Updated October 2026 · 8-minute read · Prices checked on vendor sites October 27, 2026 · Residential Business Guides

Short answer: payroll SaaS (software as a service) is cloud payroll you pay for monthly. It calculates paychecks and withholding, pays employees by direct deposit, and, on "full-service" plans, files and pays your federal, state and local payroll taxes for you. For a small or home based business, expect a base fee of roughly $35–$90 a month plus about $5–$12 per person paid, depending on the provider and plan. The right choice depends less on features than on how many people you pay, in how many states, and whether you need the software to file taxes for you.

Do you even need payroll software?

• Sole proprietor or single-member LLC with no employees: usually no. You pay yourself with owner's draws, not a paycheck, and handle your own tax through quarterly estimated payments.
• S corporation owner: usually yes. S corp owners who work in the business are generally expected to take a reasonable salary through payroll, with withholding. Some providers sell plans built for one-person S corps.
• You pay only independent contractors: a contractor-only plan or your accounting software may be enough. You'll still need to issue 1099-NEC forms at year end.
• You have even one W-2 employee: yes. Payroll tax deposits, quarterly returns and year-end W-2s are where small businesses most often get penalized, and full-service payroll handles them for you.

What full-service payroll SaaS does

• Calculates gross-to-net pay, federal and state withholding, Social Security and Medicare.
• Pays employees and contractors by direct deposit on your schedule.
• Deposits payroll taxes and files quarterly and annual returns (Form 941, Form 940, state equivalents).
• Produces W-2s and 1099s at year end.
• Often adds new-hire reporting, PTO tracking, benefits, and time tracking, sometimes on higher tiers.

Payroll SaaS pricing compared (October 2026)

Prices below are as listed on each provider's own pricing page on October 27, 2026. They change often and many carry introductory discounts, so confirm before you sign up.

Example: a home business paying two part-time employees in one state would pay about $49 + (2 × $6) = $61 a month on Gusto Simple or OnPay, or $35 + (2 × $6) = $47 on Square full service, before any add-ons or promotions.

How to choose

1. Count who you pay. Below about five people, the base fee dominates, so a low base fee matters more than the per-person rate.
2. Count states. If any employee lives or works in another state, check multi-state support and per-state fees.
3. Insist on full service if you have W-2 employees. Plans that don't file and deposit taxes leave the riskiest part to you.
4. Match your accounting. If you already use QuickBooks, Xero or another ledger, check that the payroll integrates so wages and taxes post automatically.
5. Check support hours and penalty guarantees. Many providers cover penalties caused by their own filing errors; read the terms.
6. Watch the promo cliff. Introductory discounts often end after a few months. Budget on the regular price.

Payroll SaaS vs. doing payroll yourself

Doing payroll by hand or in a spreadsheet saves the subscription fee but puts withholding tables, deposit schedules and quarterly filings on you. For most home businesses with employees, the monthly fee is less than the cost of a single late-deposit penalty. Keep the time saved for the work that earns money.

Frequently asked questions

What does SaaS mean in payroll?

Software as a service: the payroll system runs in the provider's cloud, you access it in a browser or app, and you pay a subscription instead of buying and installing software.

Can I pay myself through payroll software as a sole proprietor?

Generally no. Sole proprietors and single-member LLC owners taxed as sole proprietors take draws. Payroll for yourself becomes relevant if your business is taxed as an S corporation.

Is the cheapest payroll plan good enough?

If it's full service (files and pays taxes) and covers your states, often yes. The main differences on higher tiers are HR tools, faster deposits and support.

Pricing and features are as published by each provider on October 27, 2026, and may change. This guide is general information, not tax or legal advice. Residential Business has no affiliate relationship with the providers listed.

Related: free bookkeeping template · tax software for the self-employed. Questions? Ask the community.