Gusto Payroll Review – Best Payroll Solution for 2021?

There are a large number of cloud-based payroll software services available today. With varying packages, prices, and levels of service it can be extremely confusing deciding which one to go for.

That being said, Gusto is a provider that has been popular for a long time. Their sophisticated payroll software options, designed to cater to a large range of businesses, seem to have garnered a good reputation. Whether you employ just one person or need to arrange payroll and HR for an entire company, they have a package to suit.

However, with payroll being such a competitive sector these days, how does Gusto compare to the rest of the market? That’s exactly what we will look into today.

What follows is an in-depth review of Gusto payroll, a walk-through on everything they offer, and whether they hold up against other services available in 2021.

For all those looking for a reliable payroll software solution, we hope this helps.

Who are Gusto?

Gusto is a cloud-based human resource management (HRM), accounting, and payroll processing software suite designed for small-to-medium scale businesses (SMBs) and companies, including start-ups, that want to automate their payroll-related processes.

This software suite is developed, operated, and maintained by a company called Gusto which is owned by ZenPayroll, Incorporated.

It was founded in November 2011 as ZenPayroll by Josh Reeves, Edward Kim, and Tomer London. Gusto – the company – has developed the Gusto Software Suite as a cloud-based program that is deployed through the cloud using the software-as-a-service (SaaS) model.

This means that the software suite is installed and run on host machines maintained by Gusto, and the clients, that is (i.e) the SMBs, access these host machines as remote servers through web browsers.

Currently, this software suite serves over 100,000 SMBs and companies in the US. It focuses only on businesses based in the USA.

A Brief Overview of the Gusto Payroll Services

Gusto is an easy-to-use, cloud-based fully-managed SaaS payroll service that provides comprehensive full-service payroll, alongside team management tools, health insurance administration, 401(K)s contribution support, and on-demand human resource support.

It allows a small-to-medium-sized business (SMB) to benefit from payroll tax services and the ability to pay its workers through direct deposit or printed checks, with the payments being issued at scheduled times.

These services are available to US-based SMBs, including start-ups, located across the 50 states. Likewise, its expert support allows this SaaS to be used by both beginner and professional payroll administrators.

Gusto Payroll Suite features employee onboarding that allows the employer to easily add a new employee and designate the employee type as W-2, W-9, or 1099 in the payroll.

This employee onboarding tool allows for employee information aggregation, alongside the provision of work authorization and direct deposit forms.

It also allows for employee enrollment for insurance and compensation benefits, including compensation insurance plans, commuter benefits, medical insurance, and 401(k) contributions.

Relatedly, there is an employee self-onboarding feature that is linked to a self-service portal that provides self-service access – for the employee – so that the employee can review and verify his/her personal details in the payroll form, as well as confirm taxes, pay calculations, and tax filing services.

Gusto allows the employer to run unlimited payroll so that different employees who are supposed to be paid using different schedules can be paid on time.

Also, it provides automatic payroll filing, payroll reporting, tax compliance, benefits management, and compensation administration; as well as supports accounting integrations with accounting software such as QuickBooks, FreshBooks, and Xero.

It also provides access to Gusto wallet, which is a web-based wallet that allows an employee to save money. Additionally, Gusto comes with an FLSA-compliant time tracking tool, besides providing for deduction management and wage garnishment.

Gusto Payroll offers 4 service plans with no option for a free trial, nor an unpaid plan.

Let’s take a look at them now

Gusto Payroll Service Plans – What’s Included

Gusto Payroll Suite offers 4 service plans with no option for a free trial, nor an unpaid plan. Each of these plans features a base price and an additional fee that is charged on a per employee per month (PEPM) basis.

Any worker, regardless of his/her employee type is considered as an employee in this PEPM scheme. Thus, the SMB pays the same monthly fee if it has 5 W-2 employees or 5 freelancers, or 5 independent contractors.

Relatedly, the number of payroll runs does not affect monthly charges, hence one can run as many payrolls in a month without incurring additional charges.

The 4 service plans are described below, starting from the cheapest plan with the leanest service pack, to the most expensive, service-packed plan:

Regardless of the plan chosen, the setup process is quite straightforward using the multistep wizard with the employer filling in the right details including the company name, business address, employer identification number, and basic information about each employee.

Then the employee can be sent an email to complete the process of filling his/her details through employee self-onboarding.

Gusto allows the SMB to switch between plans. For instance, the Concierge Plan is good for an SMB start-up that lacks an HRM department because it provides templates for job descriptions and employee handbooks that can be used to recruit and organize the initial workforce, and then later the SMB can switch to the Complete Plan.

What’s the Customer Support Like?

Gusto provides a range of support to its clients. To begin with, customer support is provided by customer representatives who are online 24/7.

These representatives are well trained on HRM issues and payroll matters. This means that they can understand the issues the business is facing and propose practical remedies, including benefits selection and some advice on tax laws. Even so, dedicated support can only be provided during business hours.

Secondly, support is provided in form of training. Training enables the client to know how to use the SaaS, as well as optimize it for business operations.

Training is provided through webinars and live online tutorials. There is also written documentation that one can consult, and refer to when need be. Even so, Gusto does not provide any form of in-person training.

The Pros and Cons of Gusto Payroll

Bottom Line

As we covered in our summary at the beginning of the review, Gusto Payroll is a high-quality payroll software suite with a lot of premium functionality for the price.

The long list of pros speak for themselves; not only can you organize all employee tax payments via the software, but you can also easily manage 401K, health insurance payments, benefits, vacation, and leave.

The top-end concierge package offers real-time certified HR support. The team at Gusto will provide HR compliance advice, unlimited HR questions via phone or text, and actionable feedback. There’s also a comprehensive resource center.

Overall, the software is intuitive and the tutorials are good. However, for some users, the suite could prove a little confusing to start with as there is a lot to learn. To this end, it is a shame that no free trial is given so that potential customers can see whether Gusto is the right fit.

That aside, Gusto is still a very impressive payroll solution that will benefit your business once you’re up and running.

An In-Depth Look at Gusto Payroll

This cloud-based SaaS app is developed to provide comprehensive full-service payroll, alongside team management tools, health insurance administration, 401(K)s contribution support, and on-demand human resource support.

It is designed to eliminate the following costs for the client (business/firm/company): the cost of training employees to manage payroll in-house, and the cost of procuring, installing, and maintaining systems and software for processing payroll.

It allows the SMB to pay regular employees, freelancers, and contractors. Also, its algorithm engine and tax processing algorithms factor in the complex payroll legislation that governs payroll taxes.

This software ensures that appropriate payroll taxes are filed accurately and punctually with the applicable tax agencies.

Relatedly, it allows the SMB to run unlimited payroll so that different employees who are employed using different schedules are paid on time.

This enables the SMB to pay the freelancer and contractor on time based on an agreed payment schedule, for example (e.g) semi-monthly or weekly; while salaried regular employees are paid monthly.

Gusto Payroll is ideal for a company that has a maximum of 50 employees. This makes this SaaS well suited for use by sole proprietorships, limited liability companies (LLCs), and S corporations, especially those that have employed contract-based and part-time employees.

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Employee Onboarding and Self-Onboarding

After purchasing a service plan, the employer needs to fill in details about the company, as well as provide basic information about each employee.

This filling of employee details into the payroll SaaS is called employee onboarding. This is because it allows the employer/company to enroll its employee into the company payroll, hence confirming their status as providers of labor services to the company.

Normally, the employer fills in a few details about the employee, and then the employee is sent an email to complete the process of filling in his/her details. This called employee self-onboarding.

This employee onboarding tool allows for employee information aggregation, alongside the provision of work authorization and direct deposit forms.

Therefore, it allows the employee details to be matched to their payroll details, including bank accounts and job level in the company. It also allows for employee enrollment for health insurance, including separate visual insurance and dental insurance.

Moreover, it provides integration for third parties to support 401(K) contributions and workers compensation insurance. The 401(k) plan is a defined-contribution scheme that allows the employer to deduct a specific amount of money from the employee paycheck and then deposit it in the employee pension account.

Gusto allows the employer to easily designate the employee type in the payroll. This feature is available in the employee onboarding platform, and it allows the employer to state whether the employee is a W-2 salaried worker, a freelancer, or an independent contractor.

Taxes

As mentioned, payroll interfaces with the tax aspect of accounting. Therefore, Gusto Payroll must be able to identify the taxes that need to be paid and deduct these taxes from the payroll, and then provide a way for remitting these taxes to the tax authorities.

The main tax authority in the US is the Internal Revenue Service (IRS).

To begin with, ZenPayroll, Inc., is an IRS-authorized software developer for online payroll management solution services.

This means that its Gusto Payroll SaaS has been developed to conform to IRS standards of payroll management. So, what are the taxes that Gusto Payroll is mandated to deduct from the payroll by IRS and sub-federal level tax authorities?

The tax authorities require the employer, through its payroll department, to deduct IRS and state taxes from each paycheck, and then deposit these taxes to the IRS and state authorities in a timely manner, alongside filing well-prepared payroll returns.

Because Gusto payroll is a full-service PPC, it serves as the (outsourced) payroll department for its clients (i.e the employers who use its services).

Therefore, Gusto Payroll is required to deduct employee payroll taxes from the paycheck of each employee. So, which are these employee payroll taxes that the employer must withhold from the paycheck of each employee? These taxes can be grouped into two:

Federal Taxes

These are the federal income tax, social security tax, Medicare tax, and unemployment tax. Unemployment tax is paid by the employer only; while Medicare and social security taxes are employer matching taxes.

An employer matching tax is a tax scheme where the employer remits an equal amount of tax as that (tax amount) remitted by its employee, i.e the employer and employee share the tax burden 50/50.

State Taxes

These are the state income tax, disability insurance (DI), and unemployment insurance (UI). These taxes are state-specific, and there may be additional state taxes.

For this reason, the employer must check if the taxation tools in the Gusto Payroll Suite have been adapted to the appropriate tax requirements in the state where the business is operating.

After withholding these employee payroll taxes, the employer needs to remit (deposit) these taxes to the tax authorities on a scheduled basis.

There are usually 4 schedules; next banking day, semi-weekly, monthly, and quarterly. The schedule that the company/employer should use to deposit these taxes is specified by the IRS, and it is called the IRS schedule.

This IRS schedule is based on the prior record of depositing employee payroll taxes by the company, as well as the amount of taxes (in US$) that needs to be paid by the employer.

For example, a large company that withholds over a million dollars of payroll taxes may be required to deposit these taxes on the next banking day after issuing the paychecks to its employees, while a small company whose employee payroll taxes are less than US$2500 can be allowed to make quarterly deposits.

Paying these taxes in a timely manner is important because the IRS does charge penalties and interests for late deposits. Normally, states follow the IRS schedule.

Tax remittance to the IRS is best done through online tax deposit via the official website of the IRS, www.eftps.gov; while deposit of state taxes can also be done online by using the official online payment service (provided by the state) for depositing taxes.

Alongside tax deposits, the company must also prepare and file the right payroll returns to the tax authorities. Normally, for the federal taxes, the employer needs to file the following federal/IRS tax forms: Form 941 for quarterly tax returns, Form 944 for annual tax returns, Form 940 for unemployment tax returns, and Form W-2 salary expense report.

Direct Deposit

The direct deposit serves as the substitute for paper checks (which require the business to write, print, and distribute them[checks] to employees).

To make a direct deposit of the salaries and wages, the business needs a payment processor – which is provided by Gusto – to make the bulk ACH withdrawal and subsequent ACH deposits.

The business must first make a direct deposit request to allow for ACH withdrawal. The ACH payment processing done by Gusto can take anywhere from 1-4 business days, which means that the employees will receive their salaries at least a day after the company releases their monthly pay.

Relatedly, Gusto does not offer same-day direct deposit. The quickest direct deposit done by Gusto is the next-day direct deposit, which is available in its Concierge and Complete service plans.

When using Gusto to make these direct deposits of payroll, then Gusto operates as the direct deposit provider.

Time Tracking

In the modern workplace, time recording has replaced the traditional timesheet. In Gusto Payroll, time recording is called time tracking.

The payroll SaaS uses integration to receive approved data sent by a clock card machine or electronic Bundy clock. This allows the SaaS to log in how many hours the employee has worked per week, as well as calculate overtime.

Normally, the week in the US is considered as a 40-hour work period, and any hours clocked over this limit is considered overtime which is entitled to overtime pay.

The 40-hour work period per week is set by the Fair Labor Standard Act (FLSA), which also recommends the hourly wages for overtime. Even so, the monthly work period for exempt salaried employees is normally set at 173.33hours.

As expected, Gusto payroll must be able to do accurate overtime calculations based on the formula laid down by the employer.

Permissions and Paid Vacations

Gusto provides the permissions feature that allows the business to track the vacation and leave period of each employee, and include them in their payrolls.

Moreover, the employer can confirm if the vacation is a paid vacation or not. This allows the SaaS to deliver paid vacation dues via direct deposit.

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Components of a Gusto-issued Payslip and Employee Records

As a full-service PPC, Gusto must provide payslips to employees. Likewise, the employee is allowed to view his/her payroll via the paystub or online portal provided by Gusto. This employee payroll is expected to have the following components:

Gross Earnings

It is also called the gross pay, and it is the total monetary compensation the employee is entitled to before any deduction is made. It is usually calculated as:

Gross Pay = Salary/Wages + Bonuses + Overtime + Commissions + Other applicable benefits and earnings.

Pretax Deductions

These are deductions made before the income taxes are paid. These deductions include payments made for insurance, retirement account payments, and payroll tax saving through a tax-advantaged financial account such as a flexible spending account (FSA) or health savings account (HSA). Pretax deductions reduce the taxable income of the employee.

401(K) contribution: It requires the employer to deduct a specific amount of money from the employee paycheck and then deposit it into the approved employee pension account.

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Taxes

This includes both IRS and State income taxes. These taxes can be broadly categorized as payroll taxes and income taxes, though both are included in the payroll.

The payroll taxes are used by the federal government to support its Medicare and Social Security programs, and are listed in the payroll as FICA which stands for Federal Insurance Contribution Act, which mandates the employer to withhold Medicare and Social Security taxes from each employee payroll.

Likewise, the employer pays a share of the payroll tax of each employee, and Gusto has created a cohesive system to ensure that both the employer and employee taxes are deducted and deposited accordingly and in a timely manner.

On the other hand, the income taxes include both the federal and state income tax withholding, along with local state taxes.

These income taxes vary from employee to employee as each employee is taxed based on his/her filing status, taxable income, and allowances elected. The amount of income tax that an employee must pay is determined after this employee fills Form W-4 issued by the IRS.

Reimbursement

This is compensation paid to the employee for his/her out-of-pocket expense, i.e the personal money that the employee spent to purchase an item, pay for a service, or any other expense that was paid for by the employee so as to benefit the business/company.

Normally, this out-of-pocket expense should have been catered for by the business/employer.

Garnishment

This is the monetary benefit awarded by a court, or any legal process, to a creditor. As expected, the money is taken from the concerned debtor and given to the creditor. In relation to payroll matters, garnishment applies as wage garnishment.

Wage garnishment is the court-ordered method that mandates the employer to withhold a specified amount of money from the employee pay and then send this money to a creditor.

It is normally deducted from the after-tax pay. Usually, the wage garnishment is issued for overdue debts such as a credit card bill, tax levies, child support, and federal student loans.

Net Pay

This is an actual payment that the employee receives. It is also called the net amount, and it is calculated as follows:
Net Pay = Gross Pay + Reimbursements – Total Deductions (inclusive of wage garnishments) – Total Taxes.

Gusto Payroll also supports employee benefits including vacation/holiday pay, sick pay, and other miscellaneous payments.

Taxes are considered as mandatory payroll deductions that must be taken from the gross pay of the employee. The other deductions mentioned above are regarded as voluntary payroll deductions. The voluntary deductions can be pretax deductions or after-tax (post-tax) deductions.

The employer is expected to pay a share of the payroll taxes. These taxes are FICA, Medicare, and the unemployment tax (UT). The first form of UT is stipulated in the Federal Unemployment Tax Act (FUTA) and is called the FUTA tax, which is filed through Form 940.

The second form of UT is stipulated in the State Unemployment Tax Act (SUTA) and is called the SUTA tax. Gusto payroll processing ensures that both the employer and employee submit the necessary tax forms for the FICA, Medicare, FUTA, and SUTA taxes, along with depositing the appropriate taxes with the right tax agencies.

As expected, the payroll taxes paid by the employer need to be accounted for in the financial report of the company/business, and this requires preparation of reconciliation reports and filing of payroll tax returns.

The preparation of these reconciliation reports and filing of these tax returns can be done through the Gusto payroll processing system.

W-9, W-2, and 1099

As mentioned earlier, Gusto allows small businesses to hire freelancers on part-time contract or as W-9 employees. Hiring such freelancers exempts the employer from contributing to employee taxes, both payroll and income taxes.

About the W-9 employee, the employee is required to file his/her tax returns on Form W-9 issued by the IRS, and the employer is not required to remit taxes on behalf of this employee. Another fact, the employer does not pay FICA and Medicare taxes for this employee.

As expected, Gusto Payroll System provides provisions for creating payroll for freelancers, as well as excluding the employee payroll taxes for these unique group of employees.

Gusto payroll also provides 1099 and W-2 Support. The 1099 tax form is used by an SMB to report any payment that it has made to any independent contractor. This is because the SMB is not required to pay taxes on this payment, rather it is the independent contractor who is taxed.

This is similar to the W-9 employee. On the other hand, the W-2 employee is that standard salaried employee whose payroll taxes have been described above.