Everyone loves payday—except payroll managers. For small to medium businesses (SMBs), paying employees and contractors accurately and on time is the most complex part of accounting. It can also cost you stiff penalties with tax agencies if you get it wrong. PCMag has been reviewing small business payroll software for almost 20 years. The best payroll services do all the complicated math for you and send out paychecks at a reasonable price (typically less than $100 per month for a business with five employees). Three payroll services we've tested earn our Editors' Choice award: ADP Run for SMBs poised to grow quickly, Gusto for novice payroll managers, and OnPay for larger SMBs and those in vertical industries. Read on for all of our top picks, followed by how we evaluate the best payroll services.

How We Test Payroll Services

We test and review payroll services every year to help you pick the one that's right for your business. 

Specifically, we look at the payroll services we deem best for small businesses processing payroll for 10 workers or fewer—that's our sweet spot. (Of course, these applications can handle many more employees.) Then, we perform tests using sample payroll data. We also look at each payroll service's history, reputation, and security practices.

What Is a Payroll Service?

Online payroll services are web-based tools that process your organization's payroll and distribute the correct amount of money to employees every payday. They calculate and submit payroll taxes and filings and track other withholdings, such as for health insurance and retirement plans. These services are compliant with standard HR guidelines and best practices.

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How Much Does Payroll Cost for a Small Business?

Every payroll website we reviewed charges a base price, averaging around $40 per month, and a per-worker (employee or contractor) monthly charge of usually just a few dollars. Some, like Patriot Software and Gusto, have additional fees for some services.

Gusto is the most expensive. The version we reviewed, Gusto Plus, is $80 per month plus $12 per person per month, and you have to contact the company for pricing on its top-end Premium tier. ADP Run and QuickBooks Payroll are not far behind. To be fair, these applications have more depth and flexibility than the less expensive ones. Yet OnPay, one of our Editors’ Choice winners, gives you roughly comparable capabilities for about half the price.

Why Do You Need Payroll Software?

If you process payroll manually, you know it's a complex, deadline-driven, and exacting process. Your employees count on you to dispatch their paychecks and authorize direct deposits on scheduled paydays. They expect you to know how much to withhold for all the taxes they owe and the benefits you offer.

There's an enormous amount of detail to track, especially if you try to do it all on paper. Employees generally don't tolerate mistakes well, either. Tax agencies can assess stiff fines and other penalties if you don't get payroll filings and taxes on time, too. Benefits providers might cut off services such as health insurance if you fall behind on payments.

Payroll services help you process accurate and timely payday runs. They count on you to provide correct information about your payroll configuration and employees. And they won't let you complete a payroll if you're missing any required inputs. They make supporting data like employee profiles available while you're getting ready to pay your workers. They also offer special assistance and flexibility in areas like state registration and earnings types. Gusto can complete your state compliance requirements for you (for a fee), and OnPay is especially good at troubleshooting pay runs.

These services can save you an enormous amount of time. They minimize the frustration and headaches associated with payday. They promote goodwill with your employees because of their accuracy, flexibility, and timeliness. And they may even save you money you would otherwise pay in penalties.

What's the Cheapest Payroll Service?

The least expensive service is Patriot Software's Basic version. It costs $17 per month plus $4 per worker per month (Time & Attendance and HR Software cost extra). However, this version requires that you submit your payroll taxes and filings, a task that competitors take on themselves.

(Credit: Gusto/PCMag)

What Does Setting Up a Payroll Service Entail?

Though each payroll service has a unique user experience, they all share similar structures. They begin with the setup process, which is the most time-consuming and detail-oriented element of paying your staff. 

Though the exact order varies, some services walk you through pages of questions in a step-by-step fashion. Others provide partial setup wizards and leave the rest to you. These setup wizards ask for information about your company, such as your address and Employer Identification Number (EIN). You select your payroll schedule, which is usually weekly or biweekly, and you connect the application to your payroll bank account.

If your business offers employee benefits such as health insurance and retirement plans, you can create records that outline the cost to employees and any company contributions. The companies that provide payroll solutions like ADP Run and OnPay are themselves benefits brokers, while QuickBooks Payroll allows you to work with a third-party provider. These services then deduct the required amounts during the payroll process and submit them.

You must also create thorough records for each employee, with details such as contact information, date of birth, number of allowances from form W-4, salary or hourly pay rate, and Social Security number.

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If you've compensated employees in the past, you need to enter any existing payroll history. This process can be arduous and may require assistance from the site's onboarding specialists because absolute accuracy is critical. Some sites, like ADP Run, include tools to help automate this process.

If you offer additional payroll types like paid time off and sick pay, you can define your policies for accruing these benefits. The services then keep track of them for you. You can also pay bonuses and commissions during a regular pay run or issue them by creating an off-cycle payroll. Need to include garnishments like child support on paychecks? Payroll services can do that, too. Most also offer custom pay types, so you can create your own, sometimes even when you're in the middle of a pay run.

Once you complete the setup, you generally can't return to the dedicated setup tools, so it's essential to get it right the first time. That said, every payroll service we tested has a comprehensive settings section where you can modify and add to the payroll information you've already entered.

Setup takes time and may require you to consult many resources. But in the end, it allows you to run your payrolls so much faster than you could manually.

How Long Does Running Payroll Take?

Running payroll is the easy part. Though they differ in many ways, payroll services function similarly during the actual pay run. When you launch a payroll, they show you a list of employees (and possibly contractors; you may run them separately) and their pay rates. You first check to make sure the pay period and pay date are correct. After that, you simply enter the number of hours worked, where applicable, in the appropriate pay type boxes (regular, overtime, vacation, and so on) or import them. 

Every service has a way to import hours from time sheets or a time clock, which is more likely to be accurate than if you enter them manually. Sometimes, there’s an extra charge for this, like with ADP Run, which lets you turn a tablet into a time clock for punching in and out. Payroll software also lets you allocate funds for other earnings types and reimbursements on this same page.

After you enter all the necessary details, you preview your payroll. You can see each employee's gross and net pay, plus withholding for taxes and benefits, as well as any company contributions. The payroll service then shows you the total amount of money to be withdrawn from your bank account for direct deposits and taxes, as well as the exact date it will be debited. And it usually provides a link to checks that must be printed.

(Credit: Gusto/PCMag)

After you approve a payroll, your payroll service can generate additional tables or reports with the details of the pay run. Many allow you to edit, cancel, or void a payroll after you approve it but before a stated deadline.

If you have few employees or a very simple payroll, the process shouldn't take more than a few minutes. Depending on which service you use, you may be able to let payrolls process automatically (assuming there are no changes from the previous run). Some even offer same-day payroll and advances on paychecks.

Do Payroll Services Handle Benefits Administration?

In larger companies, separate departments usually handle payroll and benefits administration. In your small business, though, both of those responsibilities may land on your desk or that of another employee. There's so much overlap between payroll and HR that even if you're strictly running your payroll through a payroll service, you'll still be doing HR tasks.

Most of the payroll services we review offer basic HR components, such as document storage, document templates, online W-4 and W-9 forms, and new-hire reporting. We look primarily at each site’s payroll processing capabilities and consider additional HR support a bonus.

Can You Conduct Payroll on the Go?

It's possible to run a payroll from your phone, even though it’s easier to do so from a desktop or laptop. You can view employee records and sometimes reports. Some payroll services are accessible through mobile browsers, and others through dedicated apps. They don’t all replicate absolutely every feature of the desktop version, but some of them do.

As mentioned, you can invite employees to create login credentials and enter some of their personal information on their worker portal, either on the desktop or mobile app. In many cases, they can do much more than that, like punch in and out, request time off, see pay stubs, and view benefits.

Are Payroll Sites Safe?

The thought of using a payroll service may leave you wondering whether it's safe to put all your business's payroll data online. All the payroll services we review come from reputable companies with years or even decades of experience. They make every effort to keep your sensitive payroll data safe, as you can read about in our reviews.

Get All the Benefits of Payroll Apps

Using a payroll service has numerous advantages over running payroll manually, like greater accuracy and compliance, as mentioned earlier. They can save you an enormous amount of time and frustration and provide comprehensive access to current and historical payroll runs. There are really no downsides to paying your employees and contractors in this fashion.

For more small business tools, see our coverage of the best small business accounting software and the best CRM software.