You’re staring at a "starting at $39" price tag and thinking you’ve found a bargain. I hate to be the one to break it to you, but that number is almost always a lie—or at least, a very thin slice of the truth. By the time you actually hit "run" on your first payroll, that $39 has mutated into $150, and you’re wondering where the extra hundred bucks went.
Honestly, figuring out how much does it cost for payroll services feels like trying to solve a Rubik's cube in the dark. You’ve got base fees, per-employee fees, filing fees, and "oops-you-hired-someone-in-Ohio" fees.
It’s messy.
The basic math of payroll pricing (and why it’s never that simple)
Most companies in 2026 use a "Base + PEPM" model. PEPM stands for Per Employee Per Month.
A standard setup for a small shop usually looks like a $40 to $80 monthly base fee. On top of that, you’ll pay anywhere from $6 to $12 for every person on your team. So, if you have 10 employees and use a middle-of-the-road provider like Gusto or OnPay, you’re looking at roughly $100 to $150 a month just for the privilege of existing on their platform.
But wait. There's more.
If you’re a "mid-market" company—basically, you’ve outgrown the local coffee shop stage and have 100+ people—the math shifts. You aren't looking at $40 base fees anymore. You’re looking at $200 to $500 base fees. The per-head cost might drop slightly because of volume discounts, but your total bill is going to be in the $1,500 to $3,000 range per month.
Real-world snapshots of what you'll actually pay
- The Solopreneur/Micro-biz (1-2 people): You might get away with a "contractor only" plan for about $35/month, or a basic employee plan for $45-$55.
- The Growing Team (15 people): Expect a monthly bill of $130 to $200. This usually covers tax filings and direct deposits but doesn't include "the fancy stuff" like 401(k) sync or time tracking.
- The Multi-State Nightmare (10 people in 5 states): This is where it gets spicy. Many providers charge extra for every state you file in. You could easily add $50-$100 a month just in state-filing surcharges.
The "Gotcha" fees nobody puts in the big font
Providers love to hide the real costs in the fine print.
Take year-end processing. You’d assume that since you’re already paying them to handle payroll, they’d handle the tax forms, right? Kinda. Many services charge $5 to $10 per W-2 or 1099 form come January. If you have a high-turnover business—like a restaurant where you might go through 50 employees in a year to keep 15 seats filled—that "end of year" bill is going to sting.
Then there are the "Off-Cycle" runs.
Let’s say you forgot to reimburse an employee for a $500 flight, and they need that money now. If you run an extra payroll outside your normal schedule, some legacy providers will ding you with a $25 to $50 "service fee" just for clicking a button. Modern SaaS platforms like Rippling or Gusto usually include unlimited runs, but it's something you have to check.
And don't even get me started on "Implementation Fees."
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If you’re moving from an old-school system to a new one, some companies (looking at you, ADP and Paychex) might try to charge you a setup fee that ranges from $200 to $2,000 depending on how messy your data is.
Why 2026 is different for payroll budgeting
We’ve seen a shift recently. AI isn't just a buzzword in payroll anymore; it's actually driving up the base costs.
Vendors are bundling "compliance automation" and "AI-driven tax alerts" into their core packages, which justifies their 5% to 10% price hikes over the last year. Honestly, it’s a bit of a double-edged sword. You're paying more, but you're also less likely to get a terrifying letter from the IRS because a human fat-fingered a decimal point.
The cost of an error is the real "hidden" price.
According to a 2025 study by EY, fixing a single payroll error costs a business an average of $291 in labor and penalties. If you're doing this manually to save $50 a month on software, you're basically stepping over dollars to pick up pennies.
The Software vs. Full Outsourcing Divide
- Self-Service Software ($20-$50/mo base): You enter the hours. You click the buttons. The software does the math and files the taxes. Great for people who actually know what a 941 is.
- Full-Service Payroll ($50-$150/mo base): They do the heavy lifting. You basically just send them a spreadsheet or sync your time clock, and they handle the rest.
- PEO (Professional Employer Organization): This is the "Nuclear Option." They become the co-employer. It costs way more—often 2% to 15% of total payroll—but they handle benefits, workers' comp, and HR legalities. For a 20-person company, this could be $20,000+ a year.
How to actually compare quotes without losing your mind
If you’re shopping around, you need to ask for the "all-in" annual cost.
Don't let them quote you a monthly rate. Ask for a projection that includes:
- 12 months of base fees.
- 12 months of per-employee fees (based on your max headcount).
- Estimated W-2/1099 fees for the end of the year.
- Any fees for adding new states.
- Integration fees for your accounting software (some charge extra to talk to QuickBooks).
A quick tip: If you have a seasonal business, look for a provider that only charges you for "active" employees. Some legacy systems charge you for every person in the database, even if they didn't work a single hour this month. That’s a total waste of money.
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Actionable Next Steps
Before you sign anything, do these three things:
- Audit your "State Footprint": Count exactly how many states your employees live in. If it’s more than three, prioritize a provider with flat-rate multi-state filing.
- Calculate your 1099 volume: If you use a lot of freelancers, look for a plan that includes 1099 filings for free or at a low flat rate. Paying $10 per contractor in January adds up fast.
- Request an "Error Guarantee": In 2026, any reputable full-service provider should offer a guarantee that if they mess up your tax filings, they pay the IRS penalties, not you. If they won't put that in writing, walk away.
The "cheapest" service is usually the one that doesn't let you get audited. Focus on the total cost of ownership—fees, time spent, and potential penalty risks—rather than just the monthly subscription price.