Guide

Payroll software

Different types of computerised payroll systems

Computerised payroll systems make managing payroll considerably simpler. They enable you to automate your processes, minimise potential mistakes and cut down time and resources needed for payroll administration.

If you’re not sure if you should automate your payroll processing, see do you need payroll software.

Types of automated payroll systems

Many different types of automated payroll systems exist. They typically fall under two main categories:

  • payroll software that you install on your computer
  • online or cloud systems that you access via a web browser over the internet

A simple, standalone payroll software will usually tie your payroll management to a single computer. The functionality of such software may be limited. For example, it may carry out the calculations but not produce payslips, so you may have to supplement it with manual processes or use other applications.

Free UK payroll system for small businesses

Businesses with fewer than ten employees can download free payroll software from HM Revenue and Customs (HMRC). The software has some limitations, but it allows you to perform most payroll tasks, including working out the tax and National Insurance for your employees and sending this information to HMRC. Use the latest version of the HMRC's Basic PAYE Tools.

If you're looking for other software options, HMRC has tried and tested several free small business packages - see their list of free payroll software for small business.

Important: If you're using payroll software on a single computer, make sure that you keep your machine secure and properly backed up, otherwise you may risk losing your valuable data.

Online payroll and cloud payroll software

An online or cloud-based system stores your data remotely, so you can access it easily from different locations using a secure login. Most online systems will automate the whole payroll process for you, taking care of things like:

  • National Insurance and pension deductions
  • tax calculations
  • producing payslips for staff
  • keeping up with legislation
  • generating year-end tax returns

See what payroll software can and can't do and read about payroll software features.

Integrated payroll management

Payroll management often overlaps with the running of accounting and human resource (HR) processes in business. For example, you may want to:

  • transfer pay run data from your payroll system into your accounting software
  • check and transfer timesheet data from payroll to HR

When choosing a new payroll software, make sure that it is compatible and works well with your existing systems.

Depending on your business needs, you could also consider integrating payroll with related systems, eg through an ERP software. This could help you reduce costs and eliminate duplication of paperwork, data and efforts across various departments in your business.