Payroll Software FAQ: 20 Common Questions Answered

Most payroll software costs between $40-$150 per month base fee, plus $4-$12 per employee. Here's what you can expect:

• Gusto: Starts at $40/month + $6/employee (full-service tax filing included)
• QuickBooks Payroll: $45/month + $5/employee
• ADP Run: $100+/month + $8/employee (pricing varies by negotiation)
• Paychex: $100+/month + custom pricing
• Rippling: $35/month base + $8/employee (requires HRIS platform)

Pricing varies based on features like automatic tax filing, benefits administration, HR tools, and multi-state support. Full-service payroll (with tax filing) typically costs $20-40/month more than basic payroll.

Basic payroll calculates paychecks, generates reports, and provides pay stubs—but you handle tax deposits and filings yourself. This is cheaper but requires payroll knowledge.

Full-service payroll does everything automatically:

• Files federal, state, and local taxes
• Makes tax deposits on your behalf
• Generates W-2s and 1099s at year-end
• Handles quarterly tax forms (941, 940)
• Includes accuracy guarantees and penalty protection

For most SMBs, full-service is worth the extra $20-30/month to avoid tax headaches and potential IRS penalties.

Watch out for these common add-on costs:

• Year-end processing: Some providers charge $100-300 for W-2/1099 filing
• New hire reporting: $5-10 per new employee in some states
• Off-cycle payroll runs: $20-50 per extra payroll (bonuses, corrections)
• Check delivery: $5-10 per mailed check
• Benefits administration: $10-30/month extra
• Time tracking integration: May require separate subscription

Always ask for a complete fee schedule before signing up. Gusto and Rippling are known for transparent, all-inclusive pricing.

Yes—most modern payroll software (Gusto, ADP, Paychex, Rippling) handles automatic federal, state, and local tax calculations, filing, and payments on full-service plans.

This includes:

• Federal income tax withholding and deposits
• FICA (Social Security and Medicare)
• Federal unemployment tax (FUTA)
• State income tax and unemployment insurance (SUTA)
• Local taxes (city, county where applicable)
• Quarterly 941 forms and annual 940 forms
• Year-end W-2 and 1099 generation and e-filing

Premium tiers include tax accuracy guarantees—if the provider makes an error, they cover penalties and interest.

Reputable payroll providers offer tax accuracy guarantees and penalty protection. If they make an error in calculations or filing, they'll:

• Cover IRS penalties and interest fees
• Handle all correspondence with tax agencies
• File amended returns at no cost
• Reimburse you for any financial losses caused by their error

Gusto, ADP, and Paychex all provide this protection on their full-service tax plans. Always verify this guarantee is explicitly included in your contract before signing up.

Note: This protection doesn't cover mistakes you make (like entering wrong wage amounts or misclassifying employees).

Yes—reputable payroll software stays updated with federal, state, and local labor laws. This includes:

• Minimum wage changes (federal, state, local)
• Overtime rules (FLSA compliance)
• Paid sick leave requirements
• New hire reporting
• Workers' compensation requirements
• Break time and meal period laws

Providers like Gusto and ADP have dedicated compliance teams that monitor regulatory changes and automatically update their systems. You'll also receive alerts about new laws affecting your business.

Yes—most platforms handle multi-state payroll by calculating state income tax, unemployment insurance, and local taxes for employees working in different states.

This is especially important for remote teams. The software will:

• Track which states each employee works in
• Calculate and withhold appropriate state taxes
• File state unemployment insurance (SUTA) in each state
• Handle reciprocal tax agreements between states
• Alert you to nexus requirements (when you need to register in a new state)

Gusto and Rippling excel at multi-state compliance. Note: Multi-state payroll often costs extra—ask about per-state fees.

Most payroll platforms support both W-2 employees and 1099 contractors in the same system.

For employees (W-2):

• Taxes are automatically withheld and filed
• Direct deposit or checks issued on regular pay schedule
• W-2 forms generated at year-end

For contractors (1099):

• No tax withholding (contractors responsible for their own taxes)
• Payment via ACH, check, or direct deposit
• 1099-NEC forms automatically generated at year-end

Gusto and Rippling make it easy to pay mixed workforces without separate platforms. Important: Misclassifying employees as contractors can lead to IRS penalties—consult a tax professional if unsure.

Yes—all modern payroll systems provide employee self-service portals where staff can:

• View and download current and past pay stubs
• Access W-2 and 1099 forms at year-end
• Update direct deposit information
• Change tax withholdings (W-4 elections)
• View PTO balances and request time off
• Update personal information (address, phone, emergency contacts)

This reduces admin burden (no more printing and distributing pay stubs!) and gives employees 24/7 access to their payroll information. Most platforms also offer mobile apps for on-the-go access.

Yes—most payroll providers offer mobile apps for iOS and Android that let you:

• Run payroll from anywhere
• Approve timesheets and PTO requests
• View payroll reports and labor costs
• Add new employees
• Process off-cycle payments (bonuses, corrections)

Gusto, ADP, and Paychex all have highly-rated mobile apps. Employees can also use mobile apps to clock in/out, view paystubs, and submit time-off requests.

Yes—most payroll software supports multiple pay frequencies:

• Weekly: 52 pay periods per year (common for hourly workers)
• Bi-weekly: 26 pay periods (every two weeks—most common)
• Semi-monthly: 24 pay periods (1st and 15th—common for salaried)
• Monthly: 12 pay periods per year

You can also set up different pay schedules for different employee groups—for example, hourly staff paid weekly and salaried employees paid bi-weekly. Some platforms like Gusto and Rippling support off-cycle bonuses and one-time payments outside regular payroll.

Yes—payroll systems can process tips, bonuses, commissions, and other supplemental wages with correct tax withholding.

Tips: Platforms like Gusto and Square Payroll are particularly good for restaurants and service industries where tip reporting is common. You can:

• Track declared tips vs. allocated tips
• Set up automatic tip pooling and distribution
• Handle credit card tip distribution
• Ensure FICA tip credit compliance

Bonuses & Commissions: Can be paid via regular payroll or off-cycle. The system applies supplemental wage tax rates (often withheld at a flat 22% federal rate).

Direct deposit electronically transfers wages from your business bank account to employees' bank accounts on payday via ACH (Automated Clearing House).

How it works:

• You approve payroll 2-3 business days before payday
• Payroll provider initiates ACH transfer
• Funds are debited from your business account
• Employees receive deposits on payday (usually by 9am)

Employees can split deposits across multiple accounts (e.g., 80% to checking, 20% to savings) and change banking info anytime in their self-service portal. Direct deposit is faster, more secure, and cheaper than paper checks.

Yes—most payroll software supports printing paper checks for employees without bank accounts or contractors who prefer checks.

You can:

• Print checks on blank check stock using a standard printer
• Order pre-printed checks with your company info
• Use check printing services where the provider mails checks to employees (Gusto offers this for ~$5/check)

Most businesses transition to direct deposit to save time and money, but paper checks remain an option for those who need them.

Standard payroll reports include:

• Payroll summary: Total wages, taxes, deductions per pay period
• Tax liability report: Amounts owed to IRS and state agencies
• Employee earnings: YTD wages, hours, PTO by employee
• PTO balances: Accrued, used, and available time off
• Workers' comp audit: Wages by job class for insurance
• Labor cost analysis: Payroll costs by department or project
• Payroll journal entries: For syncing with accounting software

Advanced platforms like Rippling and BambooHR offer custom report builders and data exports to Excel/CSV for deeper analysis.

Yes—most payroll platforms integrate seamlessly with QuickBooks, Xero, NetSuite, and other accounting software.

Popular integrations include:

• Automatic journal entry syncing: Payroll expenses flow into your GL automatically
• Expense tracking: Reimbursements and business expenses sync both ways
• GL account mapping: Map payroll categories to specific accounts
• Tax liability tracking: See what's owed in your accounting system

Gusto and Rippling offer particularly robust integrations with 100+ business tools including accounting, time tracking, benefits, and HR systems. QuickBooks Payroll obviously integrates natively with QuickBooks Online.

Yes—many payroll platforms include built-in time tracking or integrate with popular time clock systems.

Built-in time tracking:

• Gusto: Includes basic time tracking
• Rippling: Full-featured time & attendance
• BambooHR: Integrated time-off tracking

Popular integrations:

• TSheets (by QuickBooks)
• Clockify
• Toggl Track
• Deputy
• When I Work

Integrated time tracking automatically imports hours into payroll, calculates overtime, and reduces manual data entry errors. This is essential for hourly workforces.

Not necessarily—modern platforms are converging payroll with HRIS features.

Standalone payroll is fine if you:

• Have a small team (under 20 employees)
• Don't need advanced HR features (onboarding, performance reviews)
• Already use separate tools for HR tasks

Consider integrated HRIS/payroll if you:

• Have 20+ employees
• Want employee onboarding, document management, and compliance tools
• Need time tracking, PTO management, and benefits administration
• Want to reduce data entry by having one system of record

Platforms like BambooHR, Rippling, and Gusto combine payroll with HRIS features, saving time and reducing errors from duplicate data entry.

Switching payroll providers typically takes 2-4 weeks from start to finish.

Timeline:

• Week 1: Sign up, gather employee data, set up bank accounts
• Week 2: Import employee info, configure tax settings, add benefits/deductions
• Week 3: Test payroll run, train admins, notify employees
• Week 4: First live payroll run

Most providers offer free migration assistance and dedicated onboarding specialists who handle the heavy lifting. The best time to switch is at year-end or quarter-end to avoid mid-period tax complications.

Pro tip: Run parallel payroll (old and new systems) for one cycle to verify accuracy before fully committing.

You'll need to gather:

Employee information:

• Full names, addresses, SSNs, birth dates
• Hire dates and employment status
• Pay rates, pay schedules, and job titles
• W-4 tax withholding elections
• Direct deposit bank account info

Company information:

• EIN (Employer Identification Number)
• State unemployment insurance (SUTA) account numbers
• Workers' comp policy info
• Business bank account for payroll funding

Year-to-date payroll records:

• Total wages paid per employee
• Taxes withheld (federal, state, local)
• PTO accruals and balances
• Benefits deductions

Most new providers will provide a checklist and help you export this data from your old system.

Reputable payroll providers use bank-level security to protect sensitive employee and financial data:

• 256-bit SSL encryption: Data encrypted in transit and at rest
• Two-factor authentication (2FA): Required for admin access
• SOC 2 Type II compliance: Regular third-party security audits
• Role-based access controls: Limit who can see what data
• Regular backups: Data stored in secure cloud servers with redundancy
• IRS-authorized e-file status: Approved by government for tax filing

Look for providers with compliance certifications like SOC 2, ISO 27001, and GDPR (if you have international employees). Avoid providers without clear security documentation.

Most payroll providers offer multiple support channels:

Standard support:

• Phone: Available during business hours (some offer 24/7)
• Email: Responses typically within 24 hours
• Live chat: Real-time help (usually faster than phone)
• Knowledge base: Self-service articles and video tutorials

Premium support:

• Dedicated account manager: A single point of contact (usually for larger accounts)
• Priority phone lines: Skip the queue
• Onboarding specialists: Help with setup and training

Provider highlights:

• Gusto: Excellent chat support with fast response times
• ADP & Paychex: 24/7 phone support for urgent payroll issues
• Rippling: Responsive support but can be slower for complex issues

Look for platforms with robust knowledge bases and video tutorials—this helps you solve common issues without waiting for support.