Payroll Services Cost for a Houston Small Business: 2026 Guide

Key Takeaways

• Most Houston small businesses pay $20 to $150 a month for DIY payroll software, or $100 to $500 a month for full-service payroll.

• Nearly every provider prices the same way: a base fee of $20 to $150 plus $4 to $12 per employee per month.

• A five-employee shop should budget $60 to $110 a month for software, or $150 to $350 for full service with tax filing included.

• Federal 941 and 940 filings, Texas Workforce Commission reports, and year-end W-2s should be included in the quoted price, not sold as add-ons.

• The real cost driver is mistakes. A missed federal deposit costs 2 to 15 percent of the tax owed, and late 941s add 5 percent per month.

The Short Answer: $20 to $500 a Month for Most Houston Small Businesses

Here is the number most payroll companies make you sit through a sales call to get. A Houston small business with five employees pays about $60 to $110 a month running payroll through software, or $150 to $350 a month having a provider or CPA firm run it with tax filings included. That covers the majority of shops, restaurants, salons, clinics, and contractors in this city.

Where you land inside those ranges depends on three things: how many people you pay, how often you pay them, and whether tax filing is bundled or billed separately. The rest of this guide breaks down each option with real 2026 numbers so you can price your own situation before anyone gets you on the phone.

• 1 to 4 employees, DIY software: $20 to $80 a month

• 5 to 9 employees, full service: $150 to $350 a month

• 10 to 24 employees, full service: $250 to $600 a month

• 25 to 49 employees, full service: $500 to $1,200 a month, and you should be negotiating

How Payroll Pricing Works: Base Fee Plus Per Employee

Almost every payroll provider in 2026 prices with the same formula. You pay a monthly base fee of $20 to $150, then $4 to $12 per employee per month. That is it. When a quote looks confusing, ask the rep to translate it back into base plus per-head and the fog clears fast.

Run the math on your own headcount. Three employees at a $40 base plus $6 per head is $58 a month. Eight employees at a $90 base plus $8 per head is $154. Twenty employees at a $125 base plus $10 per head is $325. Per-employee pricing scales gently, which is why headcount alone rarely explains a big quote.

One older model still floats around Houston: per-run pricing at $25 to $75 per payroll run. It sounds cheap until you remember biweekly payroll is 26 runs a year. At $50 a run that is $1,300 annually, more than most monthly plans for a small team. If you pay weekly, per-run pricing is almost never the right deal.

DIY Payroll Software: $20 to $150 a Month

Software is the cheapest line item and the most expensive time commitment. Entry plans start around $17 to $50 a month base plus $4 to $6 per employee. Mid-tier plans with full tax filing, direct deposit, and new-hire reporting run $50 to $130 base plus $6 to $11 per head. A five-person team usually lands between $60 and $110 a month all in.

The catch is the labor. The software calculates, but you approve every run, chase down timesheets, classify every new hire, and answer every notice the IRS or the Texas Workforce Commission mails you. Owners we talk to spend 3 to 5 hours a month on payroll admin, more in months with bonuses, terminations, or a contractor who suddenly looks like an employee.

Price your time honestly. If your hour is worth $75 running jobs or seeing patients, 4 hours of payroll admin costs you $300 a month before the subscription. Software is still the right call for a lot of businesses. Just compare full cost to full cost, not sticker to sticker.

Full-Service Payroll: $100 to $500 a Month for Most Small Teams

Full service means someone else runs payroll, files every federal and state return, and answers the notices. The big national providers quote $80 to $200 a month base plus $4 to $12 per employee for small teams, but the first-year teaser rate is doing a lot of work in that quote. Expect a 10 to 20 percent increase at renewal, and expect year-end W-2s, delivery fees, and off-cycle runs to show up as line items.

A local CPA firm typically charges $100 to $300 a month for payroll under ten employees, and $250 to $600 for ten to twenty-five. The number is usually flat and it usually moves less at renewal. The bigger difference is who picks up the phone. When the IRS sends a letter, a payroll call center opens a ticket. A CPA who already knows your books answers it.

If you are deciding who that person should be, we broke down when a Houston business needs a CPA versus just a bookkeeper, because payroll is often the first task owners hand off and it decides who touches everything else.

What the Quote Should Include: Tax Filing, TWC, and Year-End Forms

Texas makes payroll simpler than most states. There is no state income tax withholding. What you still owe is federal, plus state unemployment through the Texas Workforce Commission, which taxes the first $9,000 of each employee's wages at a rate the TWC assigns your business each year. New employers typically start near 2.7 percent.

Any full-service quote should include all of the following at the stated price. If an item below is an add-on, the quote is lower than the cost:

Two more fees to ask about before you sign: setup or conversion fees of $0 to $200, and off-cycle payroll runs at $25 to $75 each. If you run bonuses in December or fix a missed check, off-cycle fees add up fast. Payroll pricing follows the same pattern as tax preparation costs in Houston: the advertised number is real, but the add-ons decide the invoice.

• Quarterly federal Form 941 filings and all federal tax deposits

• Annual Form 940 for federal unemployment

• Quarterly TWC wage reports and state unemployment payments

• Year-end W-2s and 1099-NECs. Watch for $5 to $10 per form if not bundled

• New-hire reporting to the Texas Attorney General, required within 20 days

• Direct deposit without per-transaction fees

The Hidden Cost: Penalties Beat Every Subscription Fee

The most expensive payroll setup is the one that misses a deposit. The IRS failure-to-deposit penalty runs 2 percent if you are a few days late and climbs to 15 percent. A late 941 adds 5 percent of the tax due per month, up to 25 percent. On a $12,000 quarterly payroll tax bill, that is up to $3,000 for paperwork you already had the money for. We published a full breakdown of what payroll tax penalties actually cost Houston businesses, and the numbers embarrass every subscription fee in this guide.

It gets personal, too. If withheld payroll taxes do not reach the IRS, the trust fund recovery penalty lets the IRS collect 100 percent of the unpaid amount from you as the owner, even through an LLC or corporation. That risk alone is why many owners stop doing payroll themselves the month they hire employee number three.

Which Option Fits: Software, National Provider, or CPA Firm

Three buckets cover almost everyone. Match yourself to one and you have your budget.

Language and trust matter in this decision more than most pricing guides admit. A payroll provider you avoid calling is a payroll provider that fails you. If that resonates, our guide to choosing a CPA for a Vietnamese-owned business in Houston covers the questions to ask before you hand over your books, and most of it applies whatever language your family does business in.

Whichever bucket you pick, get the quote in writing with every add-on listed. The base price is where the conversation starts, not where the invoice ends.

• Choose DIY software if you have 1 to 4 W-2 employees, a simple pay schedule, and the discipline to review every filing. Budget $20 to $80 a month plus your own hours.

• Choose a national provider if you have 10 or more employees, multi-state hires, or benefits administration needs. Budget $150 to $600 a month and read the renewal terms twice.

• Choose a CPA firm if you want payroll, bookkeeping, and tax strategy under one roof, or if you have ever had an IRS notice sit unopened for a week. Budget $100 to $500 a month depending on headcount.

Frequently Asked Questions

How much does payroll cost for a five-employee business in Houston?

Budget $60 to $110 a month with DIY software, or $150 to $350 a month for full service with tax filing included. The math behind it: software plans run roughly $40 to $80 base plus $6 to $11 per employee, while full-service providers and CPA firms charge $100 to $300 flat for teams under ten. Add potential extras like year-end W-2s at $5 to $10 per form and off-cycle runs at $25 to $75 if they are not bundled. If a quote for five employees comes in above $400 a month, something unusual is being priced in, and you should ask exactly what.

Is DIY payroll software actually cheaper than hiring a payroll service?

On the invoice, yes. In total cost, often no. Software for a small team runs $20 to $110 a month, and full service runs $150 to $350, so the visible gap is $100 to $250. But DIY owners spend 3 to 5 hours a month on payroll admin, and every filing mistake is theirs. Value your time at $50 to $100 an hour and the gap closes or flips. The honest comparison is subscription plus your hours plus your error risk on one side, and the flat fee on the other. For owners under five employees with simple pay, software usually still wins. Past ten employees, it rarely does.

What does full-service payroll include?

At minimum: calculating every paycheck, direct deposit, federal tax deposits, quarterly Form 941 filings, annual Form 940, Texas Workforce Commission wage reports and unemployment payments, new-hire reporting, and year-end W-2s and 1099-NECs. Good providers also handle garnishments, respond to IRS and TWC notices, and give employees a portal for pay stubs. Anything on that list sold as an add-on means the advertised price is not the real price. The line to draw is simple: if a government agency expects a filing because you have employees, full service should file it without an extra charge.

Do payroll services file Texas payroll taxes?

The good ones do, and Texas keeps the list short. There is no state income tax, so nothing gets withheld for the state. What must be filed is the quarterly TWC wage report and state unemployment tax on the first $9,000 of each employee's annual wages, at the rate TWC assigns your account. New employers usually start near 2.7 percent. Confirm in writing that TWC filings and payments are included, because some national providers treat state unemployment as a separate module. Federal filings, meaning the 941s, the 940, and every deposit, should always be included in any plan that calls itself full service.

How do national payroll companies compare to a Houston CPA firm on price?

First-year quotes from national providers often beat a CPA firm by $50 to $100 a month. Renewal pricing usually erases that. National providers commonly raise rates 10 to 20 percent after year one and bill W-2s, delivery, and off-cycle runs separately. A Houston CPA firm charging $100 to $300 a month for a small team tends to hold the number flat and bundle year-end forms. The bigger difference is support. A call center reads your account from a screen. A CPA who also sees your books catches problems like misclassified contractors before they become penalties. Compare year-two cost, not year-one cost.

What hidden payroll fees should I watch for?

Five show up constantly: setup or conversion fees of $0 to $200, year-end W-2s and 1099s at $5 to $10 per form, off-cycle payroll runs at $25 to $75 each, amended filings at $100 to $500 when a past return needs correcting, and per-transaction direct deposit charges on older plans. Ask one question before signing: what does a complete year cost for my exact headcount, including December bonuses and year-end forms? Get the answer in writing. A provider who will not put an annual all-in number on paper is telling you the add-ons matter more than the base rate.

Can I run payroll myself for free?

Technically, yes. You can calculate withholding by hand with IRS Publication 15-T, deposit through EFTPS, and file 941s and TWC reports yourself for zero dollars in software. Almost nobody should. Manual payroll for even two employees takes several hours a month, and one late deposit costs 2 to 15 percent of the tax owed, which wipes out years of subscription savings in one mistake. The realistic floor is a budget software plan at $20 to $40 a month for one or two employees. Free payroll is like free legal advice from a cousin. The price is accurate and the cost is not.

When should I switch from software to a payroll service?

Watch for four triggers. You hit ten employees and admin hours climb past five a month. You receive an IRS or TWC notice you do not fully understand. You hire your first contractor and are not certain about the classification. Or payroll admin starts eating time you bill at $75 an hour or more. Any one of these is a signal, and two is a decision. The cost jump is modest, usually $100 to $250 a month over software, and the switch is easiest at a quarter boundary, with January 1 being the cleanest. Bring your year-to-date payroll records so the new provider can file complete W-2s.

Talk to a Houston CPA

Nguyen Accounting Group serves Houston small businesses with proactive tax planning, tax resolution, and bookkeeping. See how our tax advisory services and bookkeeping and QuickBooks support work, or book a free 30-minute consult to see if we are the right fit.