Cheapest Payroll for One Employee: How to Compare the Real Cost
With one employee, the monthly base fee drives payroll cost more than the per-worker fee. Here is how to compare options and the hidden costs.
Hiring your first employee turns an owner into an employer, and the first question most people ask is what payroll will cost. The answer surprises a lot of small businesses: with a single person on payroll, the per-employee fee barely matters. What you are really shopping for is the fixed monthly base fee, and the costs that hide underneath it.
One employee flips the pricing math
Most payroll services, QuickBooks Payroll included, price as a monthly base fee plus a smaller per-worker charge. With ten employees the per-worker fee dominates the bill. With one, you pay nearly the full subscription to cover a single person, so the base fee is the number to compare, along with exactly what that base fee includes.
Confirm the worker actually needs payroll
If the person is a genuine independent contractor, there is no payroll obligation: no withholding, no deposits, and a year-end 1099 instead of a W-2. Contractor-only plans also cost less than full payroll where they exist. Misclassifying an employee as a contractor carries its own penalties, though, so settle that question before shopping on price. Household employees fall under separate rules with their own thresholds.
The manual route: cheap until a deadline slips
With one employee, the arithmetic of payroll is simple. The cost is the calendar: federal employment taxes follow a deposit schedule set by the IRS, Form 941 is due each quarter, Form 940 once a year, and a W-2 after year end, on top of your state’s withholding and unemployment registrations and filings. One missed deposit can cost more in penalties than a year of a payroll service, and that is the comparison that actually matters.
What a full-service plan should cover
A full-service plan calculates withholding, moves the money, files the returns, and issues the W-2. Before comparing prices, verify two things: whether filings for your state are included, since state coverage varies by plan, and how year-end forms are priced. Check direct deposit timing too, because waiting several days for money to land is a real cost even when it never shows up on an invoice.
Hidden costs to price before committing
- Year-end W-2 printing and e-filing fees
- States where filing support costs extra or is unavailable
- Surcharges for faster direct deposit
- The price jump when you hire employee number two
- Payroll bundled with software you already pay for; if you subscribe to QuickBooks Online, compare adding payroll to your existing plan against a standalone service
- A PEO, which makes you a co-employer and prices per employee, is rarely the cheap answer for a single hire
If you run an older QuickBooks Desktop version
Desktop payroll runs on service keys tied to supported versions. When a version is retired, its payroll stops updating even though the company file keeps working, so the cheapest-payroll question becomes a question about keeping an unsupported Desktop version running, including payroll replacements.
Your next step
Register for federal employer accounts, plus state withholding and unemployment, before the first paycheck, because late registrations create their own penalties. Then build a 12-month total for each payroll option: base fees times twelve, every per-employee fee, year-end form costs, and any state surcharge. Compare that single number rather than the advertised monthly price, and the cheapest service for one employee usually becomes obvious.