I don't see how this could be provided for free. The regulations to comply with like employment laws in 50 states, tax jurisdictions down to county/city level including weird things like percent time worked in NYC but reside in Conn, etc. would require a massive undertaking to build.
Not that massive. It is all table driven. Weird things like time worked in NYC but reside in Conn is usually a simple ratio applied to the proper tables.
It doesn't all need to be "for free". People will pay for support/service with things like setup, reporting, table updates and payments.
I would say of all things to have a free plan - Payroll isn't something I would mess with if I was a business owner. Its also an all-or-nothing service since there are a lot of compliance things that need to be done. Its not like if the State government wants reports to ensure compliance that you say "oh I'm on the free plan and don't have reports". Same goes for collecting and paying taxes, etc.
Calculate the net pay etc. while being compliant with federal/state regulations only, or automate payments to employee accounts as well? What is the minimal value that such saas can provide to get massive number of users?
With the new FedNow service, some banks are offering cash managment software that allows direct transfer to employee accounts. A payroll system may only need to interface with these.