay global employees because it better facilitates the use of regional entities.
Are payroll services worth it?
Payroll outsourcing companies are worth it. They save time, reduce errors, and even streamline other services like benefits administration.
How much should small businesses spend on payroll?
Payroll costs vary, and there’s no single number small businesses should chase. Most businesses should calculate their own payroll costs to avoid over- or underestimating based on someone else's numbers.
Can you do payroll yourself?
While it’s possible to handle payroll yourself, leave it to the experts. To facilitate payroll the right way, you need to keep track of taxes, deductions, regulations, important dates, and banking information—which is challenging and time-consuming. Plus, even small mistakes can be detrimental and take time to fix. Outsourcing payroll is more efficient and reliable.
About Oyster
Oyster is a global employment platform designed to enable visionary HR leaders to find, engage, pay, manage, develop, and take care of a thriving distributed workforce. Oyster lets growing companies give valued international team members the experience they deserve, without the usual headaches and expense.
Oyster enables hiring anywhere in the world—with reliable, compliant payroll, and great local benefits and perks.
