Payroll providers take the headaches out of processing your payroll operations, freeing you up to focus on what matters to you most — your business. We looked at the most popular options and rising stars and decided to compare Gusto, ADP, and Paychex. These companies covered the range for small businesses in terms of price and services offered. Read on for our comparison and review of these three options, as well as our top recommendations.
Best Payroll Provider for Small Businesses: Gusto
We recommend Gusto as the best payroll provider for small businesses because they deliver nearly the same level of service as their competitors, but for a significantly lower price. They’ll manage all of your payroll taxes on your behalf, issue payments via direct deposit, generate year-end W-2s and 1099s, help you find workers comp insurance, and more.
Gusto vs. ADP vs. Paychex Summary Table
|Pricing as Reviewed*|
|Ease of Setup|
|Issue W2 and 1099*|
|Send Physical Checks|
|Workplace Poster Compliance|
|Can I Add Benefits?||
*Pricing is based on ten employees with bi-weekly payroll
Best Payroll Provider for Small Businesses: Gusto
We recommend Gusto as the best payroll provider for small businesses because they offer many of the same features as their competitors, but for a much lower price.
When it comes to payroll software, Gusto, ADP, and Paychex have many identical features: they all manage employee onboarding and payroll taxes. They can get you setup with workers comp insurance and pay employees via direct deposit. Gusto, however, comes out to a fraction of the price. It’s two thirds the price of Paychex and almost half as much as ADP. Plus, they don’t lock you into an annual contract.
Gusto has a stronger customer support team (that receives a lot of praise from users) and a newer online software that’s very easy to use. Since the limitations of Gusto are pretty minimal compared to the benefits and the lower price tag, Gusto emerged as the clear winner. Gusto also recently launched benefits offerings, which could make them a good solution as your company grows.
However, there are a few features offered by ADP and Paychex that you won’t get from Gusto. For one, ADP and Paychex provide poster compliance services, which means they’ll send the posters you need to hang in your workplace to stay compliant with labor laws. They also have a check mailing service, in case you or your employees prefer not to use direct deposit.
However, you can still print your own checks using Gusto and labor posters are also available from several online resources.
ADP vs. Paychex
ADP and Paychex are two of the most popular payroll providers, but when ADP is compared to Paychex there is little difference between them — and both fall short of our recommended provider, Gusto. In fact, we only recommend ADP or Paychex if you have used them previously and want to minimize any learning curve.
Because of its price, ease of setup, and clean interface Gusto makes more sense for most other small business owners or HR managers.
Payroll Software vs. Payroll Service
Gusto, ADP, and Paychex offer a variety of payroll and HR services. On one end of the spectrum, they act as an outsourced HR department – managing all of your payroll, benefits, onboarding, and providing an HR advisor to contact. On the other end, they give you software to run payroll yourself.
The majority of small businesses just use the second option, software, for a number of reasons:
- It’s usually much cheaper (outsourcing HR can cost as much as 3-6% of your total payroll, such as with a Professional Employer Organization or PEO, whereas payroll software costs $50 -$150 a month)
- Payroll software has advanced to a point where much of the hassle of payroll is taken care of for you — for example, new hire reports are automatically filed electronically and payroll taxes are calculated and submitted on your behalf
- Tax penalties from payroll errors and mis-filings alone cost $5 billion in 2014! Payroll software reduces the likelihood of these errors by automating things for you
For these reasons, we’ll focus on payroll software in this article. While Gusto, ADP, and Paychex do have more comprehensive payroll & HR services available, their payroll software packages are what most small businesses will need and use.
In-Depth Comparison: Gusto vs. ADP vs. Paychex
The prices in the table above and below were obtained from quotes we received in December, 2017. They reflect a business with ten employees running bi-weekly payroll.
|Price for one year (no discounts)|
|Price for one year (including potential discounts)|
Comparing prices directly can be a little tricky, as both ADP and Paychex usually offer discounts once you get on the phone with a sales rep. Paychex offered me a 40% discount and was willing to waive the setup fee while ADP offered me a 20% discount and waived the setup fee as well. Discounts are usually time-sensitive, though. Note that Gusto does not offer discounts (although your first month is free) but still beats both of them on price.
Also, ADP and Paychex charge per pay period, while Gusto charges per month regardless of your pay schedule. This is important if you pay people more than once per month because then you will pay more if you use ADP or Paychex.
Gusto’s pricing is very simple: it’s $39/month + $6/employee. For ten employees, this comes out to $99/month. There are no additional fees for setup or year-end W-2 or 1099 processing.
For ten employees running bi-weekly payroll, we were initially quoted $101.65 per pay period plus a one-time setup fee of $25. ADP then offered to discount their rate to $81.32 and waive the setup fee. Because payroll is run bi-weekly, this comes out to about $162.64/month (or $81.32 x 2). ADP also charges an additional fee of $45 + $5.75/employee (so $102.50 for ten employees) to process W-2s and 1099s at the end of the year.
Paychex quoted $77 per pay period plus a $200 setup fee, although they offered to waive the setup fee. This makes Paychex the most expensive service, despite the fact that the $77 per pay period is a significant discount from their regular rate and was a time-sensitive offer. Like ADP, Paychex also charges an additional fee to process year-end W-2s and 1099s. This charge was $60 + $6.25 per employee (or $122.50 for 10 employees).
Ease of Setup
First, you can create your own account and walk through it easily on your own as we show in this article. Payroll processing is usually every HR person’s most disliked responsibility, but Gusto makes it easy and relatively painless.
After you create your account with Gusto, you’ll receive a welcome email and a message inviting you to discuss your set up with them. Our experience with ADP and Paychex was quite different — representatives would call every few hours, then when we finally spoke with them they proceeded to try to upsell us on other services.
Here is a screenshot of the Gusto dashboard. The intuitive menu is visible on the left-hand side:
In comparison, you actually have to talk to sales reps from ADP and Paychex to set up your account with them. We suspect that this is just to create another opportunity to try to upsell us, but it could also be that their technology probably hasn’t caught up to Gusto’s system and ability to process your company’s information through the web service.
- Run payroll online
- Pay employees via direct deposit
- Automatically submit new hire reports
- Pay FICA, FUTA & SUTA taxes automatically
- Set up workers compensation insurance
- Employee login to manage account information
- Print payroll reports
Additionally, all three companies can help you set up employee benefits, such as retirement funds or health insurance. With Gusto, you can do this all from the same interface you use to run your payroll.
Here are the additional features offered by each company:
ADP and Paychex offer 24/7 phone and email support while Gusto is only offered phone and email support from 9am-8pm EST, Monday-Friday. However, other users tend to speak much more highly of Gusto’s customer service than ADP’s or Paychex’s.
Gusto also offers live chat support, where ADP and Paychex don’t.
The Bottom Line
Gusto offers almost as many features as ADP and Paychex, but for a fraction of the price. For more options check out 6 ADP Competitors; Gusto continues to come out on top because it’s easier to use and has received much better user reviews, both for the service itself and their customer support. While Gusto does have a few drawbacks, such as no 24/7 support, no paycheck mailing service, and no poster compliance, its benefits far outweigh these minor inconveniences. For these reasons, Gusto is our recommendation for the best payroll processing service for 2018.