Payroll Software: Features, Costs, and How to Choose

Running payroll by hand means calculating withholding, filing taxes, and keeping up with changing rules in every state where you have employees. Payroll software automates most of that, but products differ in what they handle for you. This guide covers the features that matter and how pricing works.

What Payroll Software Does

At minimum, payroll software calculates pay, withholds taxes, pays employees by direct deposit, and files payroll taxes. More complete platforms handle onboarding paperwork, benefits deductions, time tracking, and contractor payments. Some are standalone; others are part of broader HR or accounting suites. The right choice depends on how many employees you have and how much HR you want bundled in.

What It Typically Costs

Pricing is usually a base monthly fee plus a per-employee or per-payroll charge, so the total scales with headcount. Full-service plans — where the provider files taxes for you — cost more than self-service ones. Watch for add-on fees for tax filings, year-end forms, or additional states. Annual contracts are common, so know the renewal terms.

Things to Consider

• Whether tax filings are handled for you, or just calculated.
• Support for every state where you have employees or contractors.
• Integrations with your accounting software and time tracking.
• How onboarding, offboarding, and year-end forms are handled.
• Customer support quality — payroll mistakes are time-sensitive.

Questions Worth Asking

• Do you file federal, state, and local payroll taxes for me?
• What is my all-in monthly cost at my headcount?
• How do you handle contractors versus employees?
• What happens if a tax filing is late or wrong — who pays the penalty?