My employer uses Trinet: http://www.trinet.com/. Essentially, we outsource all of our HR functions like payroll and health insurance to them. Though we've grown quite a bit over the last 10 years, we've used Trinet since back when we had as few as two full time employees.

I can't speak to the cost side since that's not my domain, but as an employee I think they've been pretty great. It's also a huge benefit to our company not having to hassle over HR-related management issues.