Looking to stop throwing your money away on payroll software?
Every business owner would like affordable payroll software that just works. Payroll should be as cheap as possible while also being fully compliant:
- Less money spent. More money left for the business
- Avoid IRS penalties. Less payroll stress
But there’s a problem
Cheap payroll software is hard to find. Software vendors try to charge as much as possible, but labor costs account for 70.4% of business expenses. Businesses need to keep labor costs under control, too.
The problem with bad payroll software? It burns money.
This guide will explain how to find the best payroll software on a budget without skimping on the features that really matter.
Check out this table of contents:
- Why Cheap Isn’t Always Best
- What To Look For in Budget Payroll Software
- Must Have Features
- Finding The Right Fit
Why Cheap Isn’t Always Best
Let’s start with a little secret most business owners learn the hard way…
The payroll software with the lowest price tag isn’t always the best deal. Hidden costs and missing features often end up being more expensive in the long run.
Look at the IRS penalty statistics for small businesses. 40% of small businesses pay penalties averaging $845 each year. Why? They use software that can’t accurately file taxes.
Here’s another fun fact…
Some businesses still use spreadsheets or manual processing. Yes, you read that right: 51% of small businesses use spreadsheets, and 19% run payroll manually! This outdated process creates errors and wastes time.
The reality is… Businesses need customized accounting software that meets specific needs without all the extra fees.
The moral of the story? Value always trumps price.
What To Look For in Budget Payroll Software
The best payroll software on a budget provides everything that is needed without breaking the bank.
Good budget payroll software should at least:
- Calculate payroll taxes automatically
- File payroll taxes with the IRS and state
- Deposit payroll with direct deposit on the expected payday
- Be up to date on the latest tax laws
Anything else is gravy on top.
Payroll Software Pricing Models
Most payroll software companies use one of two pricing models:
- Per-employee pricing: The base cost plus an additional charge per employee
- Flat-rate pricing: A single price no matter how many employees there are
Base plans can start as low as $17 per month. However, the overall cost of the solution is more important than the monthly base price.
That $17 per month plan may not include tax filing, direct deposit, or even multi-state payroll processing.
The Problem of Hidden Fees
Payroll software vendors love to hide fees. It will look like the monthly cost is $17 but then there will be add-on fees when needed for filing taxes, multi-state payroll services, employee self-service portals, time tracking integration, etc.
It doesn’t take long before that “low-cost” solution is actually more expensive than some premium providers.
Lesson? Businesses should calculate the total annual cost of every feature that is needed.
Must-Have Features
Let’s go over the features that make a difference between payroll software that’s good and payroll software that’s garbage.
Automatic Tax Calculations & Filing
Tax filing is a must. Payroll software should be able to calculate, file, and pay payroll taxes automatically. That means federal taxes. State taxes. Local taxes. All of it.
Why? Because when taxes are done manually, businesses get penalties.
Direct Deposit
In 2024, 95.15% of Americans receive pay through direct deposit. Payroll software that doesn’t offer direct deposit is stuck in the 90s.
Direct deposit should be available the same day or next day, be free or low cost, and should be easy to set up.
Employee Self-Service
Give employees access to their own information including pay stubs, tax forms, time off requests, and any other information that employees will need. Reduces questions and human error from manually updating this information.
Multi-State Support
Planning to hire across multiple states? Make sure the software can handle payroll for employees in all the necessary states and that it’s not crazy expensive.
States have different tax rules, and the software needs to be up to date with every one of them.
Integration Capabilities
Payroll software should integrate with accounting software, time tracking tools, benefits administration, and HR management software. Standalone systems are a hassle. Integrated systems make life easy.
Finding The Right Fit
Ok, here’s a method that will help find the best payroll software for any business…
List of Must-Have Features
Write a list of every feature that is absolutely needed. No lying or cheating. The list might include tax filing in that state, direct deposit, W-2 and 1099 management, number of employees, and accounting software integration.
The Real Budget
Budget is how much a business can actually afford to pay each month. Businesses should take into account the base monthly fee, per-employee pricing, add-on features, and implementation fees.
Don’t be unrealistic. A $20 per month plan that doesn’t offer tax filing is not cheaper than a $50 per month plan that includes it.
Free Trial Periods
Payroll providers offer free trials and test runs. Businesses should take advantage of them. Run a test payroll and see what it’s like to use the software.
Read The Fine Print
Look for contract length requirements, cancellation fees, year two price increases, and hidden implementation fees. Vendors love to advertise crazy low prices the first year and then increase rates after that.
Evaluate Customer Support
When payroll is down, help is needed yesterday. Businesses need to make sure the provider has phone support available during business hours, fast response times, and a dedicated account manager if needed.
Making The Switch
It’s actually easier to switch payroll providers than most business owners think.
Migration to a new payroll software is made easy by modern systems. Providers are usually willing to help with all aspects of transferring employee data, payroll history, tax account setup, and staff training.
Migration usually takes one to two weeks. And the time saved with the right payroll software? Worth every minute of that setup process.
Focus On Value
The best payroll software for any business is not the cheapest. The best payroll software is the one that provides the most value for the money that is spent.
This means avoiding costly tax penalties, saving time with each payroll run, keeping employees happy with on-time direct deposits, and being able to scale with growth.
Businesses are waking up to this fact, and that’s why the small business payroll software market size reached $5.6 billion in 2024.
What To Do Next
Ready to find the right payroll solution?
Make that list of must-have features first. Then shop around. Take advantage of those free trials. And remember, the goal isn’t to spend the least amount of money. The goal is to get the best value.
Why? When the right payroll software gets chosen, money stops getting spent and starts getting invested in fewer headaches, better compliance, and more time to grow the business.
The Bottom Line
Finding payroll software that doesn’t break the budget does not mean that business owners need to settle for less.
It means being smart about what is needed and refusing to pay for anything that isn’t.
Businesses should focus on the features that help avoid expensive penalties and mistakes. Look for transparent pricing. Calculate the total cost.
Get it right and affordable payroll software gets found that saves money and makes everyone’s life easier.
Win-win, anyone?
