How to bill for core payroll
Learn to create a scalable payroll billing model that meets Check’s system requirements.
How to bill for core payroll
Billing for payroll can be more complex than it seems at first glance. This guide outlines recommendations to help you build a clear, scalable payroll billing model that aligns with Check’s system and Partner needs.
Key deliverables
- Billing system design and implementation plan
Develop a billing system aligned with industry standards. Complete this 1–2 weeks before your full go-to-market (GTM) motion.
- Company billing policy documentation
Document your approach to monthly arrears billing, usage-based calculations, exception handling, and guidance for non-monthly or upfront billing scenarios.
- Educational materials for companies and sales teams
Create resources that explain your billing model, especially how the active flag affects charges. These materials help align internal and external expectations.
Billing model overview
Background
Legacy payroll providers like ADP and Paychex charged on a per-employee per processed payroll (PEPP) basis. This model billed companies based on actual payroll usage at the end of the billing period—making arrears-based billing the industry norm. Today, modern providers increasingly adopt a per employee per month (PEPM) model, but arrears billing and the use of active employee definitions remain common.
Recommended approach
Check recommends billing monthly in arrears, except in one specific case (outlined below). This means:
- A flat base fee per company, regardless of payroll activity
- A per-unit fee based on actual payroll usage
Choose a method to calculate usage based on your pricing model:
- PEPM: Count each unique employee or contractor included in any approved payroll during the billing period.
- PEPP: Count every instance (not unique) of an employee or contractor included in approved payrolls during the billing period.
This structure mirrors how Check bills you: a monthly base fee per company and a PEPM charge for unique employees and contractors paid during the month.
⚠️ You do not need to have billing live for early adopters. However, you should implement it before your full GTM motion. This work typically takes 1–2 weeks, depending on your billing infrastructure.
Exception: Upfront PEPM billing
Consider billing monthly upfront only if all of the following apply:
- You already bill companies monthly upfront.
- Your core product tracks active users in a way that aligns with payroll logic.
- These active users largely overlap with those who get paid via payroll.
- You plan to use PEPM billing.
In this case, align your payroll definition of active with your product’s. Charge for every user marked as active, regardless of payroll inclusion. This approach simplifies billing and reduces confusion, but it requires clear communication around active status.
Common FAQs
How should I set the billing period?
- There’s no universal standard. Some providers base the billing period on the company’s first payroll run; others align to the calendar month.
- Recommendation: Start each billing period on the 1st of the month to simplify proration, discounts, and financial operations. Example: A company goes live April 15 and terminates June 10. Bill on May 1, June 1, and July 1 for the full months of April, May, and June.
How should I collect payment?
- You have flexibility. Some providers debit the company’s bank account; others accept credit cards.
- Recommendation: Use the same method you currently use for your core product. If you don’t collect funds today, start with credit card billing.
Why isn’t annual billing common?
- Payroll is typically usage-based and billed in arrears. Estimating usage for a full year introduces complexity.
- Recommendation: If you offer an annual plan, charge for an estimated usage amount (PEPM or PEPP) upfront and reconcile overages monthly.
How do other payroll providers bill?
Payroll provider | Approach to billing | Active definition | Billing period | Cash collection method |
Monthly in arrears | Marked as active, even if not included in payroll | 1st of the month; no rebate for cancellation | Debit the company bank account on file | |
Monthly in arrears | Marked as active even if not paid | Based on go-live date; no rebate for cancellation | Credit card or debit the company bank account | |
ADP Run | Monthly in arrears | Unique payees included in payrolls | Unknown | Debit the company bank account |
Monthly in arrears | Unique payees included in payrolls | 1st of the month; no rebate for cancellation | Credit card or debit the company bank account |
Appendix
How do we recommend you bill for passthrough fees?
- Recommendation: For the following list of fees, we recommend that these are passed down as passthrough fees downstream to the companies. Check exposes the passthrough fees that we typically see our partners bill their downstream clients through our Usage API. The chart below outlines all of the passthrough fees, and if they are exposed in the Usage API.
Check Fees | Is it a passthrough fee? | Are we billed for this? | In the Usage API | Cadence of the Bill |
Failed Employee account validation or payment, including Notification of Change (per Employee) | Passthrough | Yes | Yes | Monthly |
Funding of payroll via wire by Employer (per wire) | Passthrough | Yes | Yes | Monthly |
Return fee for unsuccessful funds transfer from Employer, inclusive of wire fees | Passthrough | Yes | Yes | Monthly |
MNDP (fka NDP, billed the same) | Passthrough | Yes | Yes | Monthly |
“Delayed filings”: Untimely tax filing where a delay is due to no fault of Check, including but not limited to re-filing (per filing) | Passthrough | Yes | Yes | Monthly |
Tax returns filed for Employers no longer using the Services (per filing) at year-end | Passthrough | Yes | No | Annually |
Product Partnerships | Passthrough | Yes | No | Monthly |
Printing and mailing W2 and 1099 paper returns at year-end, where required | Passthrough | Yes | No | Annually |
Amendments | Passthrough | No | No | Monthly |
Attempted reversal of payment to Employee (removed) | Passthrough | N/A | N/A | Monthly |
To download all the billable usage on your platform, you can alternative generate the full list by logging into your Console, navigating to the Reports tab accessible to Admin users, and selecting the month and usage report type. We will generate the report and email it to you once complete.
How do existing payroll providers typically bill?
Payroll Provider | Approach to Billing | “Active” definition | Billing Period | How they collect cash |
Monthly in Arrears | Marked as active, even if they were not included on payroll | 1st of the month, no rebate for cancellation | Debit the employer bank account on file | |
Monthly in Arrears | Marked as active, even if they were not included on payroll | Based on go-live date, no rebate for cancellation | Credit card or debit the employer bank account on file | |
ADP Run | Monthly in Arrears | Unique payees included in payrolls in a month | Unknown | Debit the employer bank account on file
|
Monthly in Arrears | Unique payees included in payrolls in a month | 1st of the month, no rebate for cancellation | Credit card or debit the employer bank account on file |
Last updated on June 30, 2024