Payroll is one of the first systems a growing business needs to get right. Paying people accurately and on time, withholding the right taxes and filing on schedule are essential. Gusto and ADP are two of the best-known payroll providers in the United States, and small-business owners often compare them.
This guide gives you a framework for comparing the two. It does not declare a winner, because the right choice depends on your business, and features and pricing change frequently. We do not quote prices. Check each provider’s current plans and get quotes. This article is general information, not legal, tax or HR advice. Consult qualified professionals for your situation.
Overview
Gusto
Gusto is a cloud-based payroll and HR platform that is popular with small businesses and startups. It is known for a modern interface and bundles payroll with features such as employee onboarding, benefits administration and contractor payments, depending on the plan.
ADP
ADP is one of the largest payroll and HR providers, serving businesses of many sizes. It offers several product lines, including options designed for small businesses and platforms for larger organizations. ADP is known for its scale and range of services.
What to Compare
Payroll Processing
Both providers run payroll, calculate withholding and handle direct deposit. Compare:
- How easy it is to run payroll each period
- Whether payroll can run automatically for salaried employees
- Support for multiple pay schedules
- Handling of bonuses, commissions and reimbursements
- Off-cycle payroll runs
Tax Filing
Payroll providers typically calculate, file and pay payroll taxes on your behalf, depending on the plan and jurisdiction. Ask each provider:
- Which federal, state and local filings they handle
- How they handle multi-state employees
- What happens if a filing error occurs and whether they offer any guarantee
- How year-end forms are produced and delivered
Contractor Payments
Many small businesses pay contractors as well as employees. Compare how each platform handles contractor onboarding, payments and year-end forms. See our guide to paying contractors.
Benefits Administration
Both providers offer ways to manage benefits such as health insurance and retirement plans, sometimes through partners. Compare which benefits are available in your state, how enrollment works and whether benefits administration costs extra.
HR Features
HR features can include onboarding, document storage, time off tracking, employee self-service and compliance resources. Compare which features are included in each plan.
Time Tracking
Some plans include time tracking or integrate with time tracking tools. If you have hourly employees, this matters.
Integrations
Check integrations with your accounting software, time tracking tools and other systems. See our guide to bookkeeping basics for small business.
Customer Support
Support quality matters when payroll problems arise. Ask about support channels, hours, whether you get a dedicated representative and response times. Read recent reviews from businesses similar to yours.
Scalability
Consider where your business will be in a few years. ADP’s range of products may appeal to businesses planning significant growth. Gusto’s plans also scale, but compare how each handles larger teams, multiple locations and more complex HR needs.
User Experience
Request demos or free trials where available. Run through tasks such as adding an employee, running payroll and pulling a report.
Questions to Ask Each Provider
- What is included in each plan, and what costs extra?
- Are there setup fees?
- Which tax filings are included?
- How are multi-state employees handled?
- How do benefits work in our state?
- What support is available?
- How are errors handled?
- Can we export our data if we leave?
- What are the contract terms?
- How long does setup typically take?
Write the answers down and compare them side by side.
Switching Payroll Providers
Switching mid-year is possible but requires care. You need to transfer year-to-date payroll data so tax filings and year-end forms are accurate. Many businesses switch at the start of a quarter or year to simplify the process. Ask the new provider how they handle transitions.
Payroll Basics to Understand
Even with software, it helps to understand payroll basics:
- Gross pay vs. net pay
- Withholding for taxes and benefits
- Employer taxes
- Pay schedules
- Recordkeeping requirements
Official government resources and qualified professionals can explain your obligations. See our hiring your first employee checklist.
When Simpler Tools May Work
Very small businesses with only contractors may not need full-service payroll. Some accounting and invoicing tools handle contractor payments. As soon as you have employees, a dedicated payroll solution is usually worthwhile.
Common Mistakes
- Choosing based on a single feature
- Ignoring add-on costs
- Not checking state-specific support
- Skipping demos
- Misclassifying workers. See our guide to paying contractors.
A Simple Comparison Worksheet
Create a worksheet with one row per requirement and one column per provider. Useful rows include total monthly cost for your headcount, setup fees, states supported, tax filings included, contractor payments, benefits options, time tracking, accounting integrations, support hours and contract terms. Fill it in from demos and written quotes rather than from memory or marketing pages. Score each row by how important it is to your business, not just whether the feature exists. A feature you will never use should not tip the decision.
Planning the Setup
Whichever provider you choose, set aside time for setup. You will typically need your EIN, state tax account numbers, bank details, employee information and any prior payroll records for the year. Having these ready before onboarding speeds things up and reduces errors on the first payroll run.
Frequently Asked Questions
Is Gusto or ADP better for small businesses?
It depends on your needs. Compare features, support, pricing and scalability.
Do both handle payroll taxes?
Both offer tax filing services, depending on the plan. Confirm details with each provider.
Can I pay contractors with both?
Both support contractor payments. Check plan details.
Can I switch payroll providers mid-year?
Yes, but transfer year-to-date data carefully.
Do I need an accountant if I use payroll software?
Software handles many tasks, but an accountant can help with tax planning and compliance questions.
The Bottom Line
Gusto and ADP both offer payroll, tax filing, benefits and HR features for small businesses. Compare plans, add-on costs, state support, customer service and scalability, and request demos. Consult qualified professionals for tax and HR questions.
Editorial note: Biz Benchly is independent and reader-supported. This guide is based on research into manufacturer documentation, published specifications and widely accepted best practices; we have not been paid to mention any product. If we add affiliate links in the future, they will be clearly disclosed per our Affiliate Disclosure.