A beginner's guide to payroll software

What are the advantages of payroll software? Samantha Skyring FCCA ACIPP MAAT of TaxAssist Accountants explains what to look out for when choosing the right payroll for your business.

Payroll Software

When do you need payroll software?

Running a payroll for any business is a complex and time-consuming process as it needs to be Real Time Information (RTI) compliant, as well as meeting workplace pension challenges and legislation changes made by HM Revenue and Customs (HMRC).

There have been so many changes to payroll over the years, the most recent was the introduction of automatic enrolment for pensions. This change alone increased the time payroll takes but also the costs involved. If you don’t have a streamlined process it could waste days of your time trying to comply.

It’s therefore almost impossible to deal with these without the support of suitable payroll software. It will ensure your employees are paid on time but, more importantly, it will ensure you comply with the rules to remain compliant and will save you money in the long run.

What are the advantages of payroll software?

There are several clear advantages for investing in payroll software. Here are just some of the main benefits to using a good software:

  • Compliance

The creation of Real Time Information (RTI) has forced businesses to provide data at the time of payments made to employees via payroll software, resulting in increased scrutiny on business owners and their payroll practices. Not only that, the implementation of auto-enrolment workplace pension schemes, making it compulsory for business owners to enrol eligible staff into private pension schemes, has also raised the stakes in terms of payroll compliance.

One of the main benefits of payroll software is knowing it will calculate things correctly and it will prompt you as an employer to comply with compulsory legislation to help you ensure you stay on top of things.

  • Cloud functionality

Most good software now has cloud functionality, meaning as an employer, you have access to real time information at your fingertips to help you keep on top of your finances.

Your employees can typically log in to access their payslips and any important forms they may need. Some software will allow employees to submit hours worked, request holiday and even log sickness. Such features therefore remove any long-winded manual processes and put less pressure on you as an employer.

As your employees can submit data to you through the cloud it also ensures the payroll function can be run seamlessly from anywhere in the world.

  • HMRC-approved

Another plus point of using payroll software is that HMRC has a list of approved payroll software. These software packages have been designed specifically to improve the efficiency of payroll reporting for business owners, allowing them to keep on top of their payroll requirements and comply with the latest legislation.

  • HR documents

It’s also possible to use a payroll software portal to act as a digital ‘hub’ for your company’s sensitive HR documentation. Placing all relevant employee documentation (such as company handbooks, contracts, newsletters or training material) in one secure hub can reassure staff when they need it the most.

  • Changing legislation

Arguably the most important aspect of using software is the knowledge that your business will always comply with the latest payroll legislation (providing you follow its instructions).

  • Save time and money

Last but by no means least, payroll software can not only save business owners time but money too. Naturally, an intuitive software can reduce staff time spent on the payroll but also will help them avoid unnecessary mistakes and therefore reduce any potential costly fines from HMRC.

What are the disadvantages of payroll software?

There aren’t many disadvantages to payroll software, but there are some areas users should be aware of:

  • Not all payroll software is the same

As with most software, they all have individual pros and cons, so you will need to find a software package that suits your business’ needs. Some will have cloud functionality, others have a portal for sensitive data distribution, while some have better warning systems to help you keep on top of things. Therefore, it’s important to work out what functions you want out of your software before choosing.

  • It cannot do everything

As much as an intuitive piece of software can really take the hassle and most of the worry out of your payroll process, it cannot spot all issues. If you incorrectly enter the wrong hours or forget to look at the prompts within the software, you can still make mistakes and potentially become non- compliant. As such you still need someone who knows what they are doing to use it properly and get the most out of it for you.

If you don’t have a staff member who can do this you should look at completely outsourcing your payroll, so it’s all done for you by a payroll provider. It is more expensive, but you also don’t have to worry about payroll at all and can completely focus on your business.

How much does payroll software cost?

There is some free payroll software out there providing you have 10 employees or less but unfortunately this software generally isn’t as intuitive as the others.

Each software is different, but generally the more comprehensive its functions, the more expensive it becomes. Some can start as low as 35p per payslip, but for a good intuitive product for a small business, you can normally expect to pay around £100 for the year, possibly more depending on what you want out of it.

Should I invest in payroll software?

It’s recommended that any business which has to run payroll should invest in some good intuitive software. The money you save from being efficient and reducing the potential for mistakes will ensure the product pays for itself.

Ask yourself if you want to do your own payroll in house (in which case buy a good payroll software) or do you want to outsource the whole function? This depends on your preference, resource availability and finances.

Before investing in software, work out what you want to do first. If you are looking at software packages make sure to understand what you want to get out of it and don’t be afraid to try some demo versions and see which ones you prefer.

About the author

Samantha Skyring FCCA ACIPP MAAT is the Group Training and Communications Manager at TaxAssist Accountants, a UK wide network of small business focused accountants supporting over 78,000 small businesses across 375 locations.

See also

Why outsourcing payroll is increasingly making sense for small businesses

Gender pay gap reporting: what employers need to know in 2021

Find out more

Find payroll software (GOV.UK)

Real Time Information support for software developers (GOV.UK)

Image: Getty Images

Publication date: 25 February 2021

Any opinion expressed in this article is that of the author and the author alone, and does not necessarily represent that of The Gazette.