Guide

Payroll software

Advantages and disadvantages of payroll software

Payroll is a business-critical operation for every organisation. You must pay your staff accurately and on time to avoid low morale, poor performance and possibly even reputational and legal difficulties. A good computerised payroll system can help you carry out your pay run with greater speed, efficiency and confidence.

Advantages of payroll software

Many businesses choose to use payroll software over manual processing, as it can help them to:

  • work out payroll calculations and deductions quicker
  • generate accurate payslips
  • calculate bonuses, expenses, holiday pay, etc with minimum effort
  • send returns to HMRC and print P45, P60 and other forms for employees
  • automate certain tasks, such as year-end reporting
  • reduce the burden of compliance
  • remove the need to understand complex tax legislation
  • store data such as payslips and annual reports in a secure, easily accessible system

Payroll software can also provide additional data and analysis to make the payroll information more useful to your business.

Linking payroll software with time recording
You can link payroll systems to timesheet systems that record employee attendance or time worked. This allows you to automatically transfer information about hours worked into the payroll system and make payroll calculations much simpler.

Using payroll software for reporting
By using basic payroll data, together with data on attendance and hours worked, payroll systems can provide a wealth of reports. This allows in-depth analysis of staff costs for the business as a whole, across departments and even individual jobs and contracts.

Storing personnel records
Most organisations will also keep other data about employees, such as records of annual leave. By getting payroll systems that record these additional types of information you can avoid the need for a separate software package.

Using payroll system to plan future costs
As payroll packages can provide forecasts, you can use these to plan staff costs and budgets by entering hypothetical numbers to see the exact total cost of an employee.

Depending on your business needs, you may find other payroll software features more useful.

Disadvantages of payroll software

Payroll software, like any other IT system, can have certain weak points. Potential problems may arise around the issues such as:

  • data security, loss or theft
  • cyber security and fraud
  • information access, quality and control

Find out more about payroll software security and data protection.

Other limitations with payroll software often arise around costs. Full featured software will generally be more expensive than manual payroll systems. It will also require computer equipment, resources and skilled operators. If you don't have these in-house, you will need to invest money into producing them.