Payroll Services for Small Business in 2025

It's Sunday night. You're still calculating overtime on a spreadsheet. Did you remember to account for the tip pool split? Is this the right state withholding rate? When's the quarterly tax deadline?

This is how most small business owners do payroll—until something breaks. A penalty notice arrives. An employee's paycheck is wrong. You realize you've been calculating overtime incorrectly for months.

Payroll services for small business exist to fix this. The real question: Which small business payroll services actually understand hourly teams?

This guide covers what payroll providers do (and what they should do but don't), the real cost beyond advertised pricing, how to spot services built for businesses like yours, and why most small businesses choose the wrong one.

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TL;DR: What you need to know about payroll services

Need the quick version? Here's what actually matters.

What payroll services do

Payroll processing for small business automates your most time-consuming tasks:

• Calculate wages, overtime, and deductions automatically
• Process direct deposits so your team gets paid on time
• File federal, state, and local taxes before deadlines
• Generate W-2s and 1099s without manual paperwork
• Maintain compliance records so you're audit-ready

Who needs payroll services

Any business with employees. IRS penalties and compliance requirements apply regardless of company size. Fixing mistakes costs more than preventing them.

What payroll services cost

Payroll providers for small business typically charge a base monthly fee plus a per-employee fee. Pricing structures vary widely.

Many providers add fees for year-end forms, off-cycle runs, and state filings that aren't included in advertised rates.

Homebase offers transparent pricing: $39 base + $6 per employee with everything included—tax filing, year-end forms, direct deposit, and support. No hidden fees.

Key decision factors

What matters when choosing online payroll services:

• Tax filing automation: Non-negotiable for peace of mind
• Integration with scheduling and time tracking: Prevents manual data entry errors
• Hourly workforce support: Tips, variable hours, overtime rules
• Transparent pricing: What you see is what you pay

The bottom line

DIY payroll means hours every pay period plus constant anxiety about tax deadlines and calculation errors. Small business payroll companies eliminate this stress while giving you your time back.

What is a payroll service for small business?

Think of payroll services as your behind-the-scenes accounting team—except most aren't actually built for teams like yours.

A payroll service for small business automates everything from wage calculations to quarterly tax filings. Payroll service providers handle the math, the deadlines, and the paperwork so you don't have to become a tax expert.

Core capabilities:

• Wage, overtime, and deduction calculations
• Direct deposit or check processing
• Federal, state, and local tax withholding
• Automatic payroll processing
• W-2 and 1099 generation
• Compliance record maintenance

Modern payroll services for small business include employee self-service portals, mobile apps, real-time tax law updates, and multi-state support.

The gap most providers miss: They handle salaried corporate employees perfectly. Hourly teams? That's where things break down.

Variable hours. Tip pooling. Split shifts. Shift differentials. Last-minute schedule changes. Most payroll companies for small business treat these as edge cases. For restaurants, retail, healthcare—these aren't edge cases. They're the entire business.

Online payroll services vs. traditional payroll

Three models exist:

Cloud-based software (QuickBooks, Square): You manage everything. Software automates calculations. You're responsible for accuracy.

Full-service providers (ADP, Paychex): They handle everything. Pricing is "call for quote" which means expensive. Built for 50+ employees.

Hybrid models (Homebase, Gusto): Software automation plus expert support. Transparent pricing. Built for 1-100 employees.

Why small business online payroll dominates: Access from anywhere, real-time updates, mobile-first, costs 50-70% less than traditional web based payroll services.

Can small businesses do payroll themselves?

Honest answer: Yes. Should you? No.

Manual payroll means tracking tax rate changes, filing quarterly returns on time, and generating compliant year-end forms. If you want to understand how to do payroll yourself, it's possible—but the time investment is substantial.

Reality check: One mistake triggers penalties. Payroll processing for small business costs $50-100/month and eliminates error risk entirely while saving hours weekly.

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Why your small business needs payroll services

You didn't start your business to become a tax expert. But somehow, every Sunday night, there you are.

Automated payroll saves time and improves accuracy

Most owners spend 5-8 hours per pay period on payroll processing. Calculating hours manually. Double-checking overtime. Preparing tax deposits.

With automated payroll: 15 minutes. Done.

Time savings matter. But getting your Sunday nights back matters more. No more panicking about whether you calculated taxes correctly. Just confidence that everyone gets paid right, on time, every time.

"Before Homebase I was manually tallying up my team's work hours and entering them into payroll, crossing my fingers I hadn't made any mistakes. Now our entire team logs in and out quickly and easily with the Homebase app, and all I have to do is send their hours to my payroll program with the click of a button." — Kathleen Smith, Founder, Smiling Tree Toys

Payroll tax compliance and penalty protection

The fear keeps you up at night: "Did I calculate the state unemployment tax correctly? Is this the right federal withholding rate? When is the quarterly tax deadline again?"

Payroll services for small business handle it all. Federal, state, and local tax filing. Changing tax rates. Quarterly deadlines. Year-end forms (W-2s, 1099s). Multi-state compliance. New hire reporting.

The math is simple: Average small business files 24 tax returns yearly. One mistake costs more than the entire payroll service.

Hourly workforce payroll benefits

Hourly workforce payroll isn't simple. Fluctuating hours. Overtime (daily vs. weekly). Tips and commissions. Tip pooling. Shift differentials. Last-minute schedule changes.

Traditional payroll companies treat these as problems. Smart payroll providers treat these as normal. Time tracking integration prevents hour mismatches. Tip management handles pooling and distribution automatically. Overtime tracking calculates without spreadsheets.

Restaurants. Retail. Healthcare. Home services. If "9-to-5" doesn't exist in your world, you need payroll built for reality. Restaurant payroll, in particular, demands systems that handle the unique challenges of tips, variable shifts, and high turnover.

Employee self-service and mobile payroll features

Your team wants answers now. When do I get paid? Where's my pay stub? How do I update my direct deposit?

Modern small business payroll services put answers in their hands. Employee self-service portals mean fewer interruptions. Mobile payroll app access means pay stubs at midnight. Digital tax forms mean no more "I lost my W-2" conversations.

Your team can also manage their time off requests directly.

Better yet: employees who see transparent financial information trust you more. Employees stay longer.

Your team expects this. Give them payroll services that match their expectations.

What to look for in a small business payroll provider

Most payroll service providers check the same boxes. Here's what actually matters for your business.

Essential payroll software features for small business

The basics you can't skip:

• Automated payroll runs. Set it once, done every time.
• Direct deposit. No more printing checks like it's 1995.
• Employee self-service portal. They get their own pay stubs. You stop answering the same questions.
• Mobile access. Run payroll from your phone. From anywhere.
• Federal and state compliance. Tax laws change. Good software updates automatically.
• Accurate overtime calculations. Daily and weekly. State-specific rules handled correctly.

For hourly businesses: Built-in time tracking isn't optional. Manual hour entry is where errors happen with payroll software for small business. Skip it, and you're asking for problems.

Tax filing and year-end compliance

Do payroll providers handle year-end tax forms for small businesses?

Here's what "yes" actually covers:

• W-2 generation for employees (delivered by Jan 31)
• 1099-NEC generation for contractors (delivered by Jan 31)
• Form 940 (federal unemployment) filing
• Form 941 (quarterly tax filing)
• State unemployment insurance filing
• Multi-state tax compliance when you operate across state lines
• New hire reporting to state agencies (an essential part of your hiring process)

Watch out: Some providers include everything. Others charge extra per form. Ask before you sign.

What you get: No manual year-end tax forms. No filing deadline panic. No penalty risk for missing deadlines.

Payroll integration with scheduling and time tracking

Here's the problem: Scheduling tool. Time tracking tool. Payroll system. Three separate systems. Two integrations. Mistakes everywhere.

What goes wrong:

Employee trades Tuesday for Thursday. Manager approves in scheduling. Time tracking maybe updates. Payroll definitely doesn't.

Employee works Thursday. Payroll processes Tuesday. Wrong person gets paid. You're fixing it manually while both employees wait for answers.

What works better: One system. Scheduling integration → time tracking payroll → payroll processing. Changes flow through automatically. No manual fixes. No angry employees.

Choose services with payroll integration built-in. Skip the integration headaches entirely.

Scalable payroll for growing businesses

Today:

• 5 employees
• One location
• Single state
• All W-2

Two years from now:

• 25 employees
• Two locations
• Three states
• W-2 and contractors

The wrong choice: Outgrow your payroll service providers. Switch mid-growth. Migrate data. Retrain everyone. Cross your fingers nothing breaks.

The smart choice: Scalable payroll that grows with you. Add employees, locations, states, contractors—same system handles it. Same pricing structure. Same interface. Zero migration pain.

Verify this matters: Multi-state support. Contractor payments. Multi-location payroll reporting. No forced "enterprise upgrade" when you hit arbitrary limits for growing business payroll.

How much do payroll services for small business cost?

Let's talk about what payroll actually costs—not what the homepage says it costs.

What you'll actually pay

Most providers advertise base plus per-employee pricing. Sounds simple. Reality isn't.

Homebase pricing:

Add payroll to any Homebase plan. First 6 months free. Then $39/month base plus $6 per employee.

Real monthly costs:

• 5 employees: $69/month
• 10 employees: $99/month
• 25 employees: $189/month

Includes tax filing, year-end forms, direct deposit, phone support, state filings, scheduling, and time tracking. Everything. No surprises.

Compare to doing it yourself:

Working on small business payroll taxes yourself can be a little risky.

• Your time: 5-8 hours every pay period. That's 130-208 hours yearly.
• Your hourly value: At $50/hour, you're burning $6,500-10,400 in opportunity cost.
• Accountant fees: $500-2,000/year.
• Error risk: One mistake wipes out everything you "saved."
• Software subscriptions: $240-600/year. Still requires manual work.

Watch for hidden fees

Other providers add surprise charges:

Year-end tax forms: $5-10 per W-2 or 1099. Ten employees? $100 annual surprise.

Off-cycle runs: $20-50 each. Bonus payment? $50. Correction? $50. Termination payout? $50.

State tax filing: $5-15 per state per quarter. Multi-state operations get expensive fast.

Setup fees: $50-200 one-time. Not mentioned until you sign up.

Direct deposit: Some charge $0-2 per deposit. Adds $50-200/year.

Premium support: Want phone support? That costs extra. Email-only is "free."

These extras add $500-1,000 annually. That $40/month service? Actually closer to $80/month.

Homebase includes everything at one flat rate. No hidden fees. No surprises.

Is it worth it?

Time saved: 130-208 hours yearly. At $50/hour, that's $6,500-10,400 back in your pocket.

Penalty avoidance: One tax mistake costs more than a year of service.

Annual cost: $800-3,200 depending on team size.

Return: 3:1 to 10:1. Most businesses break even within the first month.

Real value: Stop worrying. Start sleeping. Your Sunday nights back.

Best payroll services for small businesses in 2025

Every minute spent fighting with payroll is a minute away from your customers. We've tested the best payroll companies for small business to see which ones actually understand hourly teams—and which ones just claim they do.

Homebase payroll: Built for how you actually work

Perfect for: Anyone running a business where "9-to-5" doesn't exist

Look, we're obviously biased here. But there's a reason thousands of restaurants, retail shops, and service businesses chose us: we built Homebase payroll features specifically for hourly teams.

Your scheduling feeds your time tracking. Your time tracking feeds your payroll. Employee trades shifts? The change flows through automatically. Someone picks up an extra shift? Payroll knows. Tips get pooled and distributed? We handle the math.

One price. One system. No surprises.

Real talk from a real customer: Gerald Giles runs GG's BBQ and Catering in Virginia Beach with multiple locations. Before Homebase, he spent hours every week drowning in scheduling and payroll paperwork. Now? He runs payroll in minutes from his phone and his team manages their own schedules.

"It's made my life so much easier. I can focus on what I do best—cooking great BBQ and growing my business.” — Gerald Giles, Owner, GG's BBQ and Catering

Gusto payroll service: Good software, confusing pricing

Gusto makes solid software. Clean interface, good benefits marketplace, handles the basics well. But here's where things get tricky.

Their "Simple" plan ($49/month + $6/person) sounds affordable until you realize it doesn't include time tracking. Or multi-state payroll. Or next-day direct deposit.

Want those features? You need Plus. That's $80/month + $12/person. Suddenly that 10-person team costs $200/month instead of $109/month.

The Premium tier ($180 + $22/person) adds dedicated support and HR experts—great if you need that level of hand-holding. Expensive if you don't.

Bottom line: Gusto works well for mixed teams (hourly and salaried) who need benefits administration. Just make sure you're pricing the tier you'll actually need, not the one they advertise.

QuickBooks payroll software: Great if you live in QuickBooks

Already knee-deep in QuickBooks for accounting? Their payroll service integrates seamlessly. Your payroll data flows straight into your books without manual entry. That's the dream.

The catch? You're paying per-employee fees on top of your QuickBooks Online subscription. Core tier adds $6.50 per employee. Premium adds $10. Elite adds $12.

Elite also gives you tax penalty protection (up to $25,000) and same-day direct deposit. The lower tiers don't include either.

Here's the bigger problem: QuickBooks doesn't do scheduling or time tracking. You'll need separate tools for both. Which means manually transferring hours. Which is where errors happen. Which defeats the purpose of automation.

Bottom line: Perfect for accountant-run businesses who live in QuickBooks and don't need integrated scheduling. Everyone else should think twice.

ADP payroll: Enterprise features for small business prices (not in a good way)

ADP built their reputation serving Fortune 500 companies. Then they created ADP Run for small businesses. The problem? It feels like they scaled down enterprise software instead of building something simple from scratch.

You get robust compliance features. Multi-state support. Extensive HR add-ons. 24/7 support with actual HR expertise. All the bells and whistles.

You also get quote-based pricing with no published rates. When you call, they'll ask about your business, your needs, your growth plans. Then they'll quote you a price that's usually higher than you expected.

Most small businesses who switch from ADP tell us the same thing: "It was more complex than we needed and cost more than we wanted to pay."

Bottom line: Consider ADP if you're planning rapid expansion and need enterprise-grade compliance support. Skip it if you just want to pay your team without a PhD in payroll.

Paychex payroll service: The other enterprise option

Paychex sits in the same category as ADP. Big name. Enterprise roots. Multiple tiers (Select, Pro, Enterprise, HR Pro, HR PEO). Dedicated specialists. Comprehensive features.

Also like ADP: no published pricing. You request quotes for each tier. The final number often surprises business owners who expected something affordable.

The Flex platform packs serious power. Extensive reporting. Compliance libraries. Benefits administration. If you have 50+ employees and complex needs, Paychex handles it.

But if you have 10 employees and just need reliable payroll with scheduling and time tracking? You're paying for features you'll never use while navigating an interface built for complexity.

Bottom line: Paychex makes sense at scale. For most small businesses, it's overkill.

OnPay small business payroll: Straightforward and honest

OnPay does exactly what it says: payroll. No fluff, no upsells, no hidden fees.

$49/month + $6/person. That price includes federal, state, and local tax filing. Multi-state payroll. Year-end forms. Employee onboarding. Basic PTO tracking.

The interface is clean. The support is solid. The pricing is transparent.

Here's what you give up: scheduling and time tracking. OnPay is payroll-only. If you need those features, you're buying separate tools and hoping they integrate well.

For some businesses, that's fine. For hourly workforces where schedules change constantly and time tracking feeds payroll? That disconnect creates problems.

Bottom line: OnPay wins on transparency and simplicity. Just know you're building a tech stack, not using an all-in-one solution.

Payroll comparison: Why Homebase works differently

Most payroll providers started with salaried corporate employees and added hourly support as an afterthought. Homebase started with hourly teams and built everything around how they actually work.

The pricing difference:

Homebase costs $39 + $6/employee with everything included. 

• Gusto charges $49-$180 base depending on which tier has the features you need.
• QuickBooks adds per-employee fees to your existing subscription. 
• ADP and Paychex won't tell you the price until you're on a sales call. 
• OnPay matches our per-employee rate but you'll pay for separate scheduling and time tracking.

The integration difference (Homebase vs Gusto and others):

We built scheduling, time tracking, and payroll as one system. Not three tools that integrate. One system where changes flow through automatically.

Employee trades Tuesday for Thursday? Payroll knows. Someone picks up an extra shift? Hours update automatically. Manager approves overtime? It's already in the system.

Other providers? You run payroll in one tool, scheduling in another, time tracking in a third. Then you manually connect everything and hope nothing breaks.

The hourly workforce difference:

Tip pooling. Split shifts. Variable hours. Daily overtime in California and weekly overtime everywhere else. Shift differentials. Last-minute changes.

These aren't edge cases for us. They're the entire business. We built every feature around these realities.

Most providers treat hourly teams as a checkbox feature. We treat them as the only thing that matters.

The honest answer:

If you run a corporate office with salaried employees on fixed schedules, any of these providers work fine.

If you run a restaurant, retail shop, healthcare facility, or service business where schedules change daily and "9-to-5" doesn't exist? Most providers will frustrate you with workarounds and manual fixes.

We built Homebase for the second group. That's why our payroll works differently.

How to choose the right payroll service for your business

Here's what usually happens: You Google "payroll services." You click three websites. They all look the same. You pick the one with the lowest advertised price. Six months later, you're frustrated and looking again.

Most businesses choose payroll under pressure—tax deadlines looming, employees asking about direct deposit, no time to research properly. Sales reps sell you on features you don't need while skipping questions that actually matter.

Better approach: Spend 10 minutes on payroll evaluation now. Save yourself months of frustration later.

What actually matters when choosing the best payroll service for small business

Forget the feature checklists. Here's what determines whether payroll works or becomes another headache:

Does it match your team structure?

If you have hourly workers with variable schedules, you need integrated time tracking and scheduling. Not bolt-on integrations. Not manual hour entry. Actual integration where schedule changes flow to payroll automatically.

Does the pricing make sense for your size?

Most payroll selection criteria focus on features. Smart businesses focus on total cost at their size.

Calculate the real monthly cost: base fee + (per-employee fee × your team size) + any required add-ons.

Who pays when they screw up?

Ask every payroll provider directly: "If you make a tax filing error, who pays the IRS penalties?"

Some providers guarantee accuracy and cover penalties. Others make you pay for their mistakes.

Can you actually talk to someone?

"24/7 support" often means "24/7 email ticketing system with 48-hour response times." Ask about phone support specifically. When payroll breaks at 9 PM the night before payday, you'll care about this.

Red flags that mean keep looking:

Sales rep won't give you actual pricing without a "demo call"? They're hiding something expensive.

They keep saying "most customers upgrade to our premium plan"? The plan they're selling you is insufficient.

Can't get straight answers about what's included? You'll get surprise bills later.

Why Homebase is built for small business payroll

Most payroll services were built for enterprise customers, then scaled down. Homebase was built for you from the start.

Everything you need for small business payroll

One simple system for scheduling, time tracking, and payroll. Built-in compliance tools and team communication. Mobile-first design with clear, transparent pricing.

Payroll integration eliminates costly errors

Here's what goes wrong without integration: Employee swaps Tuesday for Thursday. You approve the change in your scheduling app. Employee works Thursday. Your time tracking sees it.

But your payroll system? Still thinks they worked Tuesday. Wrong person gets paid for Thursday's shift.

Now you're explaining the mistake to two frustrated employees. Running a correction through payroll. Paying extra fees for the off-cycle run. All because three separate systems don't talk to each other.

With scheduling and payroll integration, the change flows through automatically. Employee swaps shifts, hours update, payroll knows. No manual fixes. No copying data between systems. No awkward conversations about wrong paychecks.

This is how you maintain payroll accuracy without losing your mind.

Get started with Homebase

Ready to make payroll easier? Start a free trial today. No credit card required.

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Frequently asked questions about payroll services

What's included in a small business payroll service plan?

Standard payroll service plans include automated payroll runs, direct deposit processing, federal and state tax filing, W-2 and 1099 generation, and employee self-service portals. Premium plans add multi-state support, same-day direct deposit, HR assistance, and scheduling or time tracking integrations.

What's often missing from advertised plans: year-end form delivery, off-cycle payroll runs, state-specific filings, and phone support. Many providers charge separately for these essentials. Homebase includes everything in one transparent price.

Do payroll providers handle year-end tax forms for small businesses?

Yes, most payroll providers generate year-end tax forms, but how they deliver them varies significantly. Full-service providers handle W-2 generation for employees, 1099-NEC forms for contractors, IRS and state agency filing, and delivery to employees by January 31st.

Verify before signing: some providers charge $5-10 per form. Others include electronic delivery but charge extra for paper copies. Homebase includes all year-end forms with no per-form fees.

Which payroll service providers offer flat monthly pricing for small businesses?

Homebase offers true flat-rate pricing at $39 base plus $6 per employee with everything included—tax filing, year-end forms, direct deposit, and support. Square Payroll charges $35 plus $6 per employee but works best with Square POS systems.

Watch out for "starting at" pricing models. QuickBooks advertises low base rates but requires expensive tier upgrades for tax protection. ADP and Paychex use quote-based pricing that typically runs 2-3× initial estimates once you add features small businesses actually need.

Are there flexible payroll services for hourly and salaried staff?

Yes, all modern payroll services handle both hourly and salaried employees. The real question is how well they handle hourly workforce complexity.

Hourly-specific features to verify: multiple wage rates per employee, automatic overtime tracking with state-specific rules, tip reporting and pooling, shift differential calculations, variable weekly hours, and integration with time tracking.

Homebase was built specifically for hourly teams. Salaried employees are supported, but our focus stays on businesses where schedules change constantly and "9-to-5" doesn't exist.

What payroll software works best with Homebase?

Homebase includes payroll built directly into the platform. Your scheduling feeds time tracking, which feeds payroll automatically. No integrations to set up or maintain.

Changes flow through the system without manual data entry. If you're using Homebase for scheduling and time tracking but need external payroll, you'll lose the seamless integration that prevents most payroll errors.

How do I choose a payroll service for my small business?

Start by understanding your team structure and needs. Do you have hourly workers with variable schedules? You need integrated time tracking and scheduling, not bolt-on solutions.

Calculate total monthly costs including all required add-ons, not just advertised base rates. Ask directly: "If you make a tax filing error, who pays the IRS penalties?" Verify what's included versus what costs extra.

Can a small business do payroll themselves?

Yes, you can handle payroll manually, but it rarely makes financial sense. DIY payroll means tracking quarterly tax rate changes, filing returns on time across multiple jurisdictions, generating compliant year-end forms, and staying current with wage-hour law changes.

One IRS mistake costs more than a year of payroll service. Payroll services cost $50-100 monthly and save 5+ hours weekly. The math makes the decision for you.