Why Payroll Quotes Are So Hard to Compare: "PEPM" vs. "Base + Per-Check"

When you’re shopping for a payroll service, it can be hard to picture the price, especially if you’re not ready to talk to a salesperson yet.

So, what does “Per Employee, Per Month” even mean? Or “Base + Per-Check”?

They’re both common ways that payroll providers structure pricing. Neither is inherently cheaper or better than the other, although PEPM is typically easier to understand, and we believe that Base + Per-Check more accurately reflects the work performed.

At CSI Accounting & Payroll, we’ve worked with small businesses for 60 years, and we use the Base + Per-Check model.

In this article, we’ll answer the following:

• How is PEPM calculated?
• How is Base + Per-Check calculated?
• What else affects payroll pricing?

How PEPM Is Calculated

PEPM means “Per Employee, Per Month.” You pay a set amount for each employee each month. Since the number of employees you have on payroll is a primary factor in the cost, it’s fairly easy to understand and estimate.

A pure PEPM model would look like this:

Monthly Cost = $Rate * Number of Employees

Other PEPM models can charge a base rate like this:

Monthly Cost = $Base + ($Rate * Number of Employees)

Some providers use rate tiers based on the level of service, software, or features included. Picture a Basic tier at $X PEPM, a Standard tier at $Y PEPM, and an Expert tier at $Z PEPM, for example.

(NOTE: Don’t get PEPM mixed up with PEPP! Per Employee Per Payroll is a charge that applies to each employee for each payroll run. This is a less popular option, but it’s worth mentioning due to the similarity in names.)

How Base + Per-Check Is Calculated

With Base + Per-Check, you pay a base rate for each payroll run (whether you want payroll run weekly, biweekly, semi-monthly, or monthly), plus an amount for each paycheck.

This is the pricing model that we use at CSI Accounting & Payroll, and ours resembles this:

Per-Payroll Cost = $Base + ($Per-Check Rate * Number of Paychecks)

Just like with the PEPM pricing method, there can be rate tiers with Base + Per-Check, often reflected in the base rate.

While this method may initially seem harder to understand, it has a few key benefits:

• We believe it more accurately reflects the amount of work in processing payroll, no matter the size of your business.
• As you add employees, it only increases the per-check portion instead of affecting the base charge. There’s baseline work involved in every payroll, and adding an employee doesn't double the work.
• Under a model like CSI’s, if you run payroll less frequently, it decreases your payroll costs overall.

It doesn’t stop there! The next section will outline additional factors and costs to consider.

What Else Affects Payroll Pricing

When you compare two payroll providers’ quotes, you need to consider the prices and what they include. Some pricing models may already factor in payroll frequency, number of employees, payroll tax filings, and year-end forms (like W-2s and 1099s). Others may not.

Plus, payroll pricing is often highly dependent on the features you want, especially if they’re not already factored into a tiered rate.

Consider features like:

• HR services.
• Timekeeping.
• Benefits integrations, like 401(k) plans.
• Other add-ons.

Check out CSI’s payroll add-ons on our payroll pricing page.

Start With a Quote or Estimate!

Now that you know how to calculate Per Employee, Per Month and Base + Per-Check pricing models, as well as which additional costs to consider, are you ready to get a quote for CSI’s payroll service?

To get your quote and see if we can be a good fit for your business, click the button below for a free consultation:

Not ready to talk? That’s okay! You can only get a formal quote by talking to a consultant, but you can still estimate what your investment may look like with our Pricing Calculator.