How it works
For each quote, the monthly cost is the base fee, plus the per-person fee times the people you pay, plus any other monthly fees. The first year adds the one-time setup fee and the yearly fees, and takes off the free months. The three-year cost is the first year plus two full years at the monthly cost plus the yearly fees.
Two quotes can cross. A quote with a low base fee and a high per-person fee is cheaper for a small team; a quote with a higher base and a lower per-person fee wins as you add people. The calculator finds the headcount where they swap: the base fee gap divided by the per-person fee gap.
A worked example
You will pay 4 people. Quote A is $49 a month plus $6 a person: $73 a month. Quote B is $37 plus $5 a person, plus $12 a month for a second state: $69 a month. Quote C is $80 plus $12 a person: $128 a month.
Over three years that is $2,628 for A, $2,484 for B and $4,608 for C. B is cheapest, and A costs $144 more than B over three years even though the two look close on the first page of each quote.
Prefer to work it out yourself? Step-by-step guide: do this calculation by hand or in a spreadsheet.
Common mistakes
- Comparing base fees only. The per-person fee is what grows as you hire.
- Leaving out the plan features you need: a plan that does not file your taxes is not the same product as one that does.
- Forgetting extra states, paper W-2 and 1099 forms, and annual compliance fees. Put them in the other-fees boxes.
- Counting a promotion that has strings. Free months only belong here if the quote promises them in writing, and a one-year agreement changes what leaving costs.
- Using today's headcount for a plan you will keep for three years. Try the number of people you expect next year.
What this doesn’t tell you
This compares what the quotes charge, not the quality of the service, the accuracy guarantee, or how fast the provider answers when a tax notice arrives. It does not count your own time. Prices change, so check the number in writing before you sign.
Related calculators
Go deeper: 15 Numbers Every Small Business Owner Should Know, from The Groundwork Review.
Anticipated Questions
Do contractors count as people paid?
Often yes. Some providers charge the full per-person rate for a contractor in any month you pay one; others use a lower rate. Ask, then count them if they are charged.
What is a one-time setup fee?
A charge to get you started. Many payroll providers say they charge none. Enter zero if the quote says so in writing.
Why does the cheapest quote change when I add people?
A low base fee with a high per-person fee wins for a small team. As the team grows, the per-person fee adds up and a higher base with a lower per-person fee takes over.
Does this tell me which provider to pick?
No. It tells you which quote costs least for the same setup. Check what each plan includes before price decides it: tax filing, states, year-end forms, support and the contract terms.
Opening or moving? See your odds with a Market Feasibility Study or Site Selection Analysis.
Sources
- IRS: Outsourcing payroll and third-party payers
- IRS news release IR-2020-186: Employers should choose a payroll service provider carefully
- IRS Publication 15 (Circular E), Employer's Tax Guide
Last reviewed October 19, 2026. How our calculators work. General information for planning, not legal, tax or financial advice. Found an error? Email info@groundworkbusinessadvisory.com.
