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Why Does Payroll Cost More Per Employee When You Have Fewer Employees?

Did you know that small businesses typically spend at least five hours per pay period on payroll tasks? This can include things such as adding up payroll taxes, filing taxes, and distributing the payroll.

Altogether, this can mean spending about a month per year in typical business days managing all of this. If it sounds like too much for your business, you may need to consider reaching out to payroll services.

If you are reading this, you may be concerned about payroll cost for these services. Well, this guide will break down some of the biggest factors for this processing cost.

Number of Pay Periods

The first factor that may come into play is how often you pay your employees. Businesses run on several different pay cycles.

The most common ones tend to be weekly and bi-weekly payments. However, some businesses go as far as only paying their employees monthly.

This comes into play with processing payroll because depending on your payroll system, that can increase the number of deadlines a service has to meet when you are paying for a payroll service. As a result, the frequency they have to do this can increase their price.

Number of Employees

Another important factor you have to consider is how many employees you have. Payroll services have to charge you more if they have 50 employees’ payrolls to manage instead of 15.

What most will do is start out with a base fee that is good for a certain number of employees. Then, there will be an additional fee for each employee that you have to add to this payroll service.

Geographical Location

Payroll can get more complicated depending on where your employees are geographically located. The reason for this is that if they live in another state, they may have other tax requirements that they have to meet. The same holds true for people that are working from abroad.

Since the pandemic, at least 28% of employees have worked outside of their home state or the country. What this means is that it may be a longer process to do the paperwork and meet the tax implications required for these employees.

Payment Method

Finally, payment methods could come into play because some ways charge a higher fee than others. For example, direct deposit domestically tends to be a smaller fee than conducting wire transfers through banks or doing it through a mobile payment app.

Find Out Your Payroll Cost

These are some of the main factors that come into play when determining what your payroll cost is going to be. You need to consider how many pay periods you have, how many employees you have, where these employees are located, and what type of payment method you have.

If you do all of this, you should have a good idea of how much you have to pay.

Do you want to know more about your payroll options? Message us here with your questions.

Christina Hageny

Christina Hageny

President - Valor Payroll Solutions

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