In-house payroll vs outsourcing: what each really costs
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Outsourcing payroll to a full-service provider costs $87 to $400 a month for 10 employees on the plans with published prices (Patriot Full Service to Gusto Premium, pricing pages checked October 16, 2026), while keeping it in-house costs $0 to $57 a month in software for the same team plus the staff hours it takes, which only you can price.
Outsourcing moves the work but not, in most cases, the legal duty: the tax liability stays with your company unless you use an IRS-certified PEO. So the real comparison is your staff time and error risk against a monthly fee and a provider's written guarantee.
In-house payroll means your own staff calculate pay, deposit payroll taxes and file the returns, by hand or with software that only calculates; outsourced payroll means a provider or PEO handles the deposits and filings for a fee.
On this page
- The short answer
- Four ways to run payroll, from fully in-house to fully outsourced
- What in-house payroll costs: a formula you fill in
- Break-even: when outsourcing pays for itself
- Outsourced payroll prices at 10, 25 and 50 employees
- Payroll providers by score
- Risks of each: what can go wrong in-house and outsourced
- Exit terms: how hard it is to bring payroll back in-house
- Which one fits you
- Common mistakes when deciding
The short answer
Bottom line: Full-service payroll software costs less than doing it in-house whenever the deposits and filings would take you more hours a month than the fee gap divided by your hourly cost. For 10 employees on Patriot, that gap is $30 a month. Keep payroll in-house if you have a trained payroll person, very simple payroll, or need control a provider will not give you. Work out your own break-even below.
- Outsourced, 10 people
- $87 to $400 a monthpublished full-service plans
- In-house software, 10 people
- $0 to $57 a monthby hand, or Patriot Basic
- Who owes the tax
- Youunless the provider is a CPEO
- ADP and Paychex
- No published pricesquote only
Four ways to run payroll, from fully in-house to fully outsourced
| Model | Who calculates | Who deposits and files | Who is liable | Monthly fee, 10 people |
|---|---|---|---|---|
| In-house by hand | Your staff, with IRS tables | Your staff | You | $0 |
| In-house with calculate-only software (Patriot Basic) | Software | Your staff | You | $57 |
| Outsourced full-service software | Software | The provider | You | $87 to $400 |
| Outsourced to a PEO (Justworks PEO Basic) | The PEO | The PEO, under its tax ID | The PEO for federal employment tax, if it is a CPEO | $790 |
Prices: Patriot, Gusto and Justworks pricing pages, checked October 16, 2026. Liability: 26 USC 3511(a). The PEO fee covers HR and benefits administration as well as payroll.
Even with full-service software you still enter hours, approve each run and keep the bank account funded. A PEO goes further and co-employs your staff; see PEO vs payroll service and PEO vs ASO if that is on the table.
What in-house payroll costs: a formula you fill in
We do not guess how long payroll takes you, because it ranges from minutes for two salaried staff to days for a multi-state hourly team. Fill in your own numbers:
| Line | What to enter |
|---|---|
| H: hours per payroll run | Collecting hours, entering changes, checking, approving, paying |
| P: payroll runs per year | 52 weekly, 26 biweekly, 24 semimonthly, 12 monthly |
| F: hours per year on filings | Deposits, four Forms 941, four sets of state wage reports, Form 940, W-2s and W-3, 1099s, new hire reports, local taxes |
| R: hourly cost of the person doing it | Their pay plus employer taxes and benefits, per hour (or your own time's value) |
| S: software per month | $0 by hand; Patriot Basic $17 + $4 per worker |
| Monthly in-house cost | ((H x P) + F) / 12 x R + S |
Patriot price checked October 16, 2026. Deposit and filing frequency: IRS Topic 757 and employment tax due dates.
The filing line is the one people underestimate. A monthly depositor makes 12 federal deposits a year by the 15th of each following month; a semiweekly depositor makes one after every payday. Add state unemployment and withholding filings, and any city or school district tax in states such as Pennsylvania and Ohio. Each employee's full cost, taxes included, is in the employee cost calculator.
Break-even: when outsourcing pays for itself
Take the outsourced fee, subtract the software you would buy anyway in-house, and divide by R. That is the number of staff hours a month the provider has to save for outsourcing to cost less.
| Comparison | Outsourced | In-house | Monthly gap | Break-even hours a month |
|---|---|---|---|---|
| Patriot Full Service vs Patriot Basic | $87 | $57 | $30 | $30 / R |
| Square Payroll vs by hand | $95 | $0 | $95 | $95 / R |
| Gusto Simple vs by hand | $109 | $0 | $109 | $109 / R |
| Gusto Plus vs Patriot Basic | $200 | $57 | $143 | $143 / R |
List prices for 10 employees, one state, from each pricing page, checked October 16, 2026.
Example of the math: if R is $40, Patriot Full Service pays for itself once its filings save you more than 0.75 hours a month ($30 / $40). Replace $40 with your own figure. The fee comparison leaves out penalty risk, which only points one way: errors cost more when you have no provider guarantee to claim against.
Outsourced payroll prices at 10, 25 and 50 employees
| Provider and plan | Base + per person | 10 | 25 | 50 |
|---|---|---|---|---|
| Patriot Full Service | $37 + $5 | $87 | $162 | $287 |
| Roll by ADP | $39 + $5 | $89 | $164 | $289 |
| Square Payroll | $35 + $6 | $95 | $185 | $335 |
| Wave Payroll | $40 + $6 | $100 | $190 | $340 |
| Gusto Simple (one state) | $49 + $6 | $109 | $199 | $349 |
| OnPay | $49 + $6 | $109 | $199 | $349 |
| Justworks Payroll | $50 + $8 | $130 | $250 | $450 |
| QuickBooks Payroll + Simple Start | $88 + $6.50 | $153 | $250.50 | $413 |
| Gusto Plus | $80 + $12 | $200 | $380 | $680 |
| Gusto Premium | $180 + $22 | $400 | $730 | $1,280 |
| ADP RUN Essential (third-party estimate) | $79 + $4 | $119 | $179 | $279 |
Math: base + (per-person fee x headcount), before add-ons and promotions. Source: each vendor's pricing page, checked October 16, 2026 (Roll by ADP: rollbyadp.com/pricing). ADP RUN is quote only; the estimate is from tech.co (updated January 7, 2026, from user reports), and Fit Small Business reported a different quote in May 2025. Paychex publishes no prices, and the only third-party Paychex figure we found is for an older plan.
Some larger companies run payroll in-house on HCM software instead. Those vendors quote only. Third-party estimates: Paylocity at $18 to $22 per employee per month for core payroll and HR (OutSail, July 24, 2026), and Paycom at $4 to $6 per employee per pay run (Fit Small Business, July 7, 2026), which for 50 employees paid biweekly is $433.33 to $650 a month (50 x $4 x 26 / 12, and 50 x $6 x 26 / 12). More detail is in payroll service cost by headcount.
Payroll providers by score
Scores follow our published criteria: price transparency and cost, tax filing guarantee, contract and exit terms, and documented complaints. See how we score providers.
| Provider | Score | 10 employees, cheapest full-service plan |
|---|---|---|
| Patriot Software | 69 | $87 |
| Gusto | 69 | $109 |
| OnPay | 67 | $109 |
| Wave Payroll | 64 | $100 |
| SurePayroll | 56 | $99 or $109 (page shows both a $29 and a $39 base, + $7 per worker) |
| Square Payroll | 55 | $95 |
| QuickBooks Payroll | 52 | $153 |
| Justworks Payroll | 42 | $130 |
| ADP RUN | 32 | Quote only |
| Paychex Flex | 25 | Quote only |
Scores as of October 17, 2026. Prices from vendor pricing pages, checked October 16, 2026.
Patriot Software
Full Service is $37 plus $5 per worker, and you can start on Basic ($17 plus $4) and file yourself, then switch. Each extra state is $12 a month.
How the score adds up
- Price25/25
- Tax filing10/20
- Features8/20
- Contract and exit15/15
- Support5/10
- Complaints record6/10
Gusto
Simple is $49 plus $6 per person for one state; Plus ($80 plus $12) adds multi-state, time tracking and next-day pay. Month-to-month, cancel in the app.
How the score adds up
- Price23/25
- Tax filing14/20
- Features10/20
- Contract and exit12/15
- Support9/10
- Complaints record1/10
The full list is in best payroll software for small business.
Risks of each: what can go wrong in-house and outsourced
In-house: what goes wrong
- Every deposit and filing error is yours, with no guarantee to claim against.
- Deposit schedules trip people up: semiweekly depositors pay within days of each payday, and $100,000 owed on any day must go in the next business day.
- One person often holds all the payroll knowledge; when they leave or are out, payroll stops.
- A new remote hire in another state means new registrations you have to find and file.
Outsourced: what goes wrong
- The tax liability is still yours unless the provider is a CPEO. Guarantees are narrow: Gusto needs the agency notice 30 days before the response date; QuickBooks covers penalties only on Workforce Elite, up to $25,000 a year.
- Prices rise. An ADP customer reported an increase of "more than 10% without any notice" despite a promised freeze (Trustpilot, October 1, 2026). A QuickBooks user with 15 to 20 employees said payroll went from $1,566 in 2022 to $2,210 in 2025 (QuickBooks Community, April 2026 reply).
- Billing after cancellation: a Paychex customer said they got a cancellation confirmation and then a bill some time later (Trustpilot, October 13, 2026).
- Payrolls held when funding misses the cutoff.
The tax side of both is covered in the payroll compliance checklist and 2026 payroll taxes.
Exit terms: how hard it is to bring payroll back in-house
| Provider | How to cancel | Records after you leave |
|---|---|---|
| Gusto | In the app; takes effect immediately; full month billed after the 5th | Limited read-only access for admins; $100 federal, $100 per state and $5 per form if Gusto files final returns |
| Patriot | In settings; ends the day you submit; billed in arrears | View and download reports, 941s and W-2s; workers keep lifetime access |
| QuickBooks | In settings; ends at the end of the billing period | Payroll data for one year; $150 for year-end filings after cancel |
| Wave | In settings, any time | No payroll data access after the end of the month |
| ADP RUN | 30 days' written notice; agreement auto-renews | ADP "may keep" reports for a period not stated |
| OnPay | 30 days' written notice | Not stated in the terms |
| Paychex | Not published; the 2026 promotion needs a one-year agreement and free months are clawed back on early exit | Not published |
Sources: Gusto, Patriot, QuickBooks and Wave help pages; ADP RUN terms (effective Feb 12, 2026); OnPay terms of service; Paychex small business payroll page. Checked October 16, 2026.
Before you leave any provider mid-year, read the payroll mistakes guide on switching: missed quarterly reports are how SUTA rates jump.
Which one fits you
| Situation | Lean toward |
|---|---|
| 1 or 2 salaried employees, one state, you know payroll | In-house, or calculate-only software |
| Hourly staff, tips or overtime | Outsourced full-service software |
| Employees in more than one state, or local wage taxes | Outsourced, on a plan that includes multi-state |
| A trained payroll person on staff and 50+ employees | In-house team on HCM software, or outsourced; get quotes for both |
| You also need health benefits and HR help | A PEO; see the best PEOs and PEO cost |
Setting up either way follows the same steps in how to set up payroll.
Common mistakes when deciding
- Counting only the software fee and not your hours, or not the deposit and filing work.
- Assuming outsourcing transfers liability. It does only with a certified PEO.
- Choosing a single-state plan and then hiring in a second state.
- Signing a one-year agreement for a promotion without reading the clawback.
- Bringing payroll back in-house mid-quarter without year-to-date wages and the state accounts ready.
- Not downloading records before canceling.
Frequently asked questions
Is it cheaper to do payroll in-house or outsource it?
What does in-house payroll cost?
Does outsourcing payroll transfer tax liability?
How much does it cost to outsource payroll for 25 employees?
What are the risks of outsourcing payroll?
When should a business bring payroll in-house?
Sources (28)
- Patriot Software: Payroll pricing (checked Oct 16, 2026)
- Patriot Software: Cancel your Patriot subscription (checked Oct 16, 2026)
- Gusto: Gusto pricing (checked Oct 16, 2026)
- Gusto: Cancel your company's Gusto account (checked Oct 16, 2026)
- Gusto: Payroll terms (Section 11) (checked Oct 16, 2026)
- Square: Square Payroll pricing (checked Oct 16, 2026)
- Wave: Wave Payroll (checked Oct 16, 2026)
- Wave: Cancel payroll (checked Oct 16, 2026)
- OnPay: OnPay pricing (checked Oct 16, 2026)
- OnPay: Terms of service (checked Oct 16, 2026)
- Justworks: Justworks pricing (checked Oct 16, 2026)
- Intuit QuickBooks: QuickBooks Payroll pricing (checked Oct 16, 2026)
- Intuit QuickBooks: Tax Penalty Protection (checked Oct 16, 2026)
- Intuit QuickBooks: Cancel your QuickBooks Payroll subscription (checked Oct 16, 2026)
- SurePayroll: SurePayroll pricing (checked Oct 16, 2026)
- ADP: Roll by ADP pricing (checked Oct 16, 2026)
- ADP: RUN terms of service (checked Oct 16, 2026 (effective Feb 12, 2026))
- tech.co: ADP pricing guide (third-party estimate) (updated Jan 7, 2026; read Oct 16, 2026)
- Fit Small Business: ADP RUN review (third-party estimate) (updated May 22, 2025; read Oct 16, 2026)
- Paychex: Small business payroll (checked Oct 16, 2026)
- OutSail: How much does Paylocity cost in 2026 (third-party estimate) (Jul 24, 2026; read Oct 16, 2026)
- Fit Small Business: Paycom review (third-party estimate) (updated Jul 7, 2026; read Oct 16, 2026)
- IRS: Topic 757, Forms 941 and 944: deposit requirements (checked Oct 16, 2026)
- IRS: Employment tax due dates (checked Oct 16, 2026)
- Cornell LII (statute text): 26 USC 3511 (checked Oct 16, 2026)
- Trustpilot: ADP reviews (read Oct 16, 2026)
- Trustpilot: Paychex reviews (read Oct 16, 2026)
- QuickBooks Community: Price increase 2025 thread (read Oct 16, 2026)
This page is general information, not tax, legal or accounting advice. Rules and rates change, so check the official source linked above before you file or sign a contract. Read our disclaimer.