Best Payroll Software for Small Businesses in the UK
If you’re a business owner in the UK, then you know that payroll is a critical part of your operations. But with so many different payroll software options available, it can be difficult to decide which one is right for your company.
In this blog post, we’ll compare and contrast some of the best payroll software options for small businesses in the UK. We’ll also discuss some of the key factors you should consider when making your decision. So if you’re ready to learn more, keep reading!
What is Payroll Software?
Payroll is the process of calculating payroll for your employees, including wages, taxes, and deductions. Payroll software automates this process for you by doing all of the PAYE tax calculations and tax filings on your behalf. This allows you to save both time and money while ensuring that payroll runs smoothly and efficiently.
Why is Payroll Software Important for Small Businesses?
As a business owner, payroll can be one of the largest expenses you have. In fact, it’s estimated that payroll typically accounts for 15%-35% of your total annual sales revenue. This means that if you’re looking to grow your company and increase profitability, then payroll should be a key focus area.
By using payroll software to automate this process for you, you’ll save time and money while ensuring compliance with all relevant laws and regulations. With so many different payroll software options available today, it can be difficult to know which payroll software is the best payroll software for small businesses.
What are the Payroll Challenges That Small Businesses Face?
Payroll procedures can be really challenging regardless of business size, most common challenges that business owners cite include:
Manually carrying out the payroll is time-consuming and a very lengthy process. Much paperwork is involved in manual payroll, which creates a burden on HR and increases the probability of human errors.
The payroll process is a highly regulated area, and any discrepancy in payroll can cause penalties, fines, and a bad reputation for the company.
The payroll process also facilitates payroll fraud chances as an opening for employees to misuse their position against the business ethics/policies.
Tracking Employee Absence
The requirement of keeping track of your employees’ absence from work gets more complicated as you have a team of different departments working at different times with different schedules.
Paper time cards and simple digital timesheets can be misused and cause unintended errors.
Under or Overpayment Issues
It’s important to stay compliant with payroll laws, but sometimes errors can occur that result in underpayment or overpayment of your employees. Without proper payroll software, this process is usually done manually by payroll professionals which can create a huge payroll headache for you.
Every business might have different payroll requirements, accounting policies changes etc., so it becomes difficult for payroll professionals to manage the whole payroll procedure efficiently.
For companies where payroll requirements are dynamic and fluctuate frequently, payroll software can be useful as it caters for dynamic payroll needs at a low-cost rate compared to hiring an individual full time on payroll
Lack of Privacy and Confidentiality Issues
When you hire new employees, you’ll need to create payroll accounts for them. This process requires you to share employee payroll details with the payroll company, which can be a breach of confidentiality that is not an option in some cases.
For example, the payroll data of employees should remain confidential between them and the payroll service provider in case a wrongful termination case occurs.
Keeping payroll records is important to ensure compliance with government regulations and to maintain ideal employee-employer relationships, but it’s time-consuming and tedious especially when there are frequent changes in policies by any one of your employees or by your payroll partner.
Because of the wide range of services provided by payroll departments, there is more opportunity for payroll fraud to occur within payroll departments compared with other departments.
Changes in payroll policies or payroll providers can cause a lot of confusion if not managed efficiently. With payroll software, you can manage payroll changes easily at low-cost rates compared to hiring an expert payroll professional on payroll
Lowering Payroll Cost
Premium payroll software helps businesses reduce their payroll costs by offering technology solutions that automate time-consuming tasks and reduce the reliance on human resources.
For example, with premium payroll software, you have access to a wider range of features such as automated tax calculation, flexible deductions etc., which incur a one-time license fee rather than hourly fees for each employee.
Most countries have strict tax compliance rules around the world and any negligence in this area can lead to heavy financial penalties or imprisonment which can be a payroll nightmare for your business.
How Does a Payroll Software Tackle These Challenges?
Compatible payroll software helps small businesses in tackling the most common payroll challenges.
This feature is available in some payroll software solutions. It allows employers to manage sick leave, overtime, and absence. Employers can see the details of leave at a glance, such as how much leave employees are entitled to and what type of leave they are currently on.
It’s important to keep payroll data secure and in compliance with payroll laws at all times. With payroll software, payroll professionals can use advanced security features which ensure your payroll information is encrypted and well protected.
Access and Work From Anywhere:
Some payroll software solutions are accessible online whether you use Windows or Mac operating systems, or if you prefer to access your payroll system via smartphones or tablets. This makes it easier for employers when they need quick access to their payroll records instead of searching through emails when checking out leave balances, hours worked etc.,
Since tax requirements vary depending on the location of employees, payroll service providers must be able to handle the complexity that comes with payroll changes. Payroll companies or professional accountants help small businesses easily manage payroll tax updates.
Small businesses get access to payroll software that is affordable compared with hiring payroll professionals on payroll. Even if you hire an expert payroll provider, they usually charge payroll rates per payroll or by the hour which can add up quickly in the long run.
With payroll software, you have ready access to a range of features in one package at low-cost rates. If you outsource your payroll accounting agency you can further reduce the cost of having an active department.
Avoid Making Mistakes:
Some payroll service providers make it easy for employers to avoid costly mistakes when handling payroll matters such as entering wrong information into payroll records or failing to double-check that all calculations are accurate when creating payslips.
For example, some premium payroll software solutions provide real-time support services where experts are available 24/7 to quickly resolve payroll issues before they escalate.
A payroll service provider offers local payroll customer services with payroll expertise on payroll tax laws that are unique to the countries where your employees are based.
For example, payroll providers of small businesses can help employers handle payroll matters by dealing directly with HMRC for all types of payroll queries. They can also offer employer payroll advice on deductions including income tax, NI contributions etc., so you have access to expert guidance when it’s needed most. This ensures you meet payroll rules and regulations at all times while saving time for your business overall
You don’t need a dedicated accountant or an extra employee to create customised payslips as premium payroll software solutions offer payroll services of payroll professionals at low rates so you can keep payroll costs down.
Self-service payroll helps small businesses save more time on payroll tasks. Spend less time calculating payroll and more time on expanding your business by hiring employees, creating new products or offering better customer service.
This is because payroll software makes it easy to complete payroll tasks even if you don’t have accounting skills or payroll expertise which means more productivity for your business overall
Some payroll service providers make it easy to set reminders for payroll deadlines so you can avoid missing payroll tax returns and other payroll tasks.
What Are The Best-paid Payroll Software That Small Businesses Can Use For Payroll Solutions?
Several software are used by small businesses in the UK according to their payroll needs. However, software like gusto, square payroll, and patriot payroll provide facilities to US-based firms.
QuickBooks is primarily used by small businesses and self-employed people. It offers
- A cloud-based payroll software so employers can stay compliant and pay their employees from anywhere. Unlike manual payroll, there is no restriction of time or place.
- Tax return submissions directly to HMRC. Employees can change their data and address through the portal and access payslips which can also be printed off.
- Automate subtractions of contractors and subcontractors and directly file the construction industry’s tax schemes to HMRC.
- Employers to manage the leave, expenses, and timesheets of employees.
- Xero is not just an accounting software as it provides much more than that.
- Xero payroll is a software solution for payrolls that is cloud-based. It allows employers to calculate payroll taxes, print payslips, and file payroll information. The system essentially calculates payroll liabilities in real-time, allowing you to spend less time on payroll management.
- It offers payroll integration with HMRC so payroll providers can save your payroll records and ensure that tax returns are completed in full and precisely
- Its dashboard provides complete control of employees’ options such as leave requests and expenses.
- Businesses using Xero payroll can simply add suppliers who provide invoices, generate estimates for work orders, and manage bills and expenses all from one place. This also helps them determine how much they should charge clients
- Using Xero payroll, employers can create payroll items, which are required to process payroll. Payroll items help them generate a number of payroll reports and payroll history.
A cloud-based payroll service provider for small businesses in the UK.
- It is the only payroll that provides full integration with HMRC’s real-time PAYE system.
- All UK payroll providers will charge you an extra fee if they have to file your tax return late, while BrightPay does it for free! Brightpay offers benefits such as an automatic emergency tax calculator, deductions wizard, and payslips automatically sent by email or SMS alerts.
- CIS deduction according to the tax status of subcontractors. It also accounts for all the payment types, e.g., basic pay, hourly pay, and daily pay.
- Compilation of payroll data into one file for employers’ convenience. This data is encrypted and can also be protected through a password.
- Keeps track of HMRC payments on a monthly or quarterly basis and also supports the employment allowance claim.
- The software saves hundreds of hours every year by automating regular payroll tasks like wage slip printing or payroll reports generation.
- Its payroll also offers a secure online portal that allows employees to access payslips and change address details whenever they need to.
- Moneysoft, the payroll software for small businesses in the UK, provides full payroll management from end to end. It is essentially used by SMEs in order to automate payroll processes and payroll calculations, according to HMRC payroll guidelines.
- Moneysoft is HMRC recognised payroll software compliant with RTI submissions. In the tax year 2018/19, more than 1.5 million RTI submissions were filed through Moneysoft.
- It is the only payroll software that is able to handle payroll for unlimited employees, including part-time and temporary staff.
- Moneysoft payroll also comprises features like automated payroll calculation based on business rules, payroll reports with graphical viewing option, statutory report generation along with filing of all returns at both monthly and quarterly frequencies.
- It supports payroll management for all payroll types such as PAYE, CIS payrolls, and real-time payroll reports that can be used by employers to check their payroll software performance.
- Automation of the process of subcontractors’ CIS payments, CIS calculations, generation of subcontractors’ verification requests, and monthly CIS300 submission to HMRC.
- Payslips generation and email them to the employees, print on either plain paper or pre-printed forms.
- Automatic calculation of statutory sick pay(SSP), maternity pay(SMP), paternity(OSPP, ASPP) and adoption (SAP) pay.
- In short, Moneysoft also facilitates payroll calculation through a number of payroll items, which is why it’s widely being considered one of the affordable payroll software for small businesses.
- The payroll software for small businesses offers payroll services to more than ten thousand UK companies, which is also one of the reasons why it’s known as an affordable payroll software for small businesses in the UK.
- With KashFlow payroll, SMEs can manage payroll for employees with ease and instantly file payroll returns with HMRC. It is totally a payroll management solution delivered to small businesses at affordable costs
- The payroll software for small businesses in the UK allows you to create payroll items, which are required to process payroll. The payroll items help them generate payroll reports and payroll history.
- KashFlow also assists employers with the automatic calculation of payroll deductions, payroll reports, payroll history and payroll forms.
- KashFlow offers payroll calculation through a number of payroll items that include overtime pay items, bonus items, commission items etc., which is why HMRC considers KashFlow as one of the affordable payroll software for small businesses in the UK.
FreeAgent payroll software comprises all the payroll features that employers need to manage their payroll effectively and efficiently.
- It also facilitates simple payroll management with its automation of payroll calculation using different types of payroll items, including standard rate payroll item, junior pay rates payroll item, reduced rate payroll item etc
- Employers can easily create a new employee record or update an existing record on FreeAgent’s payroll system with a few clicks. They can also download payslips and tax summaries from within FreeAgent.
- FreeAgent lets you upload important documents regarding your company such as contracts of employment, end of year returns etc.,
- Automatic calculation of the PAYE and NIC of employees and submitted directly to HMRC.
- Payslips and P60 form generation can be emailed to employees.
- Direct submission of RTIs to HMRC,
- Application for student loans, maternity, and paternity pay.
Sage payroll software is also one of the payroll software that can be used by employers to manage payroll for their employees.
- It’s the payroll software that provides additional payroll features such as payroll calculation, generation and filing of statutory returns, online payroll processing etc.
- sage business cloud payroll offers all the necessary tools required by an employer to support their accounting processes such as the production of payslips and P60s, electronic submission of RTIs along producing reports for checking payroll history and performance
- Apart from this, it facilitates automatic calculation of deductions such as PAYE, NI etc., which makes it more affordable payroll software for small businesses in the UK and also accounts for its wide usage among the SMEs in the country.
- The use of a 4 step payroll run through which employers can automatically send workplace pensions to their employees.
- Payslips and P60s form creation, which can be conveniently accessed by employees from anywhere.
- The fee starts from as low as £6 for businesses with up to five employees.
- Reio payroll is considered one of the most effective payroll solutions that are widely being used by SMEs.
- The payroll management solution allows employers to run payroll with just a few clicks through its powerful payroll calculation process that facilitates the generation and submission of statutory returns along with accurate payroll reports
- It also provides complete control over payroll data via dynamic dashboards so that users can access relevant payroll information whenever they require it. Moreover, Reio offers support services during payroll runs so that employees or business owners can avail guidance from its experts anytime.
- Clear Books payroll software is widely being used by payroll professionals to manage payroll for their clients and is one of the best payroll software providers.
- The payroll solution helps employers with a number of payroll features such as the generation and filing of statutory returns, e-submission of RTIs etc
- It also provides additional payroll features including faster processing times, automated processes with electronic submission, accurate reporting and easy management tools that allow business owners to check payroll data on the go through its dashboards
- Customised payslips, P60s, and P45 forms can also be emailed to employees.
- Pay escape payroll software is becoming the payroll solution of choice for employers to manage payroll efficiently and accurately.
- It can be used by small businesses, micro-businesses and sole traders to help control payroll costs and remain compliant with ever-changing payroll legislation.
- The payroll management tool offers valuable payroll features such as a payroll calculator that facilitates the calculation of statutory payments along with accurate tax deductions in a few easy steps.
- It also generates payslips and P60s for employees or business owners to securely store them online or offline.
IRIS Payroll Application:
- This payroll management tool facilitates statutory payments, generation and submission of RTI online or offline, automatic payroll calculations etc., which makes it one of the best payroll solutions for UK small businesses to manage their payroll easily.
- It also allows employers to generate payslips and P60s through emailing or through its portal, which can then be downloaded by employees or clients anytime.
- Also comes with a free trial version to try before being purchased
Some Low-Cost Payroll Software For Small Businesses
Some free software for small businesses in the UK can also automate the payroll at no cost.
12 Cloud Payroll:
- This payroll software offers its free services to firms with nine or fewer employees.
- Processes the complete pay run based on HMRC RTI PAYE recognised standards.
- Automatically file the returns to HMRC, including EPS, FPS, NVR, and EYU.
- Employers can SMS and email the payslips to employees, which can be printed off. Other reports that can be printed include P60 and P45.
Basic PAYE Tool:
- This payroll software can be used by employers and companies with five employees or fewer.
- It processes payroll calculations and payroll reports, which makes it a free payroll solution for small businesses. Also offers complete payroll software services at no cost.
Stansoft Linux Payroll Software:
Under Stansoft Linux, there is no limit on the number of employees that businesses may have. It offers
- Direct submission of RTI returns to HMRC.
- Payslips generation and Full Payment Submissions to HMRC each time if an employer pays its workers.
- The payroll management solutions are designed specifically for the needs of SMEs with up to 10 employees.
- Users can generate payslips and P60s online as well as produce reports such as EPS, NVR, RTI filing etc. Other features include auto-enrolment compliance support, HMRC RTI submissions and e-file facility etc
- Primo Payroll is an affordable payroll solution that helps small business owners automate their payroll process without investing much in more expensive payroll software.
- It offers payroll services like payroll processing and filing of returns, including RTIs and electronic submissions etc. Its payroll calculator simplifies payroll calculations and reports generation along with the generation of payslips.
- Primo payroll also features a dashboard which is very useful for business owners to check their payroll data on the go.
- With all these options available, one can choose the free payroll software that best suits them depending on specific needs such as the number of employees or compliance ruling etc
Few Things to Consider While Using Payroll Software:
There are quite a few things that you must consider before choosing payroll software for your business.
Know Your Payroll Requirements
This is very important as it will help you decide the payroll software that best fits your payroll needs. For instance, employers who are familiar with using payroll software can go for payroll management solutions that require data to be submitted online or through hard copies. On the other hand, those who are not familiar with payroll should not opt for complicated payroll software and should instead choose affordable ones like Stansoft Linux
Understand What Features You Need
Before buying a payroll management solution, make sure to understand all its features. You may even consider taking demos before making any final decision on which payroll software to buy.
Ensure the Security of Your Data
Data security is one of the most essential factors you must consider while choosing the best payroll software provider. One should look for payroll management solutions that come with these characteristics:
- A secure and reliable payroll system that can protect your payroll data from intruders and hackers
- Calculates statutory pay and can report to HMRC n real-time.
- Data backup and recovery services to ensure no harm is done in case of a crash or natural disaster
- At the same time, it is also important to choose payroll software that offers decent warranties for onsite support or at least communicates maintenance status through timely updates on their website, on social media platforms etc.
Backup Your Payroll Data
A payroll management system can be a great help to take care of payroll tasks. However, as the payroll software manages critical payroll data, it is necessary to ensure that adequate backups are taken and that they are stored in an offline location
Hire Qualified Staff for Running Payroll
If you are not technically savvy or don’t have enough time or resources to manage payroll software on your own, then you must consider hiring qualified staff for running your payroll or you can outsource your payroll system to professional payroll service providers.
There are many payroll management solutions available in the market, but only a few of them are affordable online payroll software for small businesses. One must consider factors like payroll needs, cost of the right payroll software purchase and payroll software maintenance fees etc. before choosing one that best suits your payroll needs
Above all, it is also essential to back up your payroll data regularly to ensure its safety against all kinds of threats. At the same time, data security should not overshadow payroll compliance; business owners should make sure they hire qualified employees or outsource payroll systems to professional payroll service providers who can handle their payroll system with great care and attention.
Jibran Qureshi FCCA is the Managing Director of Clear House Accountants and has over 10 years of experience in practice and across multiple industries. Jibran’s educational background includes a Master’s in Financial Strategy from Oxford University and an Executive MBA from Hult International Business School. His experience in Financial Strategy, Tax Planning, Operational Consultancy and Performance Reporting guide his cognizant approach to leading Clear House and its clients to the future. It was this dexterity that led him to be Enterprise Nation’s Top 50 Advisors.
Jibran is fueled by his passion for helping businesses. He unequivocally believes that as business advisors and accountants for our clients, it is our responsibility to work with them as business partners. As specialists, it is our duty to help our clients navigate through the complexities of constant change and the implications that come with it.
Over the past decade, innovative disruptions have changed the way businesses work, everything from cloud software, and innovative business models, to AI and machine learning, has impacted how businesses operate, grow, and expand.
Jibran recognized the need to manage these disruptions sustainably, early on and shaped Clear House Accountants to not just be compliance specialists, but advisors who help build complex ecosystems around cloud accounting software, provide advice on funding support, help manage innovative tax schemes, set up and implement complex strategic plans, and much more. So, his clients can thrive, not just survive.
Jibran developed his prime role as the Managing Director to build Clear House’s capabilities so it can add value for its clients. He is of the firm belief that this can be done through consistent high-level training, building the right tools, and creating roadmaps to help businesses cope with prospective disruptions. He envisages that every client that comes on board, is provided maximum value through onboarding, ongoing services and the right mix of tools to help them become the best in the world.