Even when people find employment in a field they love, doing work they’re passionate about, the vast majority wouldn’t show up if they didn’t get paid. You can have the best company culture and the most
innovative benefits, but you’ll lose workers if you can’t compensate them accurately and on time.
Employee satisfaction is one of the key reasons you need a well-managed
payroll system — but managing it in-house can be time-consuming, error-prone, and challenging to scale. That’s where payroll service providers shine. These third-party experts handle payroll administration for you, enabling smoother operations and letting HR teams focus on strategic goals.
Let’s take a deeper look at what payroll services are, how they work, and the key factors you need to consider when choosing a provider.
What are payroll services?
Payroll services are outsourced solutions designed to manage employee compensation, streamline tax filing, and ensure compliance with labor laws. They use advanced technology to simplify payroll processes in ways many businesses can’t on their own.
How do payroll services work?
Payroll services leverage advanced technology to run payroll and reduce administrative burdens for employers while providing a seamless, engaging experience for employees. Their core functionality extends beyond basic payroll calculations. Most offer a range of services designed to simplify and optimize payroll management, both for employers and employees.
What do payroll service providers do?
Here’s a look at the features that most top payroll service providers offer:
Automatic payroll processing
Payroll providers automate wage calculations and payment distribution, significantly reducing the time and effort required for payroll management. Employers can choose flexible payment methods like direct deposit, paper checks, or pay cards — whatever suits their workforce's needs.
Direct deposit management
For many employers, direct deposit is the payment method of choice because of its speed and reliability. Payroll providers manage this process, giving employees their wages securely and on time — directly into their bank accounts.
Tax withholding and wage garnishment
Payroll systems ensure the accurate withholding of federal, state, and local taxes, as well as deductions for benefits and garnishments. Automation minimizes the risk of errors and ensures payments arrive on time.
Tax filing services
Many full-service providers handle tax filing on behalf of employers. This includes submitting federal, state, and local taxes, managing quarterly filings, and preparing year-end documents like W-2s and 1099-NECs.
Time and attendance tracking
Payroll service providers often integrate with — or even offer their own — time-tracking systems to monitor employee hours and overtime. This integration leads to more accurate wage calculations and streamlines compliance with labor laws, particularly for non-exempt employees.
Payroll reports and analytics
Employers can generate detailed reports on wages paid, taxes withheld, and employee hours worked. Advanced analytics provide insights into labor costs and payroll compliance, enabling better financial planning and operational decisions.
Compliance expertise
Payroll service providers monitor changes in wage and tax laws to keep businesses informed and compliant. These cloud-based systems often include real-time updates, aligning payroll with the most current regulations.
Employee self-service portals
Self-service tools allow employees to access pay statements, update tax withholdings, and change personal information without needing managerial intervention. They empower employees and reduce administrative workload.
On-demand employee pay
Many modern payroll services offer optional integrations like on-demand pay, also known as Earned Wage Access (EWA), enabling employees to access their earned wages before payday. EarnIn takes it one step further with its no-integration solution, making it faster and easier to implement. By offering on-demand pay through EarnIn, businesses can empower their workforce with financial flexibility while saving time and resources.
How much does a payroll service cost?
Payroll service costs vary based on factors like the number of employees, payroll frequency, and the need for extra features like tax filing or time tracking. No two companies have identical budgets or operational needs, but there are a few common pricing structures you can expect to see when comparing providers.
Monthly base fee plus per-employee charge
Many payroll providers charge a monthly base fee ranging from $20 to $120, plus a per-employee fee of $1 to $5. For example, a company with 10 employees might pay a $59 base fee plus $4 per employee, totaling $99 per month.
Per-payroll run fee plus per-employee charge
Some payroll service fees are a flat rate per payroll run — usually between $20 and $60 per run — plus a few dollars per employee. If your provider uses this pricing structure, you can manage costs by scheduling less frequent payroll runs, like biweekly, semimonthly, or even monthly.
Annual fee
Certain providers offer annual pricing, with total costs ranging from $1,000 to $6,000, including per-employee fees. This option may come with discounts for upfront payments.
5 benefits of using payroll services
Outsourcing payroll offers a number of advantages. Here are five perks that make these services worth the investment:
Efficiency. Payroll processing is time-intensive, especially for businesses with a large workforce. Outsourcing frees up HR and administrative teams to focus on core tasks that help the business grow and thrive.
Improved accuracy. Manual payroll processing can lead to costly errors. Payroll providers use software with powerful automation capabilities to ensure precise calculations for wages, taxes, and benefits.
Enhanced compliance. Staying up to date with tax laws and labor regulations can be challenging. Payroll providers mitigate risk by managing compliance on your behalf.
Data security. Payroll providers use advanced encryption and security measures to protect sensitive employee data.
Employee satisfaction. Timely, accurate payroll — coupled with features like EarnIn’s no-integration solution for
on-demand pay — reduces employees’ financial stress, increasing both morale and retention.
Payroll software or a payroll service: Which is right for you?
While your budget plays a role when deciding between a software solution or a third-party payroll provider, what’s most important is how well the different options meet your business needs.
Payroll software tends to work best for businesses that prefer hands-on control. Software automates a lot of the tedious tasks related to processing payroll, but you’ll likely manage compliance and tax filing in-house.
A full-service provider, on the other hand, is perfect for a company that wants to outsource its payroll completely. The provider handles payroll from end to end, taking care of every detail from wage calculation to compliance.
If you’re torn between those options, here are some key considerations:
Budget. Software is more cost-effective, while services offer convenience for a higher price.
Scalability. As your workforce grows, a full-service provider can accommodate complexity better than basic software.
Integration. If one option significantly reduces the time investment of integration, it may be the more efficient choice. Consider solutions like EarnIn's no-integration on-demand pay and financial wellness solution, which eliminates the need for complex integrations and can save you valuable time.
Support. Full-service providers often include dedicated customer support, while payroll software may require you to rely on self-help tools.
What’s the difference between a payroll service provider and a professional employer organization?
Payroll service providers and professional employer organizations (PEOs) both help with workforce management, but they serve different purposes.
While payroll services handle pay-specific tasks like wage calculations, tax withholdings, and payment processing, PEOs offer broader HR services that include payroll, benefits administration, and compliance. PEOs act as co-employers, sharing liability and becoming the employer of record for tax purposes, often giving small businesses access to cost-effective group benefits.
How to choose a payroll service provider: 5 factors
The right payroll provider can transform payroll from a chore into a strategic asset. Here are some of the most important factors to consider:
Reputation. Research reviews and testimonials to find a provider with a proven track record.
Features. You might want your provider to do more than just run payroll. Identify your must-have features, like tax filing, compliance tools, and a self-serve portal.
Cost transparency. Look for providers with clear pricing models and no hidden fees.
Customer support. Choose a responsive provider that offers a range of support options, including live chat, phone, and email.
Capabilities. If integration with other HR systems—such as time and attendance, benefits administration, or HRIS—is required, make sure the payroll service provider offers the necessary support.
Empower your employees with on-demand pay from EarnIn
Full-service third-party providers are just one example of the transformation happening in payroll — progress that benefits both employers and their teams. Whether you choose to partner with a payroll service provider or handle payroll in-house, it’s essential to prioritize a solution that ensures accurate and timely pay and has a positive impact on the employee experience.
EarnIn’s no-integration
Earned Wage Access solution can fit seamlessly into either approach you choose, providing employees access to earned wages whenever they need them — without requiring any changes to your payroll process. Employees can access up to $150 per day, with a max of $750 per pay period.
Same-day transfers are available for $2.99 per transfer.
Plus, with EarnIn’s Early Pay product, employees can even receive their paycheck up to 2 days early for just $2.99 per paycheck,
help reducing financial stress and nurturing a more focused, productive workforce.
Please note, the material collected in this post is for informational purposes only and is not intended to be relied upon as or construed as advice regarding any specific circumstances. Nor is it an endorsement of any organization or services.
EarnIn is a financial technology company not a bank. Banking Services are provided by Evolve Bank & Trust, Member FDIC. The FDIC provides deposit insurance to protect your money in the event of a bank failure. More details about deposit insurance
here.
A pay period is the time between your paychecks, such as weekly, biweekly, or monthly. EarnIn determines your daily and pay period limits (“Daily Max” and “Pay Period Max”) based on your income and financial risk factors as outlined in the
Cash Out Maxes section of our
Cash Out User Agreement. EarnIn reserves the right to adjust the Daily Max and Pay Period Max at its discretion. Your actual Daily Max will be displayed in your EarnIn account before each Cash Out.
EarnIn does not charge interest on Cash Outs or mandatory fees for standard transfers, which usually take 1–2 business days. For faster transfers, you can choose the Lightning Speed option and pay a fee to receive funds within 30 minutes. Lightning Speed is not available in all states. Restrictions and terms apply; see the
Lightning Speed Fee Table and
Cash Out User Agreement for details and eligibility requirements. Tips are optional and do not affect the quality or availability of services.
Lightning Speed is an optional service that allows you to expedite the transfer of funds for a fee. Depending on the product, the fee may be charged by EarnIn or its banking partner. Lightning Speed is not available in all states. Restrictions and terms apply. See the
Lightning Speed Fee Table for details.
Early Pay is an optional feature that requires you to open a Deposit Account with Evolve Bank & Trust, Member FDIC and update your direct deposit routing with your employer. This Deposit Account will receive your paycheck and will redirect it to the bank account you link to your EarnIn account. EarnIn will set aside the necessary funds from your paycheck to cover any tips, Lightning Speed fees, and Cash-Out balances from the previous pay period. Any remaining funds will be sent to your linked bank account. If you opt for Lightning Speed transfers, Evolve Bank & Trust will charge you a $2.99 fee to transfer your paycheck to your linked bank account on the same day your employer processes payroll, which may be up to 2 days before your scheduled payday. If you do not opt for Lightning Speed transfers, Evolve Bank & Trust will automatically transfer your paycheck to your linked bank account for free, by your regular payday. Early Pay is available to eligible EarnIn members in select states, and additional restrictions may apply. For more information, please refer to our
FAQ.
