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How much a payroll software system costs depends on the software and the vendor. Some vendors offer multiple versions of their software, each with different price points. Some payroll software is free. Other software systems have an up-front cost upon purchase. Some payroll systems have a recurring monthly or annual cost instead.
Before you start your search for a payroll system, you should have an idea of what your budget is going to be. For some companies, it’s easier to budget for a monthly cost than it is for a one-time fee, which is typically higher than a recurring fee. Having a budget in mind can help you to narrow down the search for a payroll software system.
Recurring Monthly Fee
A recurring monthly fee is typical of cloud-based payroll systems because it functions more like a service rather than software hosted on-site. There are a few different ways that vendors determine how much the monthly cost is for their software. It can vary depending on how you use it.
Most payroll software systems that charge a recurring fee start with a base fee. For some, this base fee may be free. The average monthly base fee is around $30 but can range lower or much higher than that. The vendor may then charge additional fees on top of the base fee depending on the additional features or number of employees a company has.
Often, the monthly recurring fee is based on the number of employees that the company has. This fee can be either based on a range of employees, for example, 1-50 or 100-200 employees, or a charge per specific number of employees. Typically, any per-employee costs are added on top of a monthly base fee. This way, smaller businesses aren’t spending as much as larger companies on their payroll software.
In-house software is more likely to have a one-time fee at purchase rather than a recurring fee but some payroll software vendors do charge both. How much this cost is depends on the payroll software in question, but is typically more than what a recurring cost would be.
Some vendors structure their software in packages or modules, with fees based on how many features are chosen. This allows companies to pick and choose which features and modules work best for them. A smaller business may not need as many features as a larger company but could later upgrade as the business grew.
Some payroll software doesn’t cost anything at all. Free software typically is either open-source, which is free to use and modify but requires more setup and configuration from an IT department, or has fewer features than paid payroll software. While it’s true that often you get what you pay for, for companies with a limited budget for payroll software, free options may suit their needs. For larger companies with dedicated IT departments, free open-source software can be a good option because it can be fully customized.