Gusto vs ADP vs Paychex (2025): Multi-State, Multi-Country Payroll for HQ in US/UK

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Why finance teams care right now

Hiring in a new US state is one thing. Adding a designer in London and a contractor in Toronto changes payroll, filings, benefits, and how your GL ties out. If you run finance from the US or UK and expect cross-border growth, the payroll system has to handle complexity without breaking month-end.

What this section covers

A practical evaluation of Gusto vs ADP vs Paychex (2025): Multi-State, Multi-Country Payroll for HQ in US/UK with a focus on:

• Compliance at registration, withholding, and year-end filings
• Contractor onboarding and payments
• Shadow payroll basics for expatriates and short-term assignments
• Integrations to GL, HRIS, time, and benefits
• A selection grid with fit signals and pitfalls

Scope and key definitions

• Multi-state payroll: registering in each US state, tracking local taxes, SUI/SUTA, disability programs, city taxes, and reciprocity rules.
• Multi-country payroll: running payroll or Employer-of-Record (EOR) outside the HQ country, or paying contractors abroad while staying compliant.
• Shadow payroll (high level): when an employee works in another country, a local “shadow” run mirrors taxable income for reporting and withholding. Often required for expats or business travelers who cross thresholds.
• Contractor vs employee: contractors are paid without payroll taxes; misclassification risk rises with long-term, controlled work.

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What to verify before you decide

Compliance and registrations

• US: who handles new state registrations, SUI rates, city forms, and disability programs.
• UK/EU: how PAYE/RTI submissions, pensions auto-enrolment, and holiday pay rules are supported.
• Global: whether payroll is in-country or via EOR, and who signs statutory returns.

Contractor handling

• Capture of W-8/W-9, tax residency, and banking details.
• International payouts with correct invoice and FX treatment.
• Guardrails to prevent misclassification when contractor roles look like employment.

Shadow payroll

• Trigger thresholds per country.
• How hypothetical tax and gross-ups are modeled.
• Journal design to avoid double counting between home and host payrolls.

Filings and year-end

• US federal, state, and local forms; deadlines and e-file capability.
• UK submissions, P60/P45 handling, and pension files.
• Country-specific year-end packages for global runs.

Integrations

• GL: map payroll expense, employer taxes, benefits, and accruals to departments, locations, projects.
• HRIS: single source of truth for headcount, cost centers, approvals.
• Time: hourly rules, overtime, and meal/break compliance.
• Benefits: deductions and employer contributions by plan.

Implementation blueprint that avoids rework

Phase 0 — Design

• Define employment models: US, UK, contractor, EOR.
• Build the payroll chart of accounts and dimension rules.
• Approvals RACI: who hires, who changes pay, who approves runs.

Phase 1 — Configure

• Set entities, states/countries, and earning/deduction codes.
• Connect HRIS, time, benefits, and GL.
• Create a parallel-run plan for two cycles.

Phase 2 — Validate

• Run two parallel cycles; tie totals to legacy system.
• Reconcile taxes, benefits, and FX effects.
• Sign off on GL postings and variance tolerances.

Phase 3 — Operate

• Close calendar with cutoffs per time zone.
• KPI pack: on-time run %, retro % of payroll, off-cycle count, error rate, support MTTR.
• Quarterly access review and audit log check.

Pitfalls and how to handle them

• Misclassification: long-term “contractors” managed like employees. Use a checklist and keep term limits.
• State surprises: local taxes and disability programs missed at registration. Maintain a state matrix.
• Double taxation on expats: shadow payroll not configured. Set traveler thresholds and alerts.
• GL drift: payroll journals posted without dimensions. Enforce mapping and lock COA changes.
• Data privacy: payroll files downloaded locally. Use role-based access, MFA, and VDI for offshore teams.

Decision patterns by scenario

• US-only growth with light international contractors: Start with Gusto for speed; add contractor payout controls and later evaluate EOR per country.
• US + UK headcount, multi-state, and plans for 3–5 more countries: ADP offers a scalable path with global options and stronger controls.
• US-centric, many hourly staff, want high-touch service or PEO: Paychex fits well; verify any international needs through partners or EOR.

Quick wrap-up

Pick the system that matches your employment model and jurisdiction footprint, not just today’s headcount. Confirm who is the legal employer in each country, how filings get signed, and how payroll hits your GL by department and project. Run parallel tests, lock the mapping, then scale.

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