Why payroll software matters

Payroll is one of the highest-risk administrative functions for a small business. Mistakes — missed tax deposits, incorrect withholding, late filings — result in IRS penalties that start at 2% and can reach 15% of the unpaid amount, plus interest. Manual payroll processing for a business with any employees beyond the owner creates meaningful compliance risk.

Modern payroll software handles tax calculations, withholding, deposits, and filings automatically, which is why it’s worth $40–100/month for most businesses with employees.

The main options

Gusto ($40–80/month + $6–12/employee/month): The most popular payroll software for small businesses in the last five years. Full-service payroll (handles federal, state, and local tax filings and deposits automatically), employee self-onboarding, benefits administration, and time tracking. Clean interface, good support. The right choice for most service businesses and offices.

QuickBooks Payroll ($45–125/month + $5–10/employee/month): Integrates directly with QuickBooks accounting. If you’re already on QuickBooks for accounting, QuickBooks Payroll adds payroll inside the tool you already use. Slightly less intuitive than Gusto but the integration eliminates the need to sync data between tools.

ADP Run ($60–150/month + variable per employee): More expensive than Gusto or QuickBooks but strong for businesses with complex needs: multiple states, union employees, certified payroll requirements (contractors on government jobs). Better for 20+ employees.

Patriot Payroll ($17–37/month + $4/employee/month): The most affordable full-service option. Less polished than Gusto but handles the core functions correctly at significantly lower cost. Worth considering for cost-sensitive businesses with straightforward payroll.

Setup essentials

When setting up payroll software, have these ready:

  • EIN (Employer Identification Number) from the IRS
  • State tax ID numbers for each state where you have employees
  • Bank account and routing number for direct deposit
  • Previous payroll records (if switching from manual or another system mid-year)
  • Each employee’s W-4 and state withholding forms