Running payroll manually is one of those tasks that sounds manageable until you're actually doing it. Federal withholding tables, state income tax rates, Social Security and Medicare calculations, quarterly filings, year-end W-2s – the compliance surface area is large, and the cost of getting it wrong is real. Penalties for late deposits, incorrect withholding, or missed filings add up fast and have nothing to do with how small your team is.
Payroll software exists to handle all of that automatically, and for small teams, the cost is often lower than people expect. Several solid options are available for under $50 per month for a team of one to five people, and a few are free for very small operations. The differences between them come down to which compliance features are included, how much of the filing is automated, and whether HR and time tracking are bundled in.
Here's a clear-eyed look at the best low-cost options for small teams, what you actually get at each price point, and how to choose the right one for your situation.
Price matters, but it's not the only number that counts. A few things are worth clarifying before you evaluate specific options.
Full-service vs. self-service payroll is the most important distinction. Full-service payroll means the software automatically calculates taxes, files federal and state payroll tax returns, and handles year-end forms like W-2s and 1099s on your behalf. Self-service payroll means the software does the calculations but you're responsible for submitting the tax filings yourself. Full-service is worth the premium for most small business owners because the filing is where mistakes happen and where the compliance burden is heaviest.
State tax filing coverage varies by provider. Some low-cost options include all 50 states in the base price. Others charge extra for multi-state payroll or exclude certain state filings from their cheapest tier. If you have employees in more than one state, verify this before committing.
Contractor vs. employee payroll also affects cost. Some providers offer separate pricing for 1099 contractors, and if you run a mixed team of employees and contractors, you'll want a platform that handles both without charging you for two separate plans.
Starting price: $49/month base + $6/month per person
Gusto is the most popular payroll platform among small businesses, and for good reason. It handles full-service payroll for all 50 states, automatically files federal, state, and local payroll taxes, prepares and files W-2s and 1099s at year-end, and offers a clean, intuitive interface that makes running payroll genuinely straightforward. For most small business owners, it's the first platform worth serious consideration.
The Simple plan at $49/month plus $6 per employee covers the core payroll functionality well for teams under 10 people. At five employees, that's $79/month – a number that's easy to justify when you consider what it replaces: the time cost of manual calculations, the professional fees for a bookkeeper to handle filings, and the exposure to penalties from compliance errors. Gusto also includes basic HR features like offer letters, onboarding documents, and PTO tracking at no additional cost on the Simple plan.
Where Gusto falls short for the most cost-sensitive buyers is that its pricing climbs if you need benefits administration, time tracking, or HR tools beyond the basics – those require upgrading to the Plus or Premium plans, which are meaningfully more expensive. If you want payroll and nothing else, Gusto's Simple plan is excellent. If you're looking for a bundled people platform, compare it against more HR-complete options at the next tier up before committing.
Best for: Small businesses wanting full-service payroll with clean UX and solid compliance coverage, willing to pay a moderate base fee.
Starting price: $20/month (tax service states) or $6/month (self-service states) + $6/month per employee
Wave is best known as a free accounting platform, and its payroll add-on is priced to match the budget-conscious audience that accounting product attracts. For businesses in one of the tax service states where Wave handles full-service payroll, the cost is $20/month plus $6 per employee – among the lowest full-service rates available. For businesses in self-service states, the cost drops to $6/month plus $6 per employee, though you're responsible for filing your own tax returns.
The tradeoff is coverage. As of 2024, Wave offers full-service payroll (automatic tax filing) in a limited number of states, with self-service available in the rest. If your business is in a self-service state, you'll save money but take on the compliance work yourself. For a solo founder with one or two employees who is comfortable with the filing process and wants to minimize software cost, this can make sense. For a business owner who wants full automation and the peace of mind that comes with it, the geography limitation is a real constraint.
Wave's interface is functional but less polished than Gusto's, and its support options are more limited. It works, but it doesn't have the same depth of onboarding help or documentation that makes Gusto easier for first-time payroll runners.
Best for: Very small teams (1–3 employees) in full-service states who want the lowest possible monthly cost and don't need HR features.
Starting price: $17/month + $4/month per employee (basic); $37/month + $4/month per employee (full-service)
Patriot Software is consistently underrated in the small business payroll space. Its full-service plan at $37/month plus $4 per employee is the cheapest true full-service payroll option that covers all 50 states, handles federal and state tax filings automatically, and includes year-end W-2s and 1099s. At five employees, that's $57/month – less than Gusto's equivalent configuration and with comparable compliance coverage.
The basic plan at $17/month plus $4 per employee handles payroll calculations but requires you to manage tax filings yourself, similar to Wave's self-service offering. For businesses that already use an accountant for tax filings and just need the calculation and payment side handled, the basic plan covers the core need at a very low cost.
Patriot's interface is straightforward without being particularly modern, and it lacks the built-in HR features that Gusto includes. There's no onboarding workflow, no integrated offer letters, and no PTO tracking in the base plan. But if payroll compliance is the primary concern and you're managing HR separately, Patriot delivers the compliance functionality at a price point that's hard to beat.
Best for: Budget-focused small teams that want full-service payroll compliance across all 50 states and don't need integrated HR features.
Starting price: $39/month + $6/month per employee (payroll add-on on top of Homebase subscription)
Homebase is primarily a scheduling and time tracking platform built for hourly workforces – restaurants, retail shops, service businesses, and any operation where shift scheduling and time clock functionality matter. Its payroll add-on integrates directly with the time tracking data, which means hours worked flow automatically into payroll calculations without manual entry or imports. For businesses running hourly teams, that integration eliminates a significant source of data entry errors and saves real time every pay period.
The cost structure is a bit different from the others on this list because Homebase charges for the scheduling and time tracking platform separately from the payroll add-on. The free tier of Homebase covers basic scheduling for a single location, and the payroll add-on costs $39/month plus $6 per employee. If you're already using or would benefit from Homebase's scheduling and time clock features, the bundled cost is competitive. If you're a salaried small team with no shift scheduling needs, there are simpler and cheaper options.
Homebase handles full-service payroll with automatic tax filings, direct deposit, and year-end W-2 preparation. The platform is particularly well-regarded for its user experience with hourly workers, including a free mobile app that employees use to clock in and out, request time off, and view their schedules.
Best for: Small teams with hourly employees who need scheduling and time tracking alongside payroll, particularly in retail, food service, or service businesses.
Starting price: $45/month + $6.50/month per employee (Core plan)
QuickBooks Payroll is priced slightly above the cheaper options on this list, but it earns its place here for businesses already using QuickBooks for accounting. The integration between the two products is seamless – payroll runs flow directly into the accounting ledger without manual journal entries, and the combined view of payroll expenses in QuickBooks makes bookkeeping and tax preparation significantly simpler.
The Core plan includes automatic federal and state tax filings, direct deposit, and year-end W-2s. The Premium and Elite plans add time tracking, same-day direct deposit, and on-demand expert support for higher monthly costs. For teams of one to five people already committed to the QuickBooks ecosystem, the Core plan is the most efficient path to integrated payroll without the friction of connecting two separate platforms.
For businesses not already using QuickBooks for accounting, it's harder to recommend as the cheapest option. The accounting product adds cost on top of payroll, and the bundle only makes sense if you need both. Standalone payroll users will find Patriot or Gusto better value.
Best for: Small businesses already using QuickBooks for accounting who want seamless payroll integration without a separate tool.
For most small teams making this decision for the first time, the practical choice comes down to three questions.
First, how many employees do you have and where are they located? For one to three employees in a single state, Wave or Patriot's basic plan may be sufficient and cost-effective. For five or more employees or multi-state operations, Gusto or Patriot's full-service plan handles the complexity most cleanly.
Second, do you need HR features bundled with payroll? If onboarding, document management, and basic HR workflows matter to you, Gusto's Simple plan includes these at no extra cost and is worth the slightly higher price over Patriot. If you're managing HR separately or don't need it, Patriot saves you money for equivalent payroll functionality.
Third, do you run an hourly workforce with scheduling needs? If yes, Homebase's integrated time tracking and payroll combination is purpose-built for that situation and saves real operational friction. If your team is primarily salaried or remote, the scheduling features aren't relevant and a simpler platform makes more sense.
Don't choose a platform based on advertised price without confirming what's included in that tier. Several payroll providers advertise a low base fee and then charge separately for state tax filing, W-2 preparation, direct deposit, or contractor payments. The real monthly cost at your team size and location is what matters, not the headline number.
Don't use a self-service plan if you're not confident in your ability to handle state and federal tax filings yourself. The savings over full-service are real, but so is the liability if a quarterly deposit is late or a state filing is missed. Penalties on payroll tax deposits can reach 15% of the unpaid amount and compound quickly.
Don't assume your cheapest option today will still be the cheapest as your team grows. Several platforms charge per-employee fees that scale steeply, and a platform that's cost-effective at three employees may be expensive at fifteen. Build a quick cost estimate for what each option would cost at twice your current headcount before committing.
Is free payroll software ever a real option? For very specific situations, yes. Wave offers payroll for free if you're in a self-service state and handle your own filings, though the $6 per employee fee still applies. For sole proprietors with no employees who just need to run owner payroll, some accounting tools include basic payroll at no additional cost. For any business with W-2 employees that needs full-service tax filing, genuinely free options are limited and usually involve a significant compliance trade-off.
How much does payroll software typically cost for a team of five? Using the options above: Wave in a full-service state runs $50/month, Patriot full-service runs $57/month, Gusto Simple runs $79/month, and QuickBooks Core runs $77.50/month. All of these include full-service tax filing. The range for a legitimate full-service payroll solution for five employees is roughly $50–$80 per month.
Do I still need an accountant if I use payroll software? For payroll specifically, full-service software handles the filings that would otherwise go to an accountant. Most small business owners still benefit from having an accountant or CPA for annual tax returns, financial planning, and business structure decisions – but the quarterly payroll tax filings are reliably automated by any of the full-service platforms above.
What happens if I get behind on payroll taxes? Payroll tax deposits are required on a set schedule – either monthly or semi-weekly depending on your total payroll liability. Late deposits trigger IRS penalties that start at 2% and escalate to 15% depending on how late the deposit is. These accumulate on top of whatever is owed. Full-service payroll software handles deposit timing automatically, which is one of the clearest arguments for paying for it rather than managing filings manually.
Can payroll software handle both employees and 1099 contractors? Most platforms on this list support both. Gusto, Patriot, and QuickBooks all handle contractor payments and year-end 1099-NEC filing. Some platforms include contractor payments in the base plan; others charge separately. Confirm the pricing for your specific contractor-to-employee mix before choosing a platform.
IRS – "Payroll Tax Deposit Penalties": https://www.irs.gov/businesses/small-businesses-self-employed/deposit-penalties
IRS – "Employment Tax Due Dates": https://www.irs.gov/businesses/small-businesses-self-employed/employment-tax-due-dates
Gusto – Payroll Pricing and Plans: https://gusto.com/product/payroll
Patriot Software – Payroll Pricing: https://www.patriotsoftware.com/payroll/pricing/
Wave – Payroll Pricing and State Coverage: https://www.waveapps.com/payroll
National Federation of Independent Business – "Small Business Payroll Guide": https://www.nfib.com/content/resources/money/small-business-payroll-guide/
