Payroll Software FAQ for Small Business 2026

Monthly costs range from $17 (Patriot Basic, self-service) to $200+ for enterprise plans. For most small businesses with 5-10 employees, full-service payroll runs $62-110/month. The two-part pricing (base fee + per-employee fee) means effective cost per worker is highest at very small headcounts. At 1 employee on Gusto Simple, the total is $55/month. At 25 employees, it is $199/month.

Patriot Full-Service at $37 + $5 per employee is the cheapest full-service option for single-state businesses. At 5 employees, that is $62/month. The caveat: Patriot charges $12/month per additional state, so multi-state businesses should compare carefully against Gusto Simple ($79 for 5 employees in any number of states).

Yes. Every provider charges a per-employee fee on top of the base monthly fee. Per-employee fees range from $4 (Patriot Basic, ADP estimated) to $12 (Gusto Plus). At very small headcounts the base fee dominates; at larger headcounts the per-employee fee becomes the bigger cost driver.

Most modern providers include direct deposit at no extra charge. Gusto, OnPay, QuickBooks Payroll, and Patriot all include direct deposit. Some providers (including Payroll4Free) charge extra for direct deposit. Same-day or next-day direct deposit is typically available on premium plans (Gusto Plus, QuickBooks Premium).

Yes. QuickBooks Payroll and some others offer 10-20% discounts for annual prepayment. Gusto typically offers promotional discounts for new customers (e.g. 6 months free on contractor-only plans). Check current promotional offers before signing up; the advertised monthly price is often the standard rate without discounts.

Gusto raised the Simple plan base fee from $40 to $49 in March 2026, a 23% increase. Gusto cited expanded features and support costs. This is the first significant price increase in several years. Most competing comparison sites have not updated their pricing tables; our figures reflect the April 2026 reality.

For a brand-new business with no prior payroll history: 1-3 hours. You need your EIN, state tax IDs, employees' W-4 information, and bank account details for direct deposit. Gusto and OnPay have guided onboarding that walks you through each step. For a mid-year switch from an existing provider, allow 4-8 hours including YTD data migration.

Business: EIN, state employer tax ID number(s), bank account for direct deposit, pay schedule (weekly, bi-weekly, semi-monthly, or monthly). Employees: legal name, SSN, home address, W-4 withholding elections, bank account for direct deposit, pay rate. You should collect the W-4 before the first payroll run.

Yes. You need a state employer tax ID (for state income tax withholding) and a state unemployment insurance account number before you can file payroll taxes. Some providers (Gusto, OnPay, QuickBooks) will help you register these during onboarding. Patriot requires you to register before adding an employee.

Most providers allow pay frequency changes at the start of a new quarter or year. Mid-period frequency changes require careful YTD reconciliation to ensure tax withholding amounts are correct. Notify your provider and affected employees at least 2-4 weeks before the change takes effect.

Most business owners run their first payroll without an accountant. Modern payroll software (Gusto, OnPay, QuickBooks) walks you through the setup with guided prompts. Having an accountant review your first run is a good precaution, especially for S-corp owner-operators or businesses with complex deductions.

Federal: employer share of Social Security (6.2% of wages up to $168,600 in 2024), employer share of Medicare (1.45%, no cap), FUTA (6% on first $7,000 of wages per employee, usually offset by SUTA credit). State: SUTA (state unemployment insurance, rate varies by state and claims history). All of these are in addition to withholding and remitting the employee's share of SS, Medicare, and income taxes.

The IRS charges a Failure to Deposit penalty of 2% for deposits 1-5 days late, 5% for 6-15 days late, 10% for 16+ days late, and 15% for deposits made 10+ days after an IRS notice. These penalties apply to the amount that should have been deposited. On a $10,000 quarterly liability, a 16-day delay costs $1,000 in penalties.

Form 941 (Employer's Quarterly Federal Tax Return) reports the wages you paid, the taxes you withheld, and the payroll tax deposits you made for the quarter. It is due April 30 (Q1), July 31 (Q2), October 31 (Q3), and January 31 (Q4). Full-service payroll software files Form 941 automatically on your behalf.

Yes. If an employee works remotely from a state other than your home state, you generally have tax nexus in that state and must withhold that state's income tax and pay that state's unemployment insurance. Most full-service providers handle multi-state automatically. Patriot charges $12/month per extra state.

SUTA (State Unemployment Tax Act) is the state unemployment insurance tax you pay as an employer. New businesses start with a standard new-employer rate (varies by state, typically 1-4%). As your business ages, your rate adjusts based on your claims history via 'experience rating'. Filing early, accurately, and consistently keeps your rate stable. Former employees who collect unemployment increase your rate.

A W-2 employee is on your payroll - you withhold taxes, pay employer SS and Medicare, and provide benefits. A 1099 contractor is self-employed - you pay them gross, they handle their own taxes, and they are responsible for their own benefits. Misclassifying employees as contractors is a serious IRS violation with significant back-tax liability.

You must file a 1099-NEC for any contractor paid $600 or more in a calendar year for services (not product purchases). The 1099-NEC is due to the IRS and to the contractor by January 31. Penalties for failure to file range from $60 to $310 per form depending on how late.

Generally no. Contractors are self-employed and handle their own taxes. The exception is backup withholding: if a contractor does not provide a valid SSN or EIN on their W-9, you must withhold 24% of their payments and remit it to the IRS. Always collect a W-9 before the first payment.

Yes. Gusto, OnPay, and QuickBooks Payroll all handle both in the same account. OnPay is particularly good for mixed teams because its pricing is unified - both W-2 and 1099 workers cost the same $6/worker rate. Square Payroll has a contractor-only plan ($0 base) and a W-2 plan (separate), so mixed teams use the W-2 plan.

It depends on what you are switching from and to. Switching from ADP or Paychex to Gusto or OnPay typically saves $50-200/month at small business scale and significantly improves UX. Switching between similarly-priced providers (Gusto to OnPay) is usually not worth the time unless you have a specific need the current provider doesn't meet.

Not if you transfer YTD data correctly. The new provider only reports wages for the pay periods they processed. Your old provider handles the W-2 for the period they covered. If YTD figures are imported correctly, year-end W-2s are accurate regardless of how many providers you used.

Yes. Gusto provides self-service CSV exports of all payroll history, YTD reports, and employee records. After cancellation, your data remains accessible for 1 year. This is significantly better than ADP, which requires a phone call and can take up to 10 business days to export.

Some providers include a benefits marketplace where you can shop for and administer health insurance plans. Gusto (Simple and Plus), Rippling, Justworks, and ADP all have benefits administration. Patriot, OnPay, Square, and Wave are payroll-only and require a separate benefits broker for health insurance.

Yes, most can, but the integration quality varies significantly. QuickBooks Payroll has a fully native two-way sync (it's the same company). Gusto has a native API integration with QBO. OnPay and Patriot use partner syncs. Square Payroll requires manual CSV export.

Full-service providers like Gusto and OnPay integrate natively with 401k providers (Guideline, Human Interest, Vestwell). Contributions sync automatically from payroll runs. Patriot and Wave do not have 401k integrations and require manual contribution uploads.

Payroll software is a tool you use yourself. A PEO (Professional Employer Organization) like Justworks co-employs your team and handles payroll, benefits, and HR compliance for you. PEOs cost more ($59-109 per employee per month all-in) but give you access to large-group health insurance rates and reduce HR compliance burden. Relevant for 5-50 employee businesses offering full benefits.