13 Alternatives to Paychex and ADP (2023)

As a small business owner, your primary focus is selling your passion and building your business. Since many small business owners simply do not have the necessary time to dedicate to HR and payroll management, they utilize outsourcing services. ADP and Paychex are the industry leaders in this arena. They provide comprehensive business solutions to efficiently run your business by offering a variety of services related to payroll, HR, attendance tracking, retirement benefits and more, in an all-in-one platform.

However, there are now many different options in payroll and HR management services beyond ADP and Paychex. First, let’s look at an overview of the payroll process...

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The Payroll Process

Processing payroll has many regulatory guidelines and can only work when you have accurate employee time tracking, HR, and management systems in place. Here is an example (from ConceptDraw):

(Video) Best Payroll Service in 2023 (Paychex vs ADP vs Gusto vs Quickbooks)

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In this diagram, you can see the roles that each HR, a manager, and a payroll specialist play in the process.

Human Resources must keep accurate and up-to-date information about the employee, keep W-2 and I-9 forms, issue employee handbooks and post-labor compliance posters. Employees must keep track of their time by using a punch card, timesheet, or more modern pin pads and scan cards. Payroll must review the accuracy of timesheets, and address any paid time off or overtime in accordance with the employer handbook, as well as state and federal regulations. Only after this entire process is completed can paychecks be issued.

A small business owner is also tasked with additional responsibilities, including hiring new employees, workers compensation insurance, employee health insurance, retirement benefits, quarterly tax filing and more! Here is where outsourcing services come in handy.

All-In-One Solutions: ADP & Paychex

HR and payroll are the core services provided to the small business owner by ADP and Paychex. These services streamline the payroll process by offering online guided services for HR compliance, as well as automated employee timesheet review, payroll calculations, and issuance of paychecks.

ADP and Paychex’s core packages typically include the following:

  • Payroll Processing
  • Taxpay Compliance
  • Labor Law Compliance Poster Kit
  • Human Resource Management

See more about ADP packages and Paychex services.

ADP and Paychex also offer these additional services:

  • Timekeeping
  • Hiring & Applicant Tracking
  • Insurance
  • Retirement

The benefit of using ADP and Paychex for these additional services is the seamless integration from an employee’s hire date to end date. Your employee’s employment applications, timecards, retirement, and health benefits are consolidated in one online dashboard. What are convenience and organization worth to you? It is certainly a luxury to have one fluid system to transfer electronic HR records, auto-generate timesheets, payroll, and employees with minimal effort...

The downside is that you pay a premium for consolidation. One of the businesses that I manage uses Paychex 401(k) retirement plans and administration, and most of the funds offered are actively managed with an expense ratio of over 100 basis points!

(Video) ADP Workforce Now vs Paychex Flex: Why I switched from Paychex Flex to ADP Workforce Now

An All-In-One Alternative

The newcomer, Gusto (formerly ZenPayroll), provides payroll, health benefits, HR, 401k plans, and workers’ compensation. This is just like the ADP and Paychex, but for a fraction of the cost for most small businesses. Plus, their pricing is transparent: $39 per month + $6 per month for each employee.

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A La Carte Alternatives

If you have only a handful of employees, you may possess a basic understanding of how your payroll workflow works in conjunction with timekeeping, human resources, and retirement plans. If this is the case, it may be possible to cost-effectively piece together an alternative to ADP and Paychex by using a combination of individual solutions.

Payroll

The main benefits of a basic payroll solution are automated tax calculations and filing, 1099 filing, W-2 filing, and direct deposit. In a poll of fifty-six independent optometrists, I found that 46% were using Intuit Quickbooks/Payroll to run their payroll. ADP and Paychex were next, followed by four respondents using an accountant and three people using (the Paychex-owned) Sure Payroll.

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Payroll Alternative #1 - Intuit Payroll offers no-frills payroll processing in a very basic, simple-to-use interface. If you use Quickbooks already, you can integrate Payroll with your software at the same price shown below.

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Payroll Alternative #2 - Your Local Bank - In an earlier article, we found a surprising payroll cost reduction by switching to a local bank.

Human Resource Management System (HRMS)

HR Alternative #1 - Zoho People will help organize and streamline your business human resource workflows, from new hire onboarding to personnel management. Zoho People is free to use for up to 5 employees. It also has very reasonable pricing, which varies based on the number of employees you have.

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HR Alternative #2 - Zenefits provides HR management, hiring & onboarding, and ACA reporting, on an easy-to-use desktop or mobile platform. Oh, and it’s FREE. They make their money from premium features and third-party providers, with which they integrate. I was a little hesitant to name Zenefits as an alternative because of its recent scandal. However, it is still a very powerful (and free) solution.

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Employer-Sponsored Retirement

There is no easy way to list employer-sponsored retirement alternatives. There are just too many factors to consider, such as keeping administrative fees and the available fund’s expense ratios low. Plus finding a third-party administrator, as well as someone who will do the record-keeping. Want to learn more about the whole process? One of our authors covered his wife’s 401(k) experience and outlined the details in a step-by-step guide.

Retirement Alternative - Betterment has a popular robo-advisor platform that is now being offered as an employer-sponsored retirement solution to small businesses. According to their website, Betterment addresses all of the concerns above in an end-to-end solution. That includes administration, recordkeeping, investment management, and compliance services,” among others. Their pricing is simple, but it’s good to know what your current fee structure is first before you compare.

(Video) Which Payroll Company is Best? | Gusto vs. Quickbooks vs. ADP vs. Paychex | $100 Referral Code

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Timekeeping

The method you choose for your employee timekeeping is flexible, but doing so accurately is essential for labor law compliance. Here are three alternatives you can use to perform your timekeeping:

Timekeeping Alternative #1 - My Time Station has an easy sign-up process, and you can use it with up to 10 employees for free. You can even turn an old iPod touch or iPad into a timeclock station by simply downloading their app.

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Timekeeping Alternative #2 - On The Clock - This is another online time clock solution that is free, for up to two employees. You can also try them out for 30 days, free. Here is their pricing structure:

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Timekeeping Alternative #3 - Intuit Time Tracking ($3.00 per employee). If you decide to use Intuit Payroll, then you can have an integrated timekeeping solution for an introductory rate of $1.50 a month.

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Poster Compliance

You don’t need to buy labor law compliance posters to be compliant. You can find the necessary federal posting documents for your industry on the Department of Labor website and the necessary documents for your state online. Simply print them all and post at your workplace.

Or, you may find it simpler to purchase a pre-printed state-specific labor-law poster on Amazon.

Employer Health Insurance

ADP and Paychex offer health insurance in addition to their core packages. Because of the Affordable Care Act, many state-run Small Business Health Options Programs (SHOP), such as California’s, may standardize the benefits and rates that are available to employer groups. This means that the rate you get from ADP or Paychex will be the same rate you get from the insurance broker down the street. You can visit Healthcare.gov to find the details of your state’s SHOP.

Workers Compensation

AP Intego provides easy, online worker’s compensation insurance quotes for your small business.

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The DIY Alternative (Advanced)

If you’ve been doing your own payroll and personnel management and have just a handful of employees, then you can get by with a combination of spreadsheets.

This method requires knowledge of payroll calculations and spreadsheets.

Google has a collection of documents that people have publicly shared called Google Docs Template Gallery. Unfortunately, it will be discontinued at the end of 2016, but is a great resource until then. In this gallery, I have found a few templates that can potentially be used as an alternative

Applicant Tracking & HR

Time Tracking

Payroll

Summary

There are many options available for small business owners to manage their payroll and HR needs. Whether you decide to use a combination of a la carte services or go with an all-in-one competitor for payroll and HR management, you will still have to address how your payroll and HR workflow will change once a system is in place. The Chrome browser has a useful tool I like to use called Draw.io, which maps the workflow of the businesses I manage. By mapping out the existing process, I can see if there are bottlenecks in the payroll and HR processes, or identify underutilized services for which I’m paying.

What kind of payroll and HR services do you use for your business needs? Sound off in the comments section!

Learn More:

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FAQs

What is the difference between Paychex and ADP? ›

ADP and Paychex are both leading payroll providers in the United States. ADP is a global leader in providing human resources (HR) and payment solutions for businesses of all sizes across the globe while Paychex is a leading provider of payroll and HR services for small and medium-sized businesses (SMBs).

What is an alternative to ADP? ›

Prominent ADP alternatives include Paychex, Rippling, OnPay, Gusto, Square Payroll and Intuit QuickBooks Payroll.

What payroll is better than ADP? ›

The best ADP competitors are:

QuickBooks – Best for payroll overall. Gusto – Best for benefits management. Paychex Flex – Best for payroll and tax advice. Square Payroll – Best for flexible payment plans.

Who is better ADP or Paychex? ›

Is Paychex better than ADP? Whether Paychex is a better option depends on the size of your company and your individual business needs. We found Paychex to be most effective for small businesses and startups, while we prefer ADP for growing businesses and large companies.

Is ADP or paylocity better? ›

ADP Workforce Now is far superior to Paylocity. Paylocity is a "one size fits all platform" that could not meet our business's unique needs. ADP Workforce Now is simply way more user friendly than Paylocity, with a much simpler and more modern looking UI, for both users and Admins.

Why switch to Paychex? ›

Our customized solutions and personalized service can help you simplify payroll processing and taxes for your business. With Paychex Flex® Select, you have access to payroll basics like new-hire reporting, integrated technology solutions, a dedicated HR advisor, and 24/7 support.

Why ADP is the best payroll? ›

ADP provides continuous 24/7 support from payroll experts to answer complex payroll questions from businesses running payroll. For HR-specific questions, the HR Pro plans offer phone access to a designated team of HR Business Advisors, available for one-off questions and scheduled check-ins. Good.

Why should I use Paychex? ›

Paychex can help the owners and HR managers of small to medium-sized businesses manage human resource administration tasks, streamline talent management, and access critical data to help them make informed business decisions with confidence.

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