Employee count, compensation, benefits, and taxes are all key components of payroll, the process of paying your employees. Changes in the economy, employees’ priorities, and technology shape everything from how you run payroll to your payroll costs. Are you staying on top of the latest payroll trends?
This article provides the data you need to understand the current state of small business payroll. Learn about employee wages and expectations, how businesses process payroll, and more to help you prepare for running payroll in 2026.
- Wages: Average hourly earnings were $37.17, and weekly earnings were $1,274.93 in January 2026; compensation rose 3.4% year-over-year.
- Workforce: Small business payrolls expanded slightly, with a 0.5% increase in workers added to payroll in February 2026.
- Benefits matter: Most workers factor benefits into job decisions; access to health insurance, paid time off, sick leave, and retirement plans is common.
- Processing payroll: Many small businesses rely on software or external firms; payroll taxes remain a top administrative and financial burden.
- Pay frequency: Biweekly is the most-used pay schedule, followed by weekly.
- Pay methods: Direct deposit is the dominant way employees get paid; alternatives like paycards and paper checks remain options.
- Risk: IRS penalties for employment tax issues are substantial.
- AI: Expect more automation, compliance tools, self-service, and flexible pay options (e.g., earned wage access) to reduce errors and meet employee expectations.
Skip Ahead
- 2026 Payroll trends: How much are employees paid in 2026?
- How many employees are on payroll?
- How important is pay transparency?
- How important are employee benefits?
- How do small businesses process payroll?
- How often do employers run payroll?
- How are employees paid?
- How much are payroll penalties?
- What is AI’s impact on payroll?
- More 2026 payroll trends to watch
- Patriot’s payroll software
- FAQs
- Sources
2026 Payroll trends: How much are employees paid in 2026?
Employee pay is generally rising in 2026. But by how much?
- $37.17. is the average hourly earnings workers received in January 2026
- $1,274.93 is the average weekly earnings workers received in January 2026
- Employee compensation increased by 3.4% year-over-year in December 2025, outpacing the 2026 cost of living adjustment of 2.8%
- Salary increase budgets are projected to be between 3.2% and 3.5% in 2026
How many employees are on payroll?
The small business workforce is growing slightly, according to recent data. How quickly is the number of employees on payroll increasing, and how many workers do small businesses employ?
- In February 2026, there was a 0.5% increase in workers added to payroll
- 49% of small businesses have between 1 and 4 workers
How important is pay transparency?
Demand for increased pay transparency continues to rise. Here is some of the latest pay transparency data, according to a 2026 survey:
- 44% of job seekers are unlikely to apply to a job posting without a listed pay range
- 45% say not listing pay is disrespectful
- 90% say pay transparency affects whether they feel valued as a worker
How important are employee benefits?
Knowing what workers want is the cornerstone of building a competitive employee benefits package:
- 63% of job seekers look for benefits in job ads
- 81% of employees cited benefits as an important factor in whether they accept a job
What kind of benefits do employees have access to in the workplace?
- 86% have access to employer-sponsored health insurance
- 80% have access to paid holidays
- 79% have access to paid vacations
- 78% have access to paid sick leave
- 67% have access to defined contribution retirement plans
How do small businesses process payroll?
Running payroll can be a burdensome process for small businesses. The National Small Business Association’s (NSBA) 2025 Small Business Taxation Survey found the following:
- 21% of small businesses use a third-party software to run payroll
- 34% of small businesses use an external firm to run payroll
- 46% of small businesses spend 1 – 2 hours administering payroll taxes per month
- 50% of small businesses spend more than 3 hours administering payroll taxes per month
- 25% of small businesses spend $100 or less per month on payroll services
- 37% of small businesses spend between $101 – $500 per month on payroll services
Frustrated by payroll taxes? You’re not alone. Payroll tax is the second most burdensome tax for small businesses in terms of administration burden (15% of respondents) and financial burden (19%). You can simplify this responsibility with payroll software.
To help you choose the right option, read our guide to the best payroll software for small businesses so you can compare features, pricing, and fit.
How often do employers run payroll?
The majority of employers run payroll once every other week, or a biweekly pay frequency, according to BLS data.
Here’s a breakdown of how many times employers run payroll per year and how many businesses use each pay period:
| Pay Period | Number of Paychecks Per Year | How Many Businesses Use It |
|---|---|---|
| Weekly | 52 | 27% |
| Biweekly | 26 | 43% |
| Semimonthly | 24 | 19.8% |
| Monthly | 12 | 10.3% |
How are employees paid?
Most employers pay employees via direct deposit, an electronic funds transfer (EFT) between the employer’s and employee’s bank accounts.
- 93% of employees receive their wages via direct deposit
Alternatives like paycards and paper checks are still used, and some employers are exploring on-demand pay options through third-party providers to give employees earlier access to earned wages.
Did You Know? Patriot Software offers a free direct deposit service!
How much are payroll penalties?
Employers can incur hefty payroll penalties for failing to file, pay, or deposit employment taxes.
Failure-to-file penalties have a maximum penalty of 25% of the tax. Failing to pay payroll taxes has a maximum penalty of 15%.
- In 2024, the IRS assigned over $26 billion in civil penalties due to employment tax problems
What is AI’s impact on payroll?
Artificial intelligence (AI) has its claws in all aspects of humankind, including business.
How will the use of AI, specifically generative AI (aka AI that creates new content like text, images, and videos), impact payroll?
- 46% of survey respondents said that generative AI use would decrease HR headcount by at least 3% over the next three years
- 12% of smaller organizations established employee incentives that reinforce generative AI
Beyond headcount effects, some payroll teams use AI to:
- Automate routine checks
- Improve compliance monitoring across states and localities
- Forecast payroll spend and cash needs
- Power employee self-service (tax forms, PTO balances, etc.)
Keep in mind that human review and robust data controls continue to be essential for accuracy and privacy.
More 2026 payroll trends to watch
- Automation becomes standard: More small businesses adopt software to automate calculations, filings, and multistate compliance to reduce costly errors from manual processes.
- Proactive compliance: Changes in minimum wages, overtime thresholds, and leave laws continue to change. Tools that track jurisdictional rules and document policies help avoid penalties.
- Flexible pay access: Interest in on-demand pay (earned wage access) and multiple payout options continues to rise, alongside strong demand for employee self-service portals.
- Platform consolidation: Integrated HR, payroll, and time systems provide real-time analytics, increase cohesion, and better support diverse workforces (e.g., contractors and hybrid teams).
Patriot’s payroll software
Patriot’s payroll software is built to reduce complexity, save time, and help you stay compliant. Core features include:
- Fast payroll runs with automated calculations
- Free direct deposit (or printable checks)
- Employee self-service portal (pay stubs, W-2 access)
- Time and attendance add-on for accurate hours
- Multi-state payroll support
- Integrations with Patriot’s accounting software
Choose the plan that fits:
- Basic Payroll (you handle tax filings): Best for owners who want low cost and control, and have simple single-state needs.
- Full Service Payroll (we file and deposit taxes for you): Best for teams that want hands-off tax compliance, multi-state coverage, and year-end filings (W-2s/1099s).
Compare features and pricing in our guide to the best payroll software for small businesses, or explore Patriot’s payroll.
FAQs
Biweekly (every other week) is the most common, followed by weekly. See the pay period table above.
Direct deposit is the dominant method, with the vast majority of employees using it. Alternatives include paycards and paper checks.
Choose a schedule that fits your cash flow and workforce (biweekly and weekly are popular). Be consistent and follow state rules on pay frequency.
The IRS assesses penalties for failing to file, pay, or deposit employment taxes. Failure-to-file can reach 25% of tax due; failure-to-pay can reach 15%.
Software automates calculations, helps manage taxes and filings, reduces errors, supports multi-state rules, and offers employee self-service, saving time and lowering compliance risk.
Many spend several hours each month on manual payroll tax administration; using software or full-service providers reduces that time.
Yes. Patriot provides free direct deposit. You can also print checks if you prefer.
Sources
- Bureau of Labor Statistics (Average Hourly and Weekly Earnings): https://www.bls.gov/news.release/empsit.t19.htm
- Employment Cost Index (ECI): https://www.bls.gov/news.release/pdf/eci.pdf
- Social Security Administration COLA: https://www.ssa.gov/cola/
- Grant Thornton Salary Increase Projections: https://www.grantthornton.com/insights/newsletters/tax/2025/hcb/sep/compensation-planning-for-2026
- Patriot Small Business Payroll Index: https://www.patriotsoftware.com/payroll/small-business-payroll-index/
- Patriot Pay Transparency Survey: https://www.patriotsoftware.com/blog/payroll/pay-transparency-hiring-survey/
- Pew Research (Small Business Employment Size): https://www.pewresearch.org/short-reads/2024/04/22/a-look-at-small-businesses-in-the-us/
- NSBA 2025 Small Business Taxation Survey: https://www.nsbaadvocate.org/_files/ugd/fec11a_47db693e25e4493aa276dff4078f249c.pdf
- NACHA (Direct Deposit usage): https://www.nacha.org/news/direct-deposit-stays-top-new-survey-getting-paid
- IRS Civil Penalties (Employment Tax): https://www.irs.gov/statistics/collections-activities-penalties-and-appeals
- McKinsey, The State of AI (HR impacts): https://www.mckinsey.com/capabilities/quantumblack/our-insights/the-state-of-ai
- BLS (Length of Pay Period): https://www.bls.gov/ces/publications/length-pay-period.htm
- BLS, Employee Benefits in the United States (context for access rates): https://www.bls.gov/ncs/ebs/
The biggest payroll trend of 2026 is ditching your payroll provider for Patriot Software. Patriot’s payroll software is fast, easy, and affordable, saving you time and money.
This article has been updated from its original publication date of May 19, 2025.
This is not intended as legal advice; for more information, please click here.
