Let’s get down to business. If you’re a business owner, you’ve likely used that phrase one or two times recently when meeting with a potential service provider or contractor. Ultimately, you could receive a great sales pitch: it’s everything you could have wanted and more, but what’s most important is what it costs. For most things, cost is the make-or-break. It’s no different when it comes to payroll services. Of course, when looking for a payroll provider, it can sometimes feel like buying a used car: you see one price, or maybe no price, but in reality, the real cost is hidden behind extra fees or services. As a business owner, this is the last situation you want to find yourself in, as the money you’re putting into your business is directly related to the money that you’re getting out of it.
At Payday HCM, we’re very familiar with the age-old problem of pricing. We receive plenty of questions from clients asking not only about how payroll service pricing tiers work in a general sense, but what kinds of things separate our service tiers as well. Some providers will intentionally make their pricing vague or hard to understand in order to disguise the true cost of their services before it’s too late. At Payday, we want to ensure that everyone understands what they’re getting and how much it costs, regardless of whether you’re our client or not.
That’s why, in this article, we’ll be going over the pros and cons of different payroll service pricing tiers. We’ll go over three different pricing levels:
- Pros and Cons: Free Payroll Services
- Pros and Cons: Mid-Tier Payroll Services
- Pros and Cons: Premium Payroll Pricing
For each, we’ll look at not only the benefits and disadvantages of each pricing tier, but also the kinds of things you can expect when going with services that fall into each pricing category.
Pros and Cons: Free Payroll Services
We'll start by going over the benefits and disadvantages of a free or free-tier of a payroll service and what you can expect from this pricing level.
Advantages of Free Payroll Services
Most payroll services are going to cost you some amount of money. Some providers, though, do offer a free tier of their payroll services. While what’s included in this service tier will vary by provider, most providers treat this tier as more of a trial or introduction to their services, with the assumption that, if you like what you see, you’ll opt for one of their paid tiers.
Obviously, the biggest advantage to going with the free tier of a payroll service is, well, it’s free—the cost can’t really get much lower than that. This option is really great for businesses that’ve either never outsourced their payroll before or are considering switching providers, as it can provide the opportunity to test out a provider’s service, potentially without any cost commitment.
Disadvantages of Free Payroll Services
As the age-old saying goes: nothing’s really free. While we don’t want to undermine the benefits of opting for the free tier of a payroll service, especially for small businesses that need to be especially cost-conscious, we also want to ensure you get the full picture. As said above, the free pricing tier of a payroll service is great for starting out or for trialing a provider—in the long term, free can quickly become costly in ways other than financially.
For starters, the free tier of any payroll service is likely the lowest tier of the services they offer. Therefore, you won’t have access to the full suite of services that the provider offers, likely just basic access to a payroll software and the ability to run payroll each pay period. On top of this, most free tiers have limited access to service or support options, often limiting you to online resources or automated chatbots.
The bottom line with the free tier of a payroll service is this: if you’re shopping around for a provider, whether you’ve never outsourced payroll or you're switching providers, the free tier can give you a better idea of whether that provider is a good fit for your business. In the long run, though, you’ll likely want to consider opting for a paid service tier so that you have access to a more complete suite of basic services as well as more comprehensive services.
Pros and Cons: Mid-Tier Payroll Services
Next, we’ll go over the advantages and disadvantages of opting for the mid-level payroll service tier and what you can expect at this price point.
Benefits of Mid-Tier Payroll Pricing
When we say mid-tier pricing, we’re largely referring to any service tier that is paid, but isn’t the top, most all-inclusive option. Usually, these options will be the first ones to offer more comprehensive service options when compared to something like a free service tier. At this price point, the distinction between providers becomes more important as different providers will offer different services at similar price points.
That being said, going with the mid-tier pricing level when outsourcing your payroll service is a great way to ensure you’re still receiving a large suite of services without paying for anything you might not use. You’ll also likely have better access to service and support options, including more dedicated support from customer service representatives.
Drawbacks of Mid-Tier Payroll Pricing
As implied by the name, mid-tier pricing is, well, in the middle: it’s neither great nor terrible. Ultimately, it has its advantages, but you may find yourself caught in the middle between two different options with more distinct advantages and disadvantages. That is to say, the free tier is more distinctly advantageous cost-wise but disadvantageous service-wise, as opposed to the premium option, which costs more but is more obviously advantageous service-wise.
At the mid-tier, while you often won’t have to risk paying more than you need to for payroll services, you still may find yourself lacking certain features or amenities. At the mid-tier, add-ons are common, meaning you may need to pay additional fees for services that may be included in something like a more premium tier.
Pros and Cons: Premium Payroll Pricing
Now that we’ve covered both the free and mid-tier of payroll service pricing, we’ll finish by going over the highest tier of service pricing and what you can expect at this price point.
Advantages of Premium-Tier Payroll Services
The cream of the crop. The crème de la crème. The top of the heap. The premium pricing level of payroll services is like the all-you-can-eat buffet of the payroll outsourcing world. Basically, at this price point, you’re moving away from an add-on fee model like in the mid-tier to a more all-inclusive model, paying one higher cost to receive a host of built-in features, some of which may extend into HR and benefits services.
At this price point, software is much more critical. When opting for a premium price point, the payroll software you’ll receive in return is likely to be much more comprehensive in what it can do. Not only this, but, like the mid-tier pricing level, you can also expect more dedicated service and support options. Premium price points are especially great for large businesses, as the software options at this level are typically built to scale.
Disadvantages of Premium-Tier Payroll Services
The premium-tier is sort of like the mirror reflection of the free-tier in terms of benefits and drawbacks: a full suite of service options at a high cost. Like the free-tier, the main drawback is the cost. Of course, if you pick the right provider, it’s more likely you’ll be getting what you pay for. Even still, it’s important to consider how the cost will play into your business’s budget.
With the premium tier, you also risk running into the issue of too much of a good thing. That is to say, you may find yourself paying for features that you don’t really use or need. Alongside this, the premium pricing tier brings about more risk in terms of the provider you select. At this price point, you’ll want to be certain that this provider fits your business’s needs. Otherwise, you risk paying too much for a service that doesn’t do what you need it to do.
Understanding Payroll Provider Pricing Doesn’t Have To Cost You
At the end of the day, it’s always about cost. You could be presented with the absolute best option for anything in the world, but if it costs too much, then what’s the point? When running a business, cost is likely at the forefront of your mind. This is for good reason: the cost of running a business almost solely determines the actual returns on your investment. This means that, when outsourcing payroll, you’ll want to find a provider at a price point that not only fits your budget but fits your needs as well. But with hundreds of different providers offering services at numerous different prices, it can be hard to know what’s going to be best for your business. With the information provided in this article, though, you’ll have a good road map for understanding provider pricing so that you can navigate the outsourcing process with ease.
When it comes to outsourcing payroll, there are several factors you’ll want to consider when selecting a provider. While all of these different factors are important, none is ultimately as decisive as price. How much a provider’s services will cost can make or break whether or not your business chooses one provider over another. It makes sense: if you’re just starting to outsource your payroll or if you’re switching providers, keeping costs down while keeping service high is likely one of your main priorities. But what kind of cost can you expect when outsourcing your payroll? Check out our article on the average cost of a payroll service provider to get a better sense of the kind of cost your business can expect.
Topics: