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Online payroll: more options, more affordable

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in Leaders & Managers,Management Training,Small Business Tax,Small Business Tax Deduction Strategies

If you're still handling payroll yourself, you know it's time consuming and prone to errors. So here's some good news: A new crop of online payroll services are popping up and—no coincidence—the costs are dropping fast.

Reasons for the new competition: cheaper technology, plus the small business sector remains a fertile market for those vendors. Fewer than 25 percent of small businesses outsource their payroll, according to the American Payroll Association.

How it works: Payroll information transmits via the Internet. Paychecks are then directly deposited into employee accounts.

Advantages: reduced costs, less paperwork, added security and fewer mistakes. Downsides: new expenses, reliance on computers and training needed.

Many basic services cost less than $50 per pay period. Add-on features, such as benefit management, data collection and tax filings, often cost more. Here are four examples:

1. Fiducial ( created a Web-based processing center that handles small business payroll. Costs start at $40.80 per pay period for a biweekly payroll of 10 employees.

2. Perquest ( is now available to California companies and will expand nationwide starting in January. Cost: $49.95 per month, plus $4.95 per employee each month.

3. PayCycle ( services start at $19.99 per month for up to five employees and 99 cents for each additional worker.

4. Sam's Club ( offers online payroll as part of a small business membership benefits package. Pay up to 40 percent less than the average cost of online payroll processing.

Several banks also offer online payroll services, including Chase Manhattan (, Wells Fargo ( and Fleet ( Community banks are joining the competition, as well. But be leery of banks' prices. Many banks use third-party payroll services and compensate them for partnerships or the right to use brand names.

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