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Best Payroll Software for Small Business
Our review of the best payroll services for 2021 looked at a number of factors that small businesses need to keep their operations running smoothly. These include:
- Ease of use
- Variety of service plan options
- Ability to integrate into your accounting system
- Customer service support
- Competitive pricing
The best payroll services for small businesses in 2021 are:
Best Overall Payroll Service: Gusto
Gusto offers a delightful user experience plus a lot of flexibility for maintaining employee records. It has a contractor-only version and the mobile app that goes with it has both an admin and employee version.
Cost: Gusto has three pricing plans with monthly base prices and an additional per person charge:
- The Basic plan is $19 per month plus $6 per month per person.
- The Core plan is $39 per month plus $6 per month per person.
- The Concierge plan is $149 per month plus $12 per month per person.
Here is a quick summary of what Gusto offers:
- Mobile app for remote admin control
- Calculation of all federal, state, local, and payroll taxes
- Ability to process W-2s
- Ability to process 1099s
- Time tracking
- Ease of use
- A variety of employee records
- Employee and contractor versions
- Reports that can be customized
- Mobile app with both admin and employee versions
- System can be sluggish at times
- Minimal dashboard features
- Not all reports viewable online; must be downloaded
Read our full Gusto Payroll Review
Best Low-Cost Payroll Service: Zenefits
Zenefits is a comprehensive solution for most small to midsize businesses (SMBs). Apart from basic payroll functions, it incorporates features for benefits administration (BA) and human resources (HR) management.
Cost: At $8 per user per month for its Essentials Plan, Zenefits is the least costly payroll service in our review.
Here is a quick summary of what Zenefits Payroll offers:
- Employee mobile app
- Admin of federal, state, local, and payroll taxes
- W-2 admin capability
- 1099 option
- Time tracking
To open an account with Zenefits, start here: https://www.zenefits.com/
- Built-in benefits and HR administration
- Easy system to navigate
- Wide range of employee records available
- Advanced business intelligence (BI) reporting
- Exceptional employee mobile app
- Advanced features may confuse the simplest businesses
- Mobile app doesn't show all admin tasks
Best Payroll Service for Larger Businesses: OnPay
OnPay is a payroll service with many features, ideal for businesses that want to go a step beyond basic payroll processing. With OnPay, you can run unlimited payrolls and create a variety of employee records.
OnPay also calculates all payroll and income taxes and can remit the deducted amounts to the relevant authorities. In the latest version, an HR dashboard has been added.
Cost: OnPay pricing starts at $36 per month plus $4 per employee per month. For example, the cost for one employee is $40 per month, two employees cost $44, and so on.
Here is a quick summary of what OnPay offers:
- Mobile access through iOS and Android devices
- Calculation of all payroll and income taxes
- W-2 management
- 1099 management
- HR add-on
To open an account with OnPay, start here: https://onpay.com/
- Fast responsive system
- Run unlimited payrolls, anytime
- Customized reporting windows
- Good mobile experience
- Employee and admin versions
- New HR tools and data
- Great employee versions
- Faint text on website when accessed through Android devices
- Mobile versions missing some functions available on desktop
Best Payroll Service for Very Small Businesses: Intuit QuickBooks
QuickBooks Payroll is an easy to understand, easy to use payroll system. It integrates very well with the QuickBooks accounting system, so payroll-related book entries are posted automatically. You can also add HR features through third-party providers.
Cost: QuickBooks has three plans that are currently at half-price:
- The Core plan’s discounted price is $22.50 per month plus $4 per employee per month.
- The Premium plan’s discounted price is $37.50 per month plus $8 per employee per month.
- The Elite plan’s discounted price is $62.50 per month plus $10 per employee per month.
Here is a quick summary of what Intuit QuickBooks offers:
- Mobile app
- Calculation of all applicable taxes
- Preparation and filing of W-2s
- Time tracking
To open an account with Intuit QuickBooks, start here: https://quickbooks.intuit.com/payroll/
- Simple user interface
- Well integrated with QuickBooks Online
- TSheets that allow time-tracking
- HR support through third-party providers
- Online help could be more extensive
- Have to pay extra to handle 1099s
- Poor experience with mobile apps
Best Payroll Service for Payment Processing: Square
Square Payroll is a bare-bones system that even a payroll novice will find easy to use. It can handle all the essential tasks your payroll administrator will require, such as adding employees, taxes, reports, and payroll runs. It can also be easily integrated with other Square products.
Cost: Square Payroll pricing starts at $29 per month, with a $5 per worker — employees and contractors — charge per month.
Examples of business types that might be best suited to Square Payroll service include: restaurants, bars, grocery stores, and other retail establishments that may experience high staff turnover or that use a lot of part-timers.
Here is a quick summary of what Square Payroll offers:
- Mobile admin app
- Computation of all payroll and income taxes
- W-2 capability
- 1099 capability
- Time tracking
To open an account with Square, start here: https://squareup.com/signup/us
- Unlimited payroll runs
- Contractor-only version
- Integrates with other Square apps: Appointments, Payments, Point of Sale
- Offers services, such as health insurance and retirement plans, from third-party benefits providers
- Low price
- Just two earnings types: hourly and salaried
- Few reports online
- Limited help online
What is a Payroll Service?
A payroll service offers payroll processing to businesses and other organizations.
The services they provide include calculating employee pay and computing and deducting withholding tax. A good payroll service will also take into account paid time off, benefits, and deductions under the Federal Insurance Contributions Act (FICA), such as Social Security and Medicare taxes. Rather than having to deal with all these calculations themselves, it can be simpler for an organization to outsource these responsibilities by using a payroll service instead.
Our review of the best payroll services for small businesses has highlighted some of the key features that will help you manage your payroll responsibilities efficiently.
All the systems we’ve reviewed handle the basic payroll functions of running payrolls, calculating income, and payroll taxes.
Some of these services go further by submitting W-2s and 1099s, as well as adding ways for you, and employees, to track time. Our review also included payroll services that add HR capability or can integrate with an accounting system.
Frequently Asked Questions
What basic functions can I expect from a payroll service?
A payroll service should, at the very least, be able to process paychecks, handle tax deductions, maintain employee records according to law, and allow employees access to check their earnings, enter time, etc.
What are payroll taxes?
Payroll taxes, known officially as employment taxes, are the taxes, required by state and federal law, that an employer must deduct or “withhold” from an employee’s earnings. Payroll taxes are made up of income tax, social security taxes, and Medicare taxes.
As an employer, do I have any payroll taxes to pay?
Yes. As an employer, you are required to pay an amount that matches the social security and Medicare taxes paid by your employees. In addition, you must pay state and federal unemployment taxes.
What are FICA taxes?
FICA taxes are the taxes levied by the Federal Insurance Contributions Act (FICA) to fund the Social Security and Medicare programs. Together with local, state, and federal income taxes, FICA taxes make up the deductions required by law from earnings.
What is a W-2?
A Wage and Tax Statement, IRS Form W-2, is a form that employers must file annually for every employee. The W-2 reports income and deductions, including various taxes.
What is a 1099?
IRS Form 1099 is used for reporting “miscellaneous income” and income paid to contractors. From tax year 2020, payments to contractors must be reported on Form 1099-NEC (nonemployee compensation).
What is the current social security tax rate?
The current Social Security tax rate is 6.2%. As an employer, you must withhold 6.2% of an employee’s wages for this tax and pay a matching amount until the employee’s income reaches the wage base limit for the Social Security tax. For income year 2020, the wage base limit is $137,700. This means you will be required to pay no more than $8,537.40 for that employee in 2020.
What is the current Medicare tax rate?
The current Medicare tax rate is 1.45%. There is no wage base limit for the Medicare tax.