18+ Small Business Payroll Statistics to Know in 2024

As a small business owner, you are aware of the importance of having employees on your team. However, equally as important is understanding how payroll factors into running your business.

Payroll is an essential component of running any type of business, no matter what size. To help shed some light on the subject, we’re here to share some in-depth small business payroll statistics on topics like employee wages, hours worked, and tax compliance.

Prepare to dive deep into everything there is to know about payroll for small businesses.

Small Business Payroll Statistics

18.3% of small businesses, or about 6.08 million, run payroll.
41% of small business owners personally manage their payroll.
33% of small businesses pay weekly, while 42% pay bi-weekly.
Approximately 40% of small businesses spend more than 80 hours per year on payroll tax compliance.
25% of small businesses were fined for payroll tax mistakes.
45% of small businesses outsource their payroll processing.
18% of small businesses utilize payroll software
60% of small businesses handle payroll in-house.
1 in 3 small business owners admits to having made payroll errors.
1 in 5 small business owners has encountered penalties for late payroll tax payments.
Payroll takes 5 hours for small business owners per pay run.
45% small business don’t even have an in-house accountant or bookkeeper.
93% of employees receive their pay through direct deposit.

Source: ( FitSmallBusiness, Netsuite, Census, Census)

How often do businesses pay employees?

Length of Pay Period	Percent
Weekly	32.4
Biweekly	36.5
Semimonthly	19.8
Monthly	11.3

Small Business Owners’ Monthly Payroll Spending

13% spend $1 – $50 on payroll.
22% spend $51 – $100 on payroll.
42% spend $101 – $500 on payroll.
11% spend $501 – $1,000 on payroll.
8% spend $1,001 – $5,000 on payroll.
3% spend $5,000+ on payroll.

Source: NSBA

Employee Pay Method Breakdown

95.15% receive pay via Direct Deposits.
2.85% receive pay via Paper Paycheck.
0.60% receive pay via Payroll Card.
0.49% receive pay via Online Payment System (PayPal, Venmo).
0.40% receive pay via Pre-paid Card.
0.50% receive pay via Other methods.

Source: B2B Reviews

Payroll Error Statistics

According to the IRS, 33% of employers make payroll errors that cost billions of dollars annually.

11.4% of businesses experience manual payroll errors with in-house payroll solutions.
37% of payroll errors occur as a result of manual data entry.
57% of payroll errors occur when businesses rely on paper or spreadsheets to manage payroll.
On average, approximately 40% of small businesses accrue $845 in IRS penalties every year due to irregularities in their payroll processes.
33% of employers make payroll errors that cost billions of dollars annually, according to the IRS.
25% of all workers have had paycheck errors.
49% of all workers would start looking for a new job if they received two incorrect paychecks.
Nearly 5 million penalties were related to payroll taxes, costing 13.7 billion dollars according to the IRS.
The second most common reason for payroll inquiries is related to missing pay, at 22%.

Source:(Intuit, Kronos, CEB ADP Survey)

Payroll Outsourcing Statistics

60.6% of businesses outsource some or all of their payroll operations.
The global payroll outsourcing market is expected to increase from $11.17 billion in 2023 to $16.12 billion by 2028.
57% of companies say outsourcing payroll lets them focus on their core business.
34% of companies do not outsource payroll technology because it is too expensive or they do not want someone else handling their finances.
76% of HR leaders believe they could benefit from outsourcing tasks.
45% of organizations use Payroll Service Providers (PSPs).
54% of organizations plan to outsource HR management tasks this year.

Source: (The Business Research Company, Alight, SuperStaff, G2, HR Leaders’ Research Study )

Top Reasons HR Leaders Consider Switching Payroll Service Providers

33% of HR leaders consider switching PSPs for a broader HR technology platform.
21% consider switching due to digital transformation initiatives.
17% are looking to switch to reduce costs.
13% cite integration/consolidation as a reason for switching.
13% are concerned with compliance, safety, or risk issues.
3% consider switching due to poor service.

Source: HR Leaders’ Research Study