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The best payroll software for small business

Payroll software can make it easier for your business to pay employees and manage the administration around this – eg. tax contributions and payslips. This article will look at what you need to consider when picking out the best payroll software for your business. 

What is payroll software?

If you’re running a business with employees in most cases you’ll need payroll software. Payroll software will enable you to carry out the following tasks:

  • Calculate and deduct PAYE contributions for your employees.
  • Send Full Payment Submission (FPS) reports to HMRC.
  • Create and distribute payslips.

The alternative to using payroll software yourself is to appoint someone else to do it for you. For example, you may choose to save time and effort and pay for an accountant or payroll firm to do it for you. 

 

What do I need to do to use payroll software?

In order to run your payroll, you will need to set up your payroll software with the following information:

  • Employer information provided by HMRC
    • PAYE reference number
    • Accounts Office reference number
  • Employee information:
    • Full name
    • National Insurance number
  • Login details for your online PAYE account
    • User ID
    • Password
  • Employee payment information
    • Weekly or monthly pay
    • Hourly rate

You will normally set up a PAYE account when you register as an employer. If you have yet to do that, you will need to register as an employer via GOV.UK.

1:27

Video: How does PAYE work for employers?

by Informi

Watch the video below to find out more on how PAYE is accrued and paid. The video also demonstrates the concept of an employee’s personal allowance and tax code.

Six of the best payroll software providers for small business

There are a large number of paid-for and free payroll software providers on the market. The full list of HMRC-approved providers is available via the GOV.UK website. 

We’re going to focus on the best payroll products based on popularity, features and customer reviews. 

  • Best for small businesses… Xero
  • Best for startups… QuickBooks
  • Best for simplicity… Sage Payroll
  • Best for larger small firms… MoneySoft Payroll Manager
  • Best for value… KashFlow
  • The best free option… HMRC Basic PAYE Tools

Continue reading below for a summary of each payroll software product. 

Xero

Founded in 2006 in New Zealand where it’s still headquartered, Xero is very well known for its cloud-based accounting software. Xero Payroll “not only manages the tasks you have to do, it automatically updates your accounts and creates HMRC submissions, too”. It’s marketed as payroll software that offers “all the tools you need”.

Cost:

Free for your first three months with any Business Edition plan. Thereafter, £5 for up to five payroll employees per month, + £1 for each additional employee a month, to a max of 200.  

Key selling points:

  • “Makes it easy to track employee time and leave, process pay and pensions and report the right information to HMRC”.
  • Easy to make adjustments.
  • Automatic tax and leave calculations, with accounts also updated.
  • Simple RTI submissions to HMRC.
  • Securely accessible from any device.
  • Easy to customise and designed to save business owners time.
  • Employees can use the app to provide timesheets or request holiday leave.
  • 30-day free trial.

Support:

Xero has an extensive portal called Central that features guidance on a wide range of accounting and payroll subjects. Xero also provides unlimited free 24/7 online support to subscribers.

Customer review:

“Having our payroll and accounting in one system is priceless.”

Clemi Hardie – Founder of Noodle Live

Find out more about Xero Payroll.

QuickBooks

Developed and marketed by Intuit, the company founded in California in 1983, cloud-based accounting software QuickBooks is used by millions of small businesses throughout the world.

With the Quickbooks’ payroll add-on you can: “Save time with our smart payroll software and focus on what matters most”. You can “Sort payslips, pensions and statutory pay, then make real-time submissions to HMRC from any location.”

Price:

Payroll is an add-on to QuickBooks. There is a standard version priced at

£4 a month +£1 per paid employee or an advanced solution for £8 a month + £1 per paid employee a month. Both must be combined with a QuickBooks subscription (£5-£12 per month for a six-month subscription).

Key selling points:

  • Simple to use. Mac or Windows.
  • Free QuickBooks app available.
  • You can make multiple pay schedules, weekly and monthly.
  • Easy to make statutory maternity, paternity and sick leave payments.
  • Net pay, taxes and NICs and pension contributions are all calculated.
  • Simple to easy to enter and make overtime/bonus payments.
  • Payslips can be printed or emailed to staff.
  • RTI data sent automatically to HMRC.
  • Workplace pension/auto-enrolment assessment and calculation of pension contributions.
  • Automatic update of tax codes at the start of the tax year.
  • “Journals automatically created and posted to your QuickBooks account”.

Support:

Intuit publishes much user information online. Free technical support is also available via Intuit’s messaging or call-me-back facility.

Customer review:

“The tech support is as good as ever and second to none.”

Mike McNulty

Find out more about QuickBooks Payroll.

Sage Payroll

According to Sage, half of all businesses in the UK use Sage Payroll, which it describes as: “The UK’s most trusted payroll solution”. And when you use it you become “part of a big club: from start-ups to household names, thousands of businesses trust Sage payroll solutions”.

Sage offers dedicated payroll solutions for businesses with fewer than 25 employees, more than 25 employees and accountants that offer payroll services.

Price:

Get three months free, then £7 +VAT per month for up to five employees (£12 +VAT a month for up to 10 employees; £17+VAT a month for up to 15 employees and £27+VAT a month for up to 25 employees – all with three months free initial offer). 

Key selling points:

  • Easy to use yet comprehensive web-based solution.
  • Available as a standalone solution.
  • Alternatively, integrates with Sage accounting software.
  • Print or email your payslips, P60s and reports.
  • Easy to amend previous pay runs; adjustments are handled automatically.
  • Seamless integration with pension providers.
  • Free trial. You can also get Sage payroll free for three months, when you sign up. No commitment, cancel anytime.

Support:

You can communicate with Sage’s UK-based team over the phone, by email or live chat. Sage also has an online help centre.

Customer review:

“Payroll is easy to use, it guides you through the process and it really makes it quicker to complete that side of the business.”

Jane Middlehurst – London-based Architects Poulsom Middlehurst

More information about Sage Payroll.

MoneySoft Payroll Manager

Payroll Manager is a “comprehensive, easy to use, HMRC-recognised RTI compliant payroll software package used by thousands of SMEs, agents, accountants and CIS contractors across the UK”, according to its Hampshire-based makers, Moneysoft.

Price:

Payroll Manager costs £72 + VAT per year for a single company, with multi-company licenses available from £144 + VAT per year. There are no hidden or additional costs. Only available as a desktop package.

Main selling points:

  • RTI compliant payroll software.
  • Easy to use; data entry is straightforward.
  • RTI filing, payslips, comprehensive reporting, automatic calculation of statutory sick, maternity, paternity, adoption and shared parental pay, etc.
  • Supports auto enrolment of workplace pensions.
  • The main screen provides a complete year’s pay history at a glance, “so that you can print payslips and reports for any period, at any time”.
  • Always kept up to date with the latest legislation by quick, automatic updates.
  • Low-cost option.
  • Free trial available.

Support:

Free email support, but no telephone support. Wealth of free payroll information available on the Moneysoft website.

Customer review:

“We are lucky to have used Payroll Manager, which has saved us a lot of time and effort. Our previous software was bloated and inflexible and caused a great deal of frustration for our management and staff. By contrast, Payroll Manager is easy to use and versatile.”

Don Powell – Direct Painters

More information about Moneysoft.

KashFlow

London-based KashFlow has been providing online accounting software for small business owners since 2005. Former web developer Duane Jackson founded KashFlow after struggling with existing accounting software packages when running his business. In 2013, IRIS acquired KashFlow. Its payroll software can be used as a standalone payroll solution or integrated with KashFlow’s online accounting software.

Price:

£6.75 per month + VAT for up to five employees (£1.13 for each additional employee). It can be combined with KashFlow accounting for £22.50 per month for up to five employees (additional employees £1.13 each). An auto enrolment add-on is available for £1 per employee, minimum £13.50 for five employees.

Key selling points:

  • Designed to be easy to use.
  • Offers a “streamlined and comprehensive approach to payroll”.
  • Takes care of “everything from employee payslips to workplace pensions in a couple of clicks”.
  • Enables employers to “pay monthly salaries, hourly wages and holiday pay from one place and easily update forms for employee, tax and insurance information”.
  • Cloud-based, so you can access it anywhere.
  • Automatically submits your RTI submissions.
  • Employees can access their payslips and data from anywhere at any time.
  • Integrates with KashFlow Bookkeeping software.
  • Free 14-day trial or book a demo.

Support:

Available Monday to Friday, 09:00 – 17:00. Initially via email. Via the KashFlow website, payroll users can also chat with customer support.

Customer review:

“It will run your payroll for you, tracking tax and NI, produce P45s and P60s and submit data to HMRC. Payroll can be complicated, but KashFlow Payroll does its best to simplify this for you. I could not run my business without it.”

Stephen S

Find out more about KashFlow.

HMRC Basic PAYE Tools

Basic PAYE Tools is free payroll software from HM Revenue and Customs (HMRC) for businesses with fewer than 10 employees. You must be registered with HMRC as an employer and have a login for PAYE Online before you can use Basic PAYE Tools. HMRC has produced user-friendly guidance on downloading and installing the software.

One major drawback is you cannot use it to produce payslips and it isn’t suitable for accountants/bookkeepers with many clients. And Basic PAYE Tools does not help you work out who to automatically enroll or enable you to calculate pension contributions. To ensure the amounts you enter are correct, you must calculate pension contributions before using Basic PAYE Tools.

Price:

Free

Key selling points:

  • No cost.
  • It enables you to perform most payroll tasks, including working out tax and NICs for your employees.
  • You can send data directly to HMRC as required.
  • Compatible with Windows 7 and Mac (OS version 10.14 Mojave and 10.15 Catalina).

Support:

HMRC has produced a guide to downloading and installing the software if you need help getting set up or want to check if your computer can run Basic PAYE Tools.

More information about HMRC’s Basic PAYE Tools.

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