How Much Does It Cost To Run Payroll? A Small Business Guide

Have you ever signed up for a new payroll service, only to be shocked by a final invoice that’s significantly higher than the quote? Are you tired of feeling like you're missing out on key features because they're buried in the fine print?

You're not alone. It's a frustrating, all-too-common experience in the world of small business payroll. The quote you agreed to feels like a starting point, not the final price, and the services you assumed were included—like garnishment processing or off-cycle bonus runs—turn out to be costly “extras.” This billing confusion creates headaches for you and your team and makes it nearly impossible to compare providers on a truly fair basis.

At Lift HCM, we believe in transparency. That’s why we’ve reviewed hundreds of payroll contracts from across the industry and found clear patterns in how providers price their services. In this aritcle, we will break down what you should expect in a standard payroll package, highlight common add-ons and hidden fees, and give you the right questions to ask so you can choose a provider with confidence and avoid billing surprises.

Table of Condents

• What Standard Payroll Functions Are Included in a Base Package?
• Services That May Cost Extra: Where Unexpected Fees Hide
• The Real-World Cost of “Add-Ons”
• How Pricing Models Affect Inclusions
• Beyond the Invoice: How Inclusions Impact Your Team
• Key Questions to Ask Before Signing a Payroll Contract
• The Bottom Line: Transparency in Payroll

What Standard Payroll Functions Are Included in a Base Package?

While specific offerings can vary, most reputable payroll providers include a core set of essential functions in their base price. Understanding these "must-haves" is the first step toward accurately comparing quotes. If a provider doesn't include these in their base package, it's a major red flag.

The comparison below breaks down the essential functions you should expect in any base package versus the common services that providers typically charge extra for.

1. Gross-to-Net Payroll Calculations: The Foundation of Paychecks

Gross-to-Net Payroll Calculations are the central function of any payroll service. It involves accurately calculating an employee's take-home pay by starting with their gross wages and applying all necessary deductions. This includes everything from calculating regular hours and overtime to applying pre-tax deductions for benefits, and post-tax deductions for things like retirement contributions.

2. Direct Deposit Processing: The New Standard for Payments

In today's digital world, direct deposit is no longer a premium feature—it’s a basic expectation. However, the speed and flexibility of direct deposit services can differ significantly between providers. Some providers offer next-day or even same-day ACH funding as part of their base package, while others charge a premium for faster processing. You should also check whether the provider allows employees to split their paychecks across multiple bank accounts.

3. Basic Tax Calculations: A Critical First Step

Any reliable payroll service should be able to accurately calculate federal, state, and local taxes based on employee wages and deductions. This is a non-negotiable function that prevents common compliance issues. It's crucial to understand that calculating taxes is not the same as filing them, and the cost of tax filing services often varies.

4. Employee Self-Service Portal: Reducing Your Administrative Burden

A modern, easy-to-use self-service portal is vital for any business. It empowers employees to access their pay stubs and tax forms (like W-2s and 1099s) online, update their personal information, and manage their banking details. An outdated or limited portal can significantly increase the workload on your HR and payroll teams as they field basic employee questions.

5. Standard Payroll Reports: Gaining Visibility into Your Data

Payroll isn't just about paying people; it's about understanding your labor costs. Most base packages include essential reports like a payroll summary, employee detail reports, and tax liability summaries. These reports are foundational for managing your business and staying compliant. Be aware that advanced or custom reporting tools—which can help with things like job costing or departmental breakdowns—often come with an extra fee.

Services That May Cost Extra: Where Unexpected Fees Hide

This is where the surprise invoices often originate. Many payroll providers use a tiered pricing model, where the following services are considered "add-ons" and billed separately. Knowing which services fall into this category is the key to avoiding costly surprises.

The Real-World Cost of “Add-Ons”

It’s easy to dismiss a $3 fee here and a $50 fee there, but these costs add up quickly. Let's look at a realistic scenario for a 40-employee business that runs bi-weekly payroll.

Imagine this business processes 10 garnishments per month and needs to run three off-cycle payrolls annually for bonuses or corrections.

• Garnishments: 10 transactions × $3/transaction × 12 months = $360/year
• Off-Cycle Runs: 3 runs × $50/run = $150/year
• Total “Extra” Costs: $510/year

This is a simplified example, but it shows how easily a low-cost quote can turn into a significant annual expense. These costs are on top of your base payroll fees and often catch businesses by surprise.

How Pricing Models Affect Inclusions

The pricing model itself can tell you a lot about what to expect. There are generally three main pricing models in the payroll industry, each with a different approach to inclusions:

• Per Employee, Per Month (PEPM): This model often bundles more services into the base price because the cost scales with your headcount. It’s a transparent and predictable model, especially for growing businesses, since many inclusions (like garnishment processing) are included.
  
  
• Flat Monthly Fee: This model keeps the headline price low but may unbundle services to stay competitive. It’s important to get a detailed list of what’s included to ensure the flat fee truly covers your needs.
  
  
• Per Payroll Run: This is often the most limited model for inclusions. Anything outside of a standard, scheduled run is usually a billable service, which can lead to frequent surprise charges for things like bonuses or corrections.

The detailed comparison below shows exactly how each pricing model approaches inclusions differently, helping you understand what to expect and what questions to ask.

Beyond the Invoice: How Inclusions Impact Your Team

The right inclusions don't just save you money; they make payroll run smoother for everyone in your company. When you choose a provider with generous inclusions, you improve the employee experience and reduce the administrative burden on your HR and payroll teams.

What "Good Inclusions" Look Like:

• Garnishments processed quickly and accurately: processed quickly and accurately: This means fewer calls to HR and less confusion for affected employees.
• An intuitive self-service portal: Employees can quickly find answers to their questions, freeing up your HR team's time.
• Built-in PTO and leave tracking: This creates transparency and reduces manual tracking, a common source of employee frustration.

What "Poor Inclusions" Can Lead To:

• Delayed payments or incorrect paychecks.
• Confusion about benefits deductions or tax filings.
• A lack of trust in the company's payroll accuracy.

Key Questions to Ask Before Signing a Payroll Contract

A great quote is worthless if it doesn't align with your needs. To avoid hidden fees and ensure you get what you pay for, ask these questions during your discovery calls:

1. Can you provide a complete, written list of all services included in the base package? This is non-negotiable. Get it in writing to protect your business.
2. Are there any services that are free now but could become billable later? Understand the long-term cost of your service.
3. What is the process and cost for off-cycle payroll runs, bonus payments, and garnishments? Be specific about these common needs.
4. How are time-off tracking and employee expense reimbursements handled and billed? These are often separate services, and you need to know their cost upfront.

The Bottom Line: Transparency in Payroll

Knowing what’s included by default helps you avoid costly surprises and ensures your payroll runs smoothly from day one. We’ve covered standard inclusions, common extras, their cost impact, and how inclusions affect both your budget and employee experience.

Before you sign any contract, demand a written inclusions list from every provider you’re considering and use it as a side-by-side checklist. At Lift HCM, inclusions are transparent from the very first conversation—no surprises, no fine print.

Ready to experience payroll clarity and service that puts your business first? Contact Lift HCM today and see how a transparent, all-in-one solution can give you confidence in every payroll run.