1. Decide how many people you will pay
Count employees, and contractors too if the provider charges for them. Use the number you expect over the next year, not only today. A shop paying 4 people uses 4.
2. Get each quote in writing, with what it includes
For each provider, write down: the base fee a month, the fee per person a month, any other monthly fee you must pay (an extra state, a required add-on), any fee charged once a year (year-end forms), any one-time setup fee, and any free months promised in writing. Also write down whether the plan files your federal and state taxes, because plans that do not are a different product.
3. Work out the monthly cost
Base + (per-person fee × people) + other monthly fees. Quote A: $49 + ($6 × 4) = $73. Quote B: $37 + ($5 × 4) + $12 for a second state = $69. Quote C: $80 + ($12 × 4) = $128.
4. Work out the first year and three years
First year = setup fee + monthly cost × (12 minus free months) + yearly fees. Three years = first year + two more years of monthly cost × 12 plus yearly fees. Over three years: A is $2,628, B is $2,484 and C is $4,608.
5. Find where two quotes cross
If one quote has the lower base fee but the higher per-person fee, it wins for a small team and loses as you grow. The crossing point is the difference in base fees divided by the difference in per-person fees. A $35 base with $6 a person against a $37 base with $5 a person: ($37 − $35) ÷ ($6 − $5) = 2 people. Below 2 people the first is cheaper. At 4 people the second is.
In a spreadsheet
B1: People you will pay (4)
B2: Base fee a month (49) B3: Fee per person (6) B4: Other monthly fees (0)
B5: Monthly cost: =B2+B3*B1+B4
B6: Yearly fees (0) B7: Setup (0) B8: Free months (0)
B9: First year: =B7+B5*(12-B8)+B6
B10: Three years: =B9+2*(B5*12+B6)
What to do with the answer
Price is one input. Before you sign, check that each plan files your taxes in your state, what the contract says about leaving, and who answers when a tax notice arrives. The IRS says an employer stays responsible for payroll taxes even when a provider handles them, so ask how deposits are made and how you can see them.
Planning estimate from the numbers on your quotes. Not legal, tax or financial advice.
Published by Groundwork Business Advisory. Updated October 24, 2026.