All employers are required to submit PAYE information online each time they make a payroll payment under HMRC's Real-Time Information (RTI). RTI-compliant payroll software makes it much easier to manage PAYE
**Note: prices correct on 01/10/24 (limited-time offers may be available)**
You must be able to report PAYE information to HM Revenue & Customs (HMRC) online, in 'real time' – on or before each payment is made. So you should choose payroll software that is recognised by HMRC. But that still leaves a huge number of different options to choose from.
There's a wealth of fantastic payroll software for small businesses designed to make the promised reduction in paperwork a reality. The right payroll software makes it much easier to calculate tax and National Insurance deductions, file reports with HMRC, make payments and keep records. What's more, what was once enterprise-only software is now available to those with smaller budgets and even fewer HR resources. So, which option is right for you?
Here's our quick guide to what to look for, and our review of some of the best packages.
Find out more about these popular payroll packages:
1. Sage Business Cloud Payroll
Sage has long been a market leader in business software, and their payroll software is admirably approachable for micro and small businesses.
Best all-rounder:
From £10 per month for Payroll Essentials (up to 5 employees then £2 per month for each additional employee) | Easy-to-use and ideal for existing Sage Accounting users
Key payroll features
- From £10 per month for Payroll Essentials up to £30 for Payroll Premium (up to 5 employees)
- Additional employees can be added from £2 per month (depending on the package taken)
- Automatic payroll tracking in Sage Accounting
- Automatically handle employee pension enrolment
- Easy to share data with your accountant
2. Pento payroll sofware
Modern design and great customer support make this a great alternative to a payroll bureau for medium-sized businesses.
Best for growth businesses:
Pricing on request | Modern design and great customer support for simple, flexible automation
Key payroll features
- Designed for simple and flexible payroll automation
- Integrations including Xero and QuickBooks
- Pensions automation with NEST, The People's Pension or Smart Pension
3. Rippling payroll software
Everything larger businesses need to manage their workforce.
Key payroll features
- custom quotes according to needs
- Powerful syncing of time, expenses and benefits for full payroll automation
- Flexible automation and reporting
- Wide range of accounting, banking, expense management and other integrations
4. Payroo payroll and pensions
Designed to combine payroll and pensions, with the flexibility to work with multiple pension providers.
Key payroll features
- From £5 per month (1-2 employees), £10 (3-5 employees), £15 (6-9 employees) upwards
- Combined payroll and pension system
- Optional CIS functionality
5. Staffology by Iris
A full range of accounting and human resources software with the potential to grow with your business.
Key payroll features
- From £35 per month (up to 20 payslips) with additional payslips costing extra; detailed package pricing according to needs
- Only pay for the playslips you need
- Call to discuss demo, trial and pricing
- Includes handy HR tools including rota planning, timesheets, expenses and performance management
6. MyPAYE payroll software
Easy but powerful pay-as-you-go solution, with the option to take advantage of integrations with leading pension providers.
Best for micro-startups:
From £1 per month per employee | Pay-as-you-go pricing and integrations with leading accounting software
Key payroll features
- From £1 per month per employee
- 30-day free trial
- Accounting integrations include Xero, QuickBooks and KashFlow
- Additional options include pensions and auto-enrolment, timesheet and expenses management, CIS
7. Deel payroll
Powerful global payroll, HR and compliance platform, ideal for businesses using remote contractors in multiple countries.
Key payroll features
- Deel global payroll from $29 per month
- Deel contractor from $49 per month for international contractor management and payroll; custom quotes for full global payroll
- Fully managed service covering more than 100 countries
- Strong support including in-house specialist payroll and compliance advisers
- Integrations with leading HR and accounting software packages
8. Papaya payroll
Global payments and payroll services across more than 160 countries, aimed at larger companies.
Key payroll features
- Global payments $2.50 per transaction
- Full service payroll from $25 per month per employee (101-500 employees)
- Sophisticated instant payments functionality in multiple currencies and countries
- Dedicated customer service manager and in-house experts
- Flexible integrations across other HR and accounting tools
**Software features, options and pricing can change at any time, so check the latest information before making a decision. Prices quoted do not include VAT.**
The pros and cons of payroll software
There are pros and cons to any business tool, and payroll is no different.
Advantages of payroll software
- Low monthly fee. These days, software as a service (SaaS) is commonplace and a great payroll system can be implemented at a reasonable cost.
- Full control. Performing the payroll yourself puts you in the driver's seat. You'll have full control over employee wages, taxation and reporting.
- Data security. Outsourcing payroll duties or performing them manually can mean the data isn't always secure and that could only add to your list of worries with new GDPR regulations in place. Data security is always a key feature of payroll software.
- Time saved. Business software is designed to be efficient, helping to save you time compared with manual processes.
- Reduction in errors. If there's one area of business in which you want to avoid making errors, it's those all-important payslips! This major advantage is hard to ignore.
Disadvantages of payroll software
- Learning curve. If you're running a small business, you'll have a colossal to-do list and no matter how easy a piece of payroll software is, it's something else to learn.
- Data access. Most modern payroll systems are web-based. If you find yourself without internet connectivity, you can find yourself without access to your payroll function.
- Vendor risk. Putting all of your payroll eggs into the basket of a software vendor is inherently risky - what happens to your data if they go out of business?
How to choose a payroll software provider
Before you start looking around for payroll software, you should answer the following questions to narrow down the most appropriate vendors:
- Business size: how many people to do you pay on a monthly basis?
- Payment structure: do you have one form of pay or is there a mix of hourly pay, salaried staff and commission?
- Pay delivery: do you pay directly via BACS or by cheque?
- Employee location: are you all based in a single location?
- Scalability: how will your business grow over the next three to five years, and what effect will that have on staff numbers and your wage structure?
- Available hardware/connectivity: what IT hardware do you have to hand and is your internet connection fast and reliable?
- Support: are you relatively tech savvy or will you require assistance?
Decide what payroll software features you require
Payroll software comes in many different shapes and sizes with most taking a modular approach to the features they offer. As well as meeting HMRC's requirements for Real Time Information (RTI), you want to be sure that your software can handle employee pension contributions, including your obligations under auto-enrolment. Ideally, it should be easy to integrate the payroll software with your accounting software and to automate payments as far as possible, making the whole process more efficient.
Be clear about any particular functionality you require: for example, if you have employees who submit timesheets, or subcontractors under the Construction Industry Scheme (CIS).
In practical terms, ease of use is often a key requirement. Look for a package that makes it easy to get started, and check what support is available if you have questions or run into any problems. Larger businesses, with more employees and more complicated requirements, may find it worthwhile to invest more time and money in customising the software to meet their exact requirements.
To help narrow your shortlist down, consider the functionality you require. Here are some of the most common:
- RTI integration. Real Time Information is now required by HMRC for payroll. Any system you choose should have this capability.
- Automation. If your payroll rarely changes, the ability to set automated rules and scheduled payments is a must.
- Real-time calculation. Find out exactly what each employee is being paid (and how they're being paid) at any given time.
- Customisable pay rules. If you regularly pay bonuses, commission or overtime, you'll need a system that can be flexible and handle pay differentials.
- BACS integration. BACS is the most common way to pay people these days, so direct integration is vital.
- Tax filing. National Insurance and PAYE tax calculations are part and parcel of payroll and ideally need managing within the same system.
- Auto enrolment integration. UK businesses are now required to provide auto enrolment to a pension scheme and make payroll deductions.
How to implement a payroll system
Historically, smaller businesses shunned payroll tools, preferring to run a manual payroll setup. However, even the smallest of businesses will be better off using a payroll system.
There are three ways to implement a payroll tool:
- Add a payroll module to an existing accounting system.
- Implement specialised, standalone payroll software.
- Utilise HMRC's free, basic PAYE tools.
The method you choose will depend on your existing accounting systems, the number of staff you employ (and therefore how big a task payroll is) and your budget.
Key questions to ask payroll software providers
Use your payroll checklist and list of requirements to find the best provider. A Google search for payroll software will unveil numerous options, therefore it's important you're armed with the right questions when approaching each vendor. Here are the key things to ask:
- How much does it cost? Is the system based on a one-off license fee or monthly/annual payment?
- How is tax handled? If you get taxation wrong, you'll land your business in hot water. Make sure you drill into the tax capabilities of each payroll system. Most importantly, ask what tax calculations - if any - are left to you.
- Will the system help you comply with pension auto enrolment requirements?
- Device compatibility. Can you access the payroll system on any device, from desktop computer to smartphone? In doing so, do you lose any functionality on smaller-screened devices?
- How far can the system be customised to match the requirements of your business?
- Multi-user access. Can you set up multi-user accounts (check if there's a cost for doing so), with varying levels of access? Is there an employee portal staff can use to download previous payslips and look up pay history?
- What support is offered? Does the system come with direct telephone/online support? Is there a knowledgebase or online video help directory to call on at any time?
- How secure is the service? Where is the data hosted and is it held in compliance with the new GDPR requirements? What up-time assurances are there and are there any fallbacks for when connectivity is an issue?
In summary...
Payroll should never be seen as a burden. It's an essential task within business, no matter how small the organisation, and the new breed of payroll systems, coupled with admirable government-led initiatives means everyone can benefit from solutions designed to reduce paperwork and ensure pay accuracy.