Best payroll and PEO for startups

What a startup needs from payroll

Payroll, 10 people

$87 to $130 a monthPatriot, Gusto, OnPay, Justworks list prices

PEO, 10 people

$790 to $1,240 a monthJustworks PEO Basic or Plus

One hire abroad

$459 to $699 a monthEOR fee, four providers below

Credits under a CPEO

Stay with youincluding the research credit

Startups ask payroll to do five things that a 10-person shop down the street may not need:

1. Benefits good enough to hire against bigger companies. This is the main reason founders pick a PEO.
2. Remote employees in several states. Each new state means withholding and unemployment accounts.
3. Equity. Option exercises and vesting can create taxable wages that run through payroll.
4. The R&D payroll tax credit. Qualifying startups can use part of the research credit against payroll taxes.
5. Hires outside the US. Neither payroll software nor a PEO can employ someone abroad; that takes an employer of record (EOR) or a contractor setup.

The three routes are payroll software plus a benefits broker, a PEO, and an EOR for anyone abroad. Most funded startups end up using two of them.

Payroll software picks for startups

Ordered by our payroll score out of 100 (see how we score). Full rankings are in best payroll software.

PEO picks for startups

Ordered by our PEO score out of 100. Full list in best PEO companies.

Also aimed at startups, with lower scores because they publish little: Amplify HR Management (23/100) serves teams of 1 to 10 in tech and healthcare; Sequoia One (17/100) pairs a PEO with benefits brokerage and equity advisory for investor-backed companies; Rippling PEO (11/100) suits teams already on Rippling, which offers its platform free for 6 months to eligible VC-backed startups but publishes no PEO price and was not found under its own name on the IRS CPEO list. See Rippling PEO review and Rippling vs Justworks.

Cost for a 10-person startup

On Justworks' own prices, the PEO costs $7,920 a year more than payroll on Basic ($9,480 minus $1,560) and $13,320 more on Plus ($14,880 minus $1,560). It is worth it only if its health plans beat what a broker can get you by roughly $100 per employee per month; the full break-even math is in PEO vs payroll service and the all-in bill with premiums and payroll taxes in PEO cost.

Benefits to compete for hires

A PEO's large-group plans are the main draw. On Hacker News, one founder found TriNet plans about 30% cheaper than Zenefits quotes for the same carrier, another said TriNet gave access to PPOs with out-of-network coverage, and a third compared and concluded PEOs are not necessarily better (HN, HN, HN). Without a PEO, you have two main options:

• A broker-placed small group plan with payroll software that deducts premiums. See small business health insurance.
• An HRA instead of a group plan. A QSEHRA reimburses up to $6,450 self-only or $13,100 family in 2026. An ICHRA has no dollar cap but requires employees to have individual coverage, and you cannot offer the same class both a group plan and an ICHRA (26 CFR 54.9802-4).

For retirement, the 2026 401(k) deferral limit is $24,500, plus $8,000 catch-up at 50 or older (IRS, November 13, 2025). Justworks PEO Basic includes a 401(k); with payroll software you add a provider (see 401(k) plans for small businesses).

Remote employees in several states

Your first out-of-state hire usually means registering for withholding and unemployment insurance in that state. Who does the work differs:

• Gusto: Simple is single-state; multi-state needs Plus. Gusto will register new state accounts through Business Compliance at $85 per state per month.
• OnPay: multi-state is included in its one plan; state registration is not stated.
• Patriot: $12 a month per additional state.
• Rippling: a Capterra reviewer (May 11, 2026) said they had to register with state agencies themselves (Capterra).
• PEOs: TriNet says state registration is handled under the PEO without detail; Justworks lists multi-state payroll and state unemployment administration.

Moves go wrong often. Gusto reviewers describe employees moving from Utah to Massachusetts and old work locations staying on reports; a Justworks reviewer had wages reported to New York for someone who did not live or work there; an Insperity client said multi-state payroll was wrong for months (Trustpilot: Gusto, Justworks, Insperity). Check each state's rules on our state pages, for example California, New York and Texas.

Equity and payroll

When equity compensation creates wages, such as income at an option exercise or at vesting, that income runs through payroll and needs withholding. If it is paid as supplemental wages, the 2026 federal flat withholding rate is 22%, rising to 37% on supplemental wages above $1 million (IRS Publication 15, 2026). Social Security (6.2% up to $184,500) and Medicare (1.45%, no cap) apply too.

Before you pick a provider, ask how it takes in equity events from your cap table tool, whether it can run an off-cycle payroll for them, and who reports them on W-2s. Sequoia sells equity advisory alongside its PEO; most payroll providers do not describe equity handling on their pricing pages.

The R&D payroll tax credit

A qualified small business can elect to apply part of its research credit against its payroll taxes instead of income tax, which matters for startups with no taxable income yet. The election is made on the income tax return and the credit is then claimed against payroll taxes on the quarterly payroll return with Form 8974 (IRS); the annual cap is set in Internal Revenue Code section 41(h), so check the current figure in the IRS instructions for Form 6765 before you plan around it.

Two points to settle with your provider:

• Under a certified PEO, the credit stays yours. Federal law keeps the research credit with the customer, not the CPEO (26 USC 3511(d)). Ask the PEO how it applies your credit when it files payroll returns under its own account.
• Fees for handling it. A Gusto customer on Hacker News said Gusto started charging for the R&D credit payroll offset from April at $328.59 a month, before the offset began, and that this was not clearly disclosed (HN, October 2025).

Hiring outside the US: EOR or contractor

A PEO only co-employs US workers. For someone abroad, you either hire through an employer of record, which employs them in their country, or pay them as a contractor if the role really is independent.

Contractor platforms cost less: Remote from $29, Oyster $29, Justworks $39 for international contractors, Multiplier $40 and Deel $49 per contractor per month. The trade-off is misclassification risk if the person works like an employee. See PEO vs EOR, best EOR services and EOR pricing.

When to move from payroll software to a PEO

• Your broker's renewal quote is far above what a PEO quotes for the same plan level.
• You are hiring in states where you have no accounts and no one to manage them.
• You need HR policy help and workers' comp, and do not want to buy them separately.

And when to leave: reviewers report renewals up 8% to 18% a year at ADP TotalSource and yearly increases at TriNet. Leaving mid-year is easier from a certified PEO because the Social Security and FUTA wage bases carry over (26 USC 3511(b)). If you want HR help without co-employment, consider an ASO (PEO vs ASO).

Common mistakes

• Signing a two-year promo. Deel's PEO promo credits three months but requires a two-year order form and full list price if you leave early.
• Not checking CPEO status. Without it, the section 3511 rules do not apply: you can stay liable for federal employment taxes, and the wage-base carryover is not guaranteed when you switch. Check the IRS certified PEO list.
• Paying contractors abroad who work like employees. Price the EOR before you assume a contractor setup is cheaper.
• Forgetting state accounts for remote hires. The first payroll in a new state needs registrations in place.