Updated October 2026
Running payroll by hand is risky: a missed tax deposit or a wrong withholding can mean penalties. Payroll software does the calculations, pays your team and files payroll taxes for you, usually for less than the cost of an afternoon of an accountant’s time each month.
What payroll software does
Table of Contents
- Calculates pay and withholdings for federal, state and local taxes.
- Pays employees by direct deposit, and contractors where supported.
- Files and pays payroll taxes on your behalf, in most full-service plans.
- Prepares year-end forms: W-2s for employees and 1099s for contractors.
- Handles new-hire paperwork, and often benefits, paid time off and time tracking.
Check what’s included: some basic plans calculate pay but leave tax filings to you.
Leading payroll software for small businesses
| Provider | Often a good fit for |
|---|---|
| Gusto | Most US small businesses wanting payroll, benefits and HR in one place |
| OnPay | Simple, affordable payroll, including employers in several states |
| QuickBooks Workforce (formerly QuickBooks Payroll) | Businesses already using QuickBooks Online for accounting |
| ADP RUN | Growing businesses that want a large provider and room to scale |
| Paychex Flex | Owners who want a dedicated contact for help |
| Patriot Software | Budget-conscious businesses wanting straightforward payroll |
| Rippling | Businesses wanting payroll inside a wider HR and IT system |
| Square Payroll | Businesses already taking payments with Square |
How pricing usually works
Most providers charge a monthly base fee plus a fee per person paid, with unlimited pay runs. Some quote prices individually, and a few charge per payroll run. Ask about extra fees for year-end forms, state registrations, off-cycle payrolls and benefits administration, and check prices after any introductory discount.
Payroll software, a payroll service or a PEO?
- Payroll software: you run payroll yourself; the software does the math and filings.
- A full-service payroll provider: a person helps you run payroll and handles more of the admin. See outsourcing payroll.
- A PEO (professional employer organization): takes on payroll, compliance and often benefits as a co-employer, which can give small teams access to better benefits.
How to choose
- Count your people and where they work. Employees in several states or abroad narrow your choices.
- Match your accounting software, so payroll entries flow into your books.
- Decide whether you need benefits: health insurance, retirement plans and workers’ compensation.
- Ask about support: chat, phone or a dedicated contact.
- Try the employee experience, since your team will use the app too.
Your responsibilities, even with software
You remain responsible for paying the right people the right amounts and for your employment taxes. Keep employee information current, approve every payroll, register for state payroll taxes, and keep records. The IRS’s employment tax pages explain your federal obligations.
Keep learning
Related guides
Sources
- TechRepublic, Best payroll software and services for 2026
- Patriot Software, Best payroll software for small businesses in 2026
- IRS, Employment taxes
Last reviewed October 24, 2026. Startup costs are estimates; check local prices, licensing and tax rules before you commit money.
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