Outsourced Payroll vs In-House: 2026 Cost Comparison

Payroll looks cheap until your first multi-state hire, your first 941 mismatch, or your first year-end W-2 correction. Here is the real cost comparison we share with founders evaluating our payroll service vs keeping it in-house.

In-house: the visible cost

Software (Gusto, ADP Run, QuickBooks Payroll) runs $40-$80 base + $6-$15 per employee per month. For a 10-person team, that is roughly $1,500-$2,500/year in software alone.

In-house: the hidden cost

What founders never count: 4-8 hours of bookkeeper/owner time per month at $40-$90/hr. State registration in every new state ($50-$300 each plus ongoing returns). Penalty exposure - the IRS issues over $13B in payroll penalties annually, mostly for late deposits and missed filings.

• Software: ~$2,000/yr
• Internal labor (5 hrs/mo @ $60): ~$3,600/yr
• Multi-state registrations and filings: ~$500-$2,000/yr
• Penalty risk: variable, frequently $1,000+ per incident

Outsourced: what you actually pay

A full-service outsourced provider (us, or a comparable firm) typically charges $150-$400/month for 10 employees - all-in. That includes federal/state filings, W-2s, 1099s, new-hire reporting, garnishments, and a named contact. Total: ~$3,000-$4,800/year. Within striking distance of the in-house bill once you count labor, with the penalty risk transferred.

The real question is not cost

Above ~5 employees, the cost gap is a rounding error. The deciding factors are responsiveness, multi-state coverage, and integration with bookkeeping and year-end tax. Pick the model that gets all three correct on the same calendar.