Independent buying guide. Not affiliated with Wave, QuickBooks, Intuit, Xero, FreshBooks, Zoho, Sage, or Kashoo. We do not list specific dollar prices because vendor pricing changes frequently. Brackets and tier summaries are guidance only, always check the vendor for current rates.
Honest 2026 buying guide for businesses with 2 to 10 W2 employees. Integrated versus best-of-breed, where the real cost lives, and how to pair accounting software with Gusto, Paychex, or in-software payroll.
The integration question decides this
Adding payroll to your accounting setup is the most consequential decision a small business makes after picking the accounting software itself. There are two paths: integrated, where the same vendor sells you both the accounting software and the payroll module, or best-of-breed, where you pair an accounting tool with a dedicated payroll service like Gusto or Paychex.
Integrated wins on simplicity. One vendor, one bill, one support team, and the data flows automatically between the books and the payroll without you setting up an integration. Best-of-breed wins on quality and often on price at scale. Gusto is widely considered the strongest small-business payroll experience in the US market and at five-plus employees the per-employee math often comes out cheaper than in-software alternatives.
Under five employees, integrated is usually the right call. Above five, best-of-breed starts to make sense. Above ten, best-of-breed almost always wins.
How to budget for accounting plus payroll
The realistic monthly budget for a five-person business looks roughly like this. Accounting subscription, around $30 to $80 in the entry-to-mid bracket. Per-user fees, around $20 to $60 if you are on a per-seat tool with three logins. Payroll, around $40 base plus $30 to $60 for the five employees, totalling $70 to $100. Payment processing if clients pay by card, 2.9% plus 30c per transaction on the volume.
The accounting subscription is rarely the largest line item. Payment processing usually is, followed by payroll. The point of optimising the accounting choice is not to save the $20/month between two plans, it is to pick the tool that integrates well with your payroll choice and does not waste your time on month-end close.
Candidate tools, ordered by fit
Ordered by best fit for a typical 2 to 10 employee US small business. Verify current pricing on each vendor's pricing page using the link on each card.
Candidate 1
Wave + Wave Payroll
Wave is free; Wave Payroll bracket varies by full-service vs self-service, see Wave's page
Under $20/moLast verified April 2026
Best for: Very small teams (2-3 employees), price-sensitive, US-only
Free Wave accounting plus paid Wave Payroll. Wave Payroll has full-service in selected states (Wave files state and federal taxes for you) and self-service in the rest (you file). The pairing is the cheapest accounting+payroll combination if you fit Wave's geographic and feature constraints. Limits show up at five-plus employees, complex benefit structures, or international hiring.
QBO Plus + Payroll Premium typically falls in the $50-150/mo bracket; verify current
$50-150/moLast verified April 2026
Best for: Established small businesses, accountant-led, US tax-heavy
The market default for US small businesses with employees. Tight integration between accounting and payroll, deep US tax workflows (1099, sales tax, multi-state filings), and the broadest accountant compatibility. The cost is on the higher side but the time saved on US tax workflows usually justifies the difference for established businesses with two or more employees.
Strengths
Most accountant-friendly tool in the US market
Multi-state payroll and full-service tax filing across all states
Xero in the $20-50/mo bracket plus Gusto's per-employee pricing
$50-150/moLast verified April 2026
Best for: Modern small businesses, multi-currency, growing teams who like the Xero UI
Best-of-breed pairing. Xero handles the books with strong multi-currency support and a clean UI. Gusto handles payroll with strong employee experience, benefits administration, and multi-state filing. The integration between them is solid (transactions sync) but not perfect (some manual reconciliation occasionally needed). Often cheaper than QuickBooks + Payroll for similar functionality, especially at five or more employees.
Strengths
Gusto has the best employee experience in payroll
Strong benefits and contractor 1099 support
Xero is excellent on multi-currency
Often cheaper than QuickBooks + QB Payroll at scale
Zoho Books $20-50/mo plus payroll add-on or Gusto integration
$20-50/moLast verified April 2026
Best for: Cost-sensitive teams already in the Zoho ecosystem
Zoho Books integrates with Gusto for US payroll and Zoho has its own Zoho Payroll product available in select states. The pairing is aggressive on price and feature breadth, but the US accountant network for Zoho is smaller than QuickBooks or Xero. Stronger if you already use Zoho CRM, Zoho Inventory, or other Zoho apps.
Payroll services come in two flavours. Self-service calculates the right withholdings and tells you what to pay where, but you submit the tax payments and file the forms yourself. Full-service does both: it calculates and files. Full-service is roughly $10 to $20 a month more on the base fee but the time saved is significant if you operate in more than one state. For multi-state businesses, full-service is essentially mandatory.
State filing complexity is the differentiator. Federal filings (941 quarterly, 940 annually, W2 and W3 in January) are similar everywhere. State filings vary widely: California has its own quarterly filings on top of federal, Texas has no state income tax but has unemployment, New York has a stack of separate forms. A multi-state team (employees in different states) compounds this. Best-of-breed services like Gusto handle multi-state cleanly; in-software payroll varies on coverage by tier.
1099 contractors and the W2 boundary
Payroll services handle W2 employees primarily but also track 1099 contractors. The accounting consequence is that 1099 payments are bills (paid through the AP side of accounting) and not payroll runs. The payroll service tracks the 1099 totals through the year and issues 1099-NEC forms in January, but does not withhold taxes from contractor payments.
The W2 vs 1099 classification itself is a tax question with real consequences. The IRS uses behavioural and financial control tests to determine whether someone is an employee or a contractor. Misclassifying employees as contractors is a real liability. If you are unsure, consult your accountant before the first payment.
paychexpricing.com for the Paychex angle, especially at 10-plus employees
When does payroll software stop making sense?
Two ends of the spectrum. At one employee, payroll software is borderline overkill. Some businesses with a single owner-employee handle payroll through quarterly estimated taxes plus a year-end W2 they file via a CPA, no software needed. At 50-plus employees, you outgrow the small-business payroll services and move to ADP, Paychex Flex, or Workday, with HR and benefits administration as part of the package. Between those two ends, modern payroll software is the right tool.
Where to verify pricing
Each candidate card above links to the vendor's own pricing page. We do not quote specific dollar amounts on this page because vendor pricing changes frequently. Use the brackets to budget at the right order of magnitude, then click out to verify the current rate at the moment you are buying. Note the Last verified April 2026 stamp on each card, which is when we last confirmed the bracket.
Should I use integrated accounting+payroll or best-of-breed?+
It depends on team size and your tolerance for managing two vendors. Under five employees, integrated (Wave + Wave Payroll, QuickBooks + QB Payroll) is simpler. Above five employees the math often favours best-of-breed (Xero + Gusto, or Zoho Books + Gusto) because Gusto's per-employee fee tends to come out similar to in-software payroll, while the accounting subscription savings stack up. Above ten employees, almost always best-of-breed.
What does payroll software actually do that I cannot do myself?+
Three core things. First, calculate the correct withholdings (federal income tax, FICA, state income tax, state unemployment) per employee per pay period. Second, pay the employees. Third, remit the withheld taxes to the IRS, the SSA, and state agencies and file the required forms (941 quarterly, 940 annually, W2 in January, plus state equivalents). Doing this by hand is technically possible but the penalty exposure for getting it wrong, especially for state filings, makes payroll software effectively mandatory above one or two employees.
Does QuickBooks Payroll handle all 50 states?+
Yes, QuickBooks Online Payroll handles federal and state tax filings across all 50 states for full-service tiers. The lower payroll tiers (self-service) require you to file state taxes yourself in some states. Always verify the current tier coverage on the Intuit pricing page, as the tier names and inclusions change occasionally.
What are the typical hidden costs of payroll add-ons?+
The two big ones. Per-employee monthly fees that scale linearly with headcount, typically $6 to $12 per employee per month industry-wide. State filing fees in some payroll services for businesses operating in multiple states. Both are normal and unavoidable, but they should be in your budget projection from the start. See our hidden costs page for the full list.
Can I run payroll alongside contractors I pay 1099?+
Yes. All payroll services handle a mixed W2 and 1099 workforce. The W2 employees go through the normal payroll cycle with tax withholdings; the 1099 contractors are paid through the bills-payable side of accounting and tracked separately for year-end 1099-NEC filing. Most modern payroll services (Gusto especially) handle both in one workflow.
What about ADP and Paychex?+
ADP and Paychex are full-service payroll providers most useful at 50 plus employees or where complex benefits administration matters. For 2 to 10 employee businesses, Gusto generally has a better experience at a comparable price point. Paychex is competitive at 10 to 50 employees, especially with HR and benefits add-ons. See <a href='https://paychexpricing.com'>paychexpricing.com</a> for a deeper read on Paychex specifically.