How much does payroll software cost?

Running payroll is one of the most important tasks in any business. It affects compliance, employee satisfaction, and financial planning.

G2 revealed that businesses that use payroll systems see a 31% reduction in errors and 70% fewer instances of compliance issues.

While many companies are already experiencing the apparent benefits, some are yet to reap them. And one of the most common questions decision-makers face is: How much does payroll software cost?

Payroll software costs depend on the software type, its pricing model, and the unique requirements of your business.

Let’s explore the different cost factors, pricing models, and how to evaluate whether payroll software provides real value.

What is payroll software?

Payroll software is a digital solution that automates the process of paying employees. It calculates wages, deducts taxes, manages benefits, and ensures compliance with labor laws. 

Modern payroll platforms often include features like direct deposit, reporting, and integration with accounting or HR systems.

For many small to medium-sized businesses, payroll software replaces manual spreadsheets, reducing human error and saving valuable time. Larger enterprises also rely on payroll platforms to manage complex payroll structures across different locations.

4 types of payroll software pricing models

Payroll software providers use different pricing models. The most common include:

1. Per-employee, per-month (PEPM) pricing – A flat fee for each employee every month. This model is common with cloud-based payroll systems. Prices typically range from $5 to $15 per employee per month, plus a base fee.
2. Flat monthly fee – A fixed monthly cost regardless of the number of employees. This is ideal for small teams where pricing predictability matters.
3. Pay-as-you-go pricing – Costs are tied to payroll runs. Businesses pay only when payroll is processed, which works well for companies with seasonal staff or irregular payment schedules.
4. Custom enterprise pricing – Larger companies may negotiate tailored pricing based on features, number of employees, and service level agreements.

Each model has advantages depending on company size, payroll frequency, and budget.

For example, small businesses often prefer flat fees, while larger organizations lean towards PEPM pricing for scalability.

Factors that affect payroll software cost

Several elements influence payroll software pricing beyond the basic model:

• Number of employees – Costs rise as the workforce grows. A company with 20 employees may pay around hundreds of dollars monthly, while a firm with 200 employees could spend thousands per year.
• Features and add-ons – Advanced features like tax filing, time tracking, employee self-service portals, and HR integrations increase costs.
• Deployment type – Cloud-based solutions generally charge monthly subscriptions, while on-premise payroll systems may require higher upfront fees for licenses and infrastructure.
• Compliance requirements – Companies operating in multiple states or countries often face higher costs due to more complex compliance rules.
• Support and service levels – Some providers include 24/7 support in their packages, while others charge extra for premium service.
• Integration needs – Linking payroll software with accounting, HR, or benefits systems can add implementation and maintenance costs.

Payroll software cost comparison

To provide a clearer picture, here’s a general comparison of what businesses might expect to pay, along with the reasons these ranges differ:

Small business payroll software (1–10 employees)

Typical software cost: $20–$100 per month

At this level, pricing remains lower because the volume of transactions is small and the software usually covers only the core payroll functions.

These plans often automate basic salary payments, tax calculations, and employee records without needing advanced compliance or integration features. The limited scale reduces the complexity, which keeps monthly fees in the lower range.

Medium-sized business payroll software (10–100 employees)

Typical software cost: $100–$500 per month

Costs increase in this bracket because payroll systems need to handle a higher employee headcount while ensuring accuracy across multiple pay rates, benefits, and tax obligations.

As businesses grow, they also tend to add extra features such as time tracking, advanced reporting, or employee self-service portals.

These capabilities require more sophisticated systems and support, which is why the price jumps significantly compared to small business plans.

Large business payroll software (100+ employees)

Typical software cost: $500+ per month, often moving into custom pricing

For larger organizations, payroll becomes highly complex. Companies may operate across multiple states or countries, face stricter compliance requirements, and need advanced integrations with accounting, HR, and enterprise resource planning systems.

These customizations demand more processing power, technical support, and ongoing updates, which is why costs often exceed $500 per month and move into custom pricing tiers.

The range exists to accommodate the unique infrastructure and compliance needs of large-scale operations.

Examples of payroll software pricing

Here’s a simple breakdown of how much payroll systems that have disclosed their pricing plans cost:

*Updated rates as of August 2025

Additional costs you might encounter from payroll platforms

The headline subscription price is rarely the full cost. Businesses should also budget for:

• Setup and implementation fees – Some providers charge one-time setup fees, which can cost up to several hundred dollars.
• Tax filing services – While basic packages may include payroll calculation, automated tax filing often comes at an extra cost.
• Year-end reporting – Producing W-2s, 1099s, or equivalent documents may incur additional charges.
• Direct deposit fees – Some platforms charge per transaction, while others include it in their base package.
• Custom integrations – Connecting payroll to ERP or HR systems can involve extra development or consulting fees.
• Premium support – Priority support or dedicated account managers may cost extra, especially for enterprise clients.

How to know if your payroll software provides ROI

Payroll software should not just be an expense. It should return value to the business over time. 

Here are the areas to evaluate in detail:

Time savings

Payroll is a recurring task, and every hour spent on manual calculations is time that could go toward higher-value work. Automating payroll reduces processing time.

This time savings translates directly into cost savings, as fewer staff hours are required to handle repetitive payroll tasks.

Error reduction

Payroll mistakes can be costly. The IRS estimates billions are lost each year due to payroll-related errors, with about one-third of businesses facing penalties annually.

These errors also hurt employee morale when payments are late or incorrect.

Software minimizes these risks by automatically updating tax tables, calculating withholdings, and maintaining accurate records.

The reduction in penalties and the improvement in employee trust both create measurable financial and cultural returns.

Scalability

A system that scales with business growth prevents the need for expensive software replacements. Payroll platforms designed to adapt to employee increases, multiple locations, or more complex compliance rules ensure that the investment continues to deliver value long-term. 

This scalability protects ROI by spreading the cost of payroll software over many years of use without incurring major transition expenses.

Compliance protection

Non-compliance is just as much a financial issue as it is a legal one. Penalties for incorrect tax filings, misclassified employees, or missed deadlines quickly add up.

Reliable payroll software continuously updates compliance rules and integrates them into payroll runs. By protecting the business against these fines, the software generates ROI in the form of avoided costs and reduced legal exposure.

Employee satisfaction

Employees notice when their pay is accurate and on time. Consistency builds trust, which contributes to retention. Replacing employees is expensive, often costing 30–50% of an employee’s salary in recruitment and training, as per MGR Workforce.

Payroll systems can indirectly boost ROI by helping retain staff, reducing turnover-related expenses, and fostering a positive company culture.

When evaluating ROI, businesses should weigh the software’s monthly or annual subscription against these quantifiable and indirect savings. A simple formula you can use is:

Payroll Software ROI = (Time Saved + Error Costs Avoided + Compliance Costs Avoided + Retention Value) – Software Cost

By looking at ROI through this lens, companies can see payroll software not as a line-item expense but as an investment in efficiency, compliance, and employee satisfaction.

Sample demo questions to ask potential payroll software providers

Before choosing a payroll solution, prepare demo questions to ensure transparency and fit:

1. What pricing model do you use, and what does it include?
2. Are there setup, tax filing, or year-end reporting fees?
3. How does the platform handle compliance updates across states or countries?
4. Can it integrate with existing HR or accounting software?
5. What level of support is included in the subscription?
6. Is employee self-service (like payslip access) part of the package?
7. How secure is employee data, and what protections are in place?
8. Can the system scale if the workforce doubles in size?
9. What downtime guarantees or service-level agreements do you offer?
10. Do you provide client references in a similar industry?

Payroll software cost can feel like another line item on the budget, but in reality, it’s a decision that shapes efficiency, compliance, and employee satisfaction.

When you weigh the monthly fees against the hours saved, errors prevented, and penalties avoided, the value becomes clear. What looks like an expense often functions as an investment in stability and scalability.

The right payroll solution supports growth. By choosing a system that fits your business size, anticipates compliance needs, and adapts as you expand, you ensure that payroll becomes an engine of reliability rather than a recurring headache.

The question isn’t only “how much does payroll software cost?” but also “what do we gain by using it well?” For many businesses, the return goes far beyond dollars saved.