How payroll systems price their services

Understanding the many fees payroll service providers can charge makes it easier to compare multiple vendors.

To get the best price for payroll systems, you should know what you're looking for before you begin contacting potential vendors to process your payroll. With a set agenda, you'll be in a far better position to negotiate. The payroll industry is extremely competitive, and providers are almost always willing to bargain.

Pricing is divided into three areas: per-check fees, base account fees, and add-on features where applicable.

Per-check fees

Per-check fees range between $0.80 to $2 per check, while base account fees vary according to frequency of payroll periods and the number of employees you need to pay. Less frequent pay periods cost more initially, but are usually cheaper over the long term. See our chart on real-world pricing to learn more about average prices in the short- and long-term.

Base account fees

Your base account fee also typically includes notification of your federal and state tax obligations, while tax filing is available for an additional cost. Tax filing fees vary according to the service, with an average of $5 per payroll period. Generally, you can expect to pay about $1 per year-end W-2 issued. Checks are usually processed and ready within 24 hours.

Add-on features

From tax filing to 401(k) administration, payroll providers are forever expanding their menu of offerings to their customers. You should take a look at all these options beforehand to get a sense for your total needs.

Knowing what you'd like to outsource in addition to bare-bones payroll processing helps you in two ways. First of all, it helps to define your base pricing so a la carte options don't end up driving your costs up. It's common for services to try to reel you in with a low base fee, then add additional features and services on a nickel-and-dime basis. Secondly, if you start out with the menu of options that you need, you can avoid having to change your service mid-stream, which can be expensive.

Similarly, watch carefully for very low first-year pricing with these add-on services. It's another common trap to increase rates substantially for these services after six months or a year. Before signing on the dotted line, make sure to nail down any pre-scheduled price increases.

How do you pay?

Payment for payroll systems can be automatically deducted from an account you set up, or sent directly to you in the form of an invoice. Invoicing is better because it allows you to maintain control over your payment, and creates a paper trail, which is essential for any successful payroll program.

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