How Much Do Payroll Services Cost for Small Businesses

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How Much Do Payroll Services Cost for Small Businesses

Every business with employees needs to run payroll. While many small business owners start off doing payroll themselves, compliance and accuracy concerns can make it a tricky process. 

Not only are payroll tasks frequently time-consuming, the payroll mistakes can also prove costly in terms of audit penalties and employee turnover. Research suggests, for example, that 49% of workers will start a new job search after just 2 paycheque problems. 

A qualified payroll professional is the key to avoiding penalties and ensuring you pay your employees accurately and on time.

It’s a good idea, however, to compare the pros, cons, and payroll costs attached to:

  • Hiring an in-house payroll administrator, vs
  • Outsourcing to a payroll service provider 

Before we examine how much payroll services cost for small businesses, let’s find out exactly what payroll professionals do.

What are the responsibilities of payroll personnel?

Payroll personnel are responsible for ensuring your employees get paid correctly and at the right time, and that the payroll deductions are remitted to the CRA and other authorities. 

Typical payroll tasks include:

  • Recording employee timesheets
  • Performing payroll tax calculations on wages, vacation pay, termination pay, and banked time
  • Calculating employer health tax and work-safe (WCB)/WSIB filings
  • Withholding employee deductions and making government remittances
  • Processing direct deposits or paycheques for hours worked
  • Submitting T4s for employee income tax filing 
  • Issuing ROEs (record of employment) for exiting employees 
  • Preparing bookkeeping entries

Benefits administration, RRSP matching, and other human resources services might also fall under the umbrella of payroll responsibilities, especially if deductions are involved.

If you have employees in different provinces, meanwhile, your payroll personnel must ensure that wages, taxes, vacation days, and employment termination payments are made according to the regional requirements where your employees are based. 

Ideally, the payroll professional you hire will have Payroll Compliance Practitioner (PCP) certification that ensures they’re well-versed in payroll legislation, and capable of keeping your organization compliant. 

A word about DIY payroll solutions

You may be able to cut costs using dedicated accounting software to do payroll yourself (or having your office manager or bookkeeper do it). But as your team grows, the process can get increasingly complex.

Common DIY payroll mistakes include:

  • Miscalculating pay. Not only are physical timesheets prone to human error, there’s a lot of payroll data to track (think time and attendance, vacation pay, overtime, and commissions) and each province has its own payroll policies.
  • Misclassifying employees. Contractors, for example, are usually responsible for their own payroll deductions and require T4As instead of T4s.
  • Missing payroll deadlines. To ensure employees are paid on time - and avoid remittance penalties and late fees - payroll must be processed several days in advance, so banks have ample time to process direct deposits.

Remember: your employees count on timely pay runs and accurate pay amounts to meet mortgage withdrawals and other financial commitments.

The best way to avoid payroll errors and delays is to hire PCP-certified personnel or outsource payroll to an established payroll company. 

So, how much do payroll services cost for small businesses like yours? Let’s find out.

Hiring an in-house payroll administrator

Hiring a full-time PCP or experienced payroll specialist will keep your organization up to date on the latest payroll legislation.

Payroll administrators can be costly, however, and hiring a full-time payroll administrator might not make financial sense if your business has fewer than 100 employees. 

Depending on job scope and experience level, the average annual salary of a full-time, experienced PCP in Canada is about $65,000. On top of their salary, you can also expect additional fees of about 10% to cover overhead costs like IT equipment, benefits, and payroll deductions

Pros of hiring an in-house PCP:

  • Accurate payroll calculations
  • Up-to-date knowledge about the latest legislation 
  • Your organization remains payroll compliant

Cons of hiring an in-house PCP:

  • Additional headcount may not represent the best value for a growing business
  • Managing an additional employee increases overhead
  • An abrupt departure could mean scrambling to get payroll done properly until a replacement is hired
  • Backup staff must be trained to cover payroll in the event of an unexpected departure or extended vacation

Outsourcing to a payroll service provider

Online payroll services are usually more cost-effective than hiring in-house personnel. Plus, payroll providers typically have PCPs and experienced specialists on their team who can both perform payroll tasks and help you navigate tricky compliance issues. 

Most payroll service providers charge a one-time onboarding or base fee for any payroll software or time tracking apps, followed by a monthly recurring fee based on number of employees and scope of engagement. 

At Enkel, for example, our monthly recurring fee starts at $150-200 for 5 employees (depending on payroll complexity). 

Pros of outsourcing to a payroll provider:

  • Access to PCPs and experienced payroll professionals who are well-versed in compliance and upcoming legislative changes
  • Won’t add to team headcount
  • Scalable to meet growing payroll needs
  • Eliminates dealing with payroll personnel turnover, training, or vacation coverage
  • Reduces risk of payroll fraud

Cons of outsourcing to a payroll provider:

  • Less payroll submission flexibility (professional payroll providers usually have stringent submission deadlines to ensure pay runs are processed in enough time for funds to be disbursed) 

When you’re growing a business, payroll is one area where you can’t afford to perform tasks incorrectly. If you can’t justify the cost of hiring in-house to ensure you have competent, fully trained personnel on your side, outsourcing to a proven payroll service provider is a safe and cost-effective option. 

At Enkel, we provide accurate, on-time, hassle-free payroll processing to businesses across Canada. So, if you’re thinking about offloading your payroll, let's talk! Get in touch with us today to learn more.

Gracia Chua
About Gracia Chua
Gracia Chua is the Marketing Specialist at Enkel Backoffice Solutions, a Vancouver based accounting firm that provides day-to-day bookkeeping services for small to medium-sized businesses and non-profit organizations.