A Guide to Payroll Software Pricing Models

Are you a small-business owner or HR manager looking for payroll software but not sure which pricing plan to choose? Finding payroll software that offers the features you need within your budget isn't the only challenge. Your decision is influenced by many other factors: upfront costs, recurring expenses, hidden charges, and more.

We’ve put together this comprehensive guide to help you compare the pricing plans of top-rated payroll systems. This guide assists you in determining which plan provides the most value for your software investment. You’ll also learn how software providers typically license and price their payroll tools.

What are the different types of payroll software pricing models?

The cost of payroll software solutions varies depending on the software type, business size, required features and functionalities, number of users and employees, vendor reliability, and available integrations. Here are some common payroll software pricing models:

Subscription license

You pay a monthly or annual fee to use the software for a set period of time. Pricing is typically based on the number of users per month. The subscription model is commonly used for cloud-based deployments where the system is hosted by the software provider on their servers and can be accessed by your users on compatible devices, such as laptops, smartphones, and tablets, via the internet.

Some common types of subscription pricing options include: 

• Per user: Pricing is based on the number of users accessing the software. It can be either a flat fee per user or a tiered structure where the cost per user decreases as the number of users increases.

• Per employee: This pricing structure charges based on the number of employees for whom you process payroll through the software.

• Tiered: Different pricing tiers based on the payroll features included, with higher tiers offering more advanced functionalities.

• Flat rate: A single, fixed fee for a specified period, regardless of the number of users or employees.

• Pay as you go: Charges are based on the actual consumption of software resources, such as the number of payroll reports processed, the volume of data stored, or the frequency with which specific features are used.

Perpetual license

Under this pricing model, you pay a one-time upfront fee for the permanent license to own and use the payroll solution. The fee can vary based on the number of users. The perpetual pricing model is commonly used for on-premise deployments where the software is hosted and maintained in-house on your own servers.

Free and open-source license

These pricing options are commonly used by small-business owners or payroll teams with limited budgets and resources.

• Freemium: A basic version of the software is offered for free, with premium features, add-ons, or additional services available for a fee.

• Open source: The software source code is freely available, allowing users to modify and distribute it. While the software is often free to use, you may incur implementation and maintenance costs.

Common subscription pricing tiers for payroll software

Under the subscription model, per-employee pricing is the most commonly seen. You pay a fixed fee for every user seat, and prices increase as the number of user seats increases. Per-user pricing plans are typically of three types, according to analysis by our research team.

• Entry-level plans (1-100 employees): Cost up to $497 per month and offer access to standard software features. These are suitable for small businesses with basic payroll needs, such as employee onboarding, time tracking, and payroll calculation.

• Mid-tier plans (101-250 employees): Cost up to $2,317 per month and offer advanced features such as benefits administration, payroll tax filing, and automated payroll. These are suitable for businesses that have outgrown basic payroll tools but don’t require the full range of functionality offered by enterprise-level systems.

• High-end plans (251+ employees): Cost up to $3,329 per month and offer a range of advanced payroll capabilities, including unlimited features from entry-level and mid-tier plans, unlimited payroll runs, customizable payroll reports, and global payroll. These plans suit larger enterprises with extensive customization and scalability requirements for payroll.

For reference, below is a snapshot of the prices of the most reviewed payroll solutions with subscription pricing plans. These products are taken from the most recent Software Advice FrontRunners report for payroll software.*

Note: For each pricing tier—entry-level, mid tier, and high end—we calculated the median value based on their respective prices mentioned in the product pricing table above. In this case, the median represents the middle value of the monthly fee for each pricing tier when all the top-rated software solutions are considered. While average pricing may be easily skewed by outliers, the median value gives users an understanding of the midpoint of ranges they're likely to encounter.

What are the upfront and recurring costs associated with payroll software?

Upfront costs are the initial expenses incurred when purchasing or subscribing to software, such as licensing, installation, setup, and training. The graphic below illustrates the primary upfront costs associated with payroll management software.

Recurring costs are the ongoing expenses associated with using software, such as subscription fees and maintenance costs. These costs may be charged monthly or annually and can also include expenses for upgrades or additional user licenses. The graphic below shows the primary recurring costs associated with payroll software.

What are the additional costs associated with payroll software?

These additional costs are common across different software providers and pricing models, so it’s important to include them in your budget.

• Data migration: Data migration involves transferring existing payroll data from your current system to the new payroll software. This process ensures all historical payroll information, employee records, tax details, and other relevant data are accurately moved to the new system. Costs associated with data migration can include consultation fees for experts to plan and oversee the migration, expenses for cleaning and formatting data to ensure compatibility with the new system, labor costs for the time and effort required by your staff or external consultants, and potential costs for specialized tools or software to facilitate the migration process.

• Training: Training ensures your staff can effectively use the new payroll software, including understanding its features, functionalities, and best practices for operation. Costs associated with training can include fees for training sessions conducted by the software provider or third-party trainers, expenses for training materials such as manuals, guides, and online resources, and the time spent by employees attending training sessions, which can impact productivity. Additionally, there may be ongoing support costs for refresher courses or advanced training as needed.

• Hardware and IT: Implementing a new payroll solution may require upgrades or additions to your existing hardware and IT infrastructure. This can include purchasing new computers, servers, or other hardware components to meet the software's requirements. Costs can also arise from upgrading your network infrastructure to ensure smooth operation and compatibility. Additionally, you may incur expenses for IT staff or external consultants to set up, configure, and maintain the new hardware and software environment.

• Maintenance and upgrades: Maintenance and upgrades are ongoing costs associated with keeping your payroll software up-to-date and running smoothly. This includes regular software updates to fix bugs, add new features, and ensure compliance with changing regulations. Costs can also include fees for technical support and troubleshooting, as well as potential expenses for additional licenses or modules as your business grows or your needs change. Regular maintenance contracts with the software provider or third-party service providers can also contribute to these costs.

How to find the right pricing plan for payroll software

• Identify the payroll features you require. Pricing plans with more advanced features and functionality tend to be more expensive than those with fewer features. For example, a basic plan costs less than an advanced plan having premium features such as real-time payroll reporting and analytics. By identifying the must-have software features for your team, you can prioritize spending to find a pricing plan that fits your budget while meeting your payroll needs.

• Consider the number of employees. If you have up to 250 employees, you can go with a basic or mid-level plan. But if you need payroll processing for more than 250 employees, consider investing in a premium or advanced plan. It's a good idea to choose a scalable software solution that can adapt to any changes in the number of employees. Additionally, some software providers offer per-user licensing, so it’s important to factor in the number of employees when budgeting for payroll software.

• Check if free or open-source software works for your payroll needs. Free or open-source software is typically available at no cost and can be modified and distributed by users. These software products can be a cost-effective solution if your business has a limited budget, but they may offer limited features and support. Before making a choice, evaluate the specific needs of your payroll team and compare them to what free or open-source software solutions offer. If the software meets your needs and has an active support community, it can be a good option for your small business.

Common questions to ask when choosing payroll software

Below are a few questions you should ask software providers when evaluating the pricing plans of the payroll solutions you’ve shortlisted.

• Is there any setup or implementation fee?

Setup or implementation fees often cover essential activities such as data migration, system configuration, and customization to fit your specific needs. Understanding these costs upfront helps avoid unexpected expenses late and allows you to budget more accurately for the total cost of ownership. Additionally, knowing these fees helps you compare different providers more effectively, as some may offer lower or waived setup costs as part of their package.

• What are the costs for additional users or employees?

As your business grows, you'll likely need to add more employees to the payroll system. Understanding how these costs scale ensures the software remains affordable as your company expands. Some providers may offer tiered pricing or bulk discounts, which can be more cost-effective in the long run. By asking this question, you can plan better for future expenses and ensure the software can accommodate your growth without breaking the bank.

• What is included in the maintenance and support fee?

Maintenance and support fees often include regular software updates, bug fixes, and access to customer support for troubleshooting issues. Knowing what is included helps you evaluate the level of payroll service you can expect and ensures there are no hidden costs for essential services. It also allows you to compare the value offered by different providers, as some may include more comprehensive support and updates in their fees, making them a better long-term investment.