By samson  · Last updated: October 2026 · Reading time: 7 minutes

Two ways accounting software handles payroll

Before comparing brands, it helps to know that "accounting software with payroll" means two different things:

1. Payroll built into or sold by the accounting vendor. The same company makes both products, so employee pay runs post to your books automatically. QuickBooks Online with QuickBooks Payroll is the best-known example.

2. Accounting software connected to a separate payroll provider. The accounting tool syncs with a payroll specialist such as Gusto, ADP RUN,Paychex Flex or OnPay. You manage two logins, but you can often get stronger payroll features.

Neither approach is automatically better. What matters is whether pay runs, tax liabilities and employee costs reach your general ledger without manual re-entry.

Comparison table

Vendors change plans, regions and pricing often, so this table compares how payroll works rather than quoting prices. Confirm current details on each vendor's site before you buy.

The options in more detail

QuickBooks Online + QuickBooks Payroll

If you already keep your books in QuickBooks, adding its payroll product keeps pay runs, liabilities and employee expenses in one system. The trade-off is cost: you pay for accounting and payroll separately, and the features you may want (such as faster direct deposit or automated tax filing) depend on the payroll tier.

Xero

Xero's approach varies by country. In several markets payroll is built into Xero. In the US, Xero users typically pair it with a partner payroll provider. Confirm what is available where your business operates.

FreshBooks

FreshBooks is strongest for invoicing and time tracking. Payroll has been delivered through a partner integration rather than as a native module, so treat it as accounting plus a connected payroll service.

Wave

Wave is popular with very small businesses. Its payroll is an optional paid add-on that has been limited to certain regions, so check availability before planning around it.

Zoho Books + Zoho Payroll

Zoho suits businesses that already run other Zoho apps. Payroll is a separate product, and its availability depends on where you operate.

Sage

Sage has long served small and mid-sized businesses with accounting and payroll offerings. Because product lines and regional versions differ, compare the specific Sage edition you're considering rather than the brand as a whole.

Patriot Software

Patriot sells accounting and payroll as distinct products aimed at small US employers who want a simpler, lower-cost setup. Because they are billed separately, price both together when comparing.

Payroll-first providers (Gusto, ADP RUN, Paychex Flex, OnPay)

If payroll is your main pain point, starting with a payroll specialist and syncing it to your accounting tool can be the better route, especially when you need HR features such as onboarding, benefits administration or time-off tracking.

Payroll features to look for

• Automatic tax calculation and filing: federal, state and local withholding, plus quarterly and annual filings.
• Direct deposit speed: some plans offer same-day or next-day deposit while others take several days.
• Year-end forms: W-2s for employees and 1099-NEC for contractors (US).
• Worker types: hourly, salaried, and contractors handled correctly in the same system.
• Accounting sync: pay runs post to the ledger automatically and correctly.
• Time tracking: built-in or integrated, so hours flow into pay runs.
• Multi-state support: needed if employees live or work in more than one state.
• Reporting: payroll journals, liability reports, and labor-cost reports.
• Penalty protection: some providers guarantee tax filings. Read the terms to see what is actually covered.
• Support: access to a human when a filing or notice goes wrong.

How to choose

• You already use an accounting tool and are happy with it: start with that vendor's payroll or recommended partner to avoid re-keying data.
• You have one to five employees and a tight budget: compare the lower-cost options, and add up the combined cost of accounting plus payroll, not just one.
• You have employees in several states or countries: prioritise multi-jurisdiction support, and confirm availability in every location.
• You want HR features too: consider a payroll-first provider that integrates with your accounting tool.
• You run a construction business: see the note below.

Compliance basics (US)

Payroll software automates the work, but as the employer you remain responsible for getting it right. In broad terms, US employers:

• withhold federal income tax, Social Security and Medicare from employee pay, and pay the employer share of Social Security and Medicare;
• deposit those taxes on the IRS schedule and report them, generally quarterly, on Form 941;
• report and pay federal unemployment tax (FUTA) annually on Form 940;
• furnish Form W-2 to employees and file W-2s with the Social Security Administration by the January deadline;
• report payments to independent contractors on Form 1099-NEC where thresholds are met;
• handle state and local withholding and unemployment taxes, which vary by location.

The IRS explains these obligations in Publication 15 (Circular E), Employer's Tax Guide. Employers outside the US face different rules (income tax withholding, pension and social insurance schemes), so check local requirements and confirm which software supports your country.

Common mistakes

• Assuming payroll is included. In most cases it is a separate paid product.
• Comparing only the headline price. Per-employee fees, tax-filing add-ons, and extra states can change the total.
• Misclassifying workers. Treating an employee as a contractor can create tax and wage liability.
• Ignoring state rules. Many requirements are state-specific.
• Skipping the test run. Use free trials or demos to run a sample payroll and check that it posts to your books correctly.

Frequently asked questions

Does QuickBooks have payroll?

Yes. QuickBooks offers payroll through QuickBooks Payroll, which connects to QuickBooks Online. It is sold as a separate subscription in tiers, so compare what each tier includes.

Is payroll included in accounting software?

Usually not. Most vendors sell payroll as an add-on or as a separate connected product, so budget for both.

Can small businesses do payroll in accounting software for free?

Accounting tools may offer free or low-cost tiers, but payroll typically carries a fee because it involves tax filing and direct deposit. Check each vendor's current plans to see what is free, if anything.

Is it better to use accounting software payroll or a separate payroll service?

If you want the simplest bookkeeping, payroll from your accounting vendor reduces manual entry. If you want deeper payroll and HR features, a payroll-first provider that integrates with your accounting tool may serve you better.

Do I still need an accountant if I use payroll software?

Often yes. Software calculates and files, but you remain responsible for accuracy. An accountant or payroll specialist can help with setup, worker classification, and notices from tax agencies.

Sources and how to verify this guide

Vendor features, regions and pricing change frequently. Use these primary sources to confirm the details before you decide:

• IRS, Publication 15 (Circular E), Employer's Tax Guide: federal withholding, deposits and employer responsibilities (irs.gov).
• IRS, Forms 941, 940, W-2 and 1099-NEC instructions: filing requirements and deadlines (irs.gov).
• US Department of Labor, Wage and Hour Division: wage and hour rules, Davis-Bacon and certified payroll guidance (dol.gov/agencies/whd).
• Vendor pricing and features pages: QuickBooks (Intuit), Xero, FreshBooks, Wave, Zoho, Sage, Patriot Software, Gusto, ADP and Paychex. Confirm current plans, regions and prices on each vendor's own website.

This article is general information, not tax, legal or accounting advice. Payroll obligations depend on your location and circumstances, so consult a qualified professional for your situation.