Payroll: A Necessary Evil – But Let’s Make It Easy!

Running a small business means juggling a million things at once – and payroll is one of those non-negotiables. Paying your team correctly and on time is essential, but let’s be honest: payroll can be a headache. Tax calculations, payslips, pensions – it’s a lot to manage.

The good news? You don’t need to be a payroll expert. With the right payroll software for small businesses, you can automate the time-consuming bits, avoid costly mistakes, and stay compliant with HMRC – all without breaking a sweat.

This guide cuts through the noise, giving you a simple breakdown of the best payroll software options for small businesses and what to look for when choosing one. No jargon, no fluff – just practical advice to make payday a breeze

 

 

Why Do You Need Payroll Software?

Gone are the days of manually calculating tax deductions and fiddling with spreadsheets. A solid payroll software for small businesses means:

Fewer errors – Reduce the risk of costly mistakes in tax and pension calculations.

Time-saving automation – Set up payroll to run automatically each month.

Legal compliance – Ensure HMRC, RTI (Real Time Information), and pension regulations are met.

Payslip generation – Automatically create and distribute digital payslips.

Seamless integrations – Sync payroll with accounting and HR software.

Payroll should be stress-free, and the right software makes it easy.

 

What’s Inside This Guide

• How to pick the right payroll software

• Free vs paid payroll solutions

• Cloud-based vs desktop payroll software

• The top payroll software for small businesses

• Feature comparison – what’s actually worth paying for?

• Next steps to get going

 

 

Free vs Paid Payroll Solutions

One of the first decisions to make is whether to opt for a free or paid payroll software. Each option has its benefits and drawbacks, depending on the size and needs of your business.

Free Payroll Software: Pros & Cons

Pros:

• No upfront costs – great for startups and very small businesses.

• Basic payroll functionality, including payslip generation.

• Often cloud-based, allowing easy remote access.

Cons:

• Limited features – may not include automatic tax filing or pension integration.

• Employee caps – many free plans limit the number of employees.

• Minimal customer support – often self-service only.

• Potential security risks – data protection may not be as robust.

Best for micro-businesses with simple payroll needs.

 

 

Paid Payroll Software: Pros & Cons

Pros:

• Full automation – handles tax calculations, HMRC submissions, and pension contributions.

• Scalability – can grow with your business.

• Enhanced security – better encryption and compliance with UK laws.

• Dedicated support – phone, chat, and email support available.

Cons:

• Monthly or yearly subscription fees.

• Learning curve – more features mean more to learn.

Best for businesses looking for automation, compliance, and future growth.

 

 

Cloud-Based vs Desktop Payroll Software

Another important consideration is whether you want a cloud-based or desktop payroll solution.

Cloud-Based Payroll Software: The Future of Payroll

Pros:

• Accessible from anywhere – perfect for remote businesses.

• Automatic updates – ensures compliance with tax laws.

• Data backup – no risk of losing payroll records due to system failures.

• Works on any device – no need for a dedicated payroll computer.

Cons:

• Requires internet access – won’t work offline.

• Subscription-based – continuous costs instead of a one-time purchase.

Best for businesses that value flexibility and need multi-device access.

Desktop Payroll Software: The Traditional Approach

Pros:

• Works offline – no need for constant internet access.

• One-time payment options – some software requires only a one-time purchase.

• Full data control – no reliance on third-party cloud providers.

Cons:

• Requires manual updates – staying compliant means updating manually.

• Limited accessibility – can only be used on the installed computer.

• Higher IT dependency – data backups and security must be managed in-house.

Best for businesses with in-house IT support and those needing offline access.

 

 

The Best Payroll Software for Small Businesses

We’ve reviewed the top payroll software options to help you choose the best fit for your business. Whether you need basic payroll processing or a full-featured system with HR integration, here are the best contenders:

1. QuickBooks Payroll – Best for Accounting Integration

QuickBooks Payroll is an excellent choice if you’re already using QuickBooks for accounting. It streamlines payroll processing and automatically calculates tax and pension contributions.

Pros:

• Seamless integration with QuickBooks.

• Automatic RTI submissions to HMRC.

• Employee self-service portal for payslips and tax documents.

• Supports auto-enrolment pensions.

Cons:

• More expensive than some standalone payroll tools.

• Best suited for businesses already using QuickBooks.

Pricing: Starts at £4 per month + £1 per employee.

2. Xero Payroll – Best for Small Teams

Xero Payroll is ideal for businesses that need simple payroll processing without complicated extras. It’s user-friendly and integrates with Xero’s accounting software.

Pros:

• Great for micro and small businesses.

• Auto-enrolment pension management.

• HMRC-compliant with real-time reporting.

• Mobile app for payroll processing on the go.

Cons:

• Limited advanced features.

• No dedicated payroll-only plan (requires Xero accounting subscription).

Pricing: Starts at £5 per month + £1 per employee.

3. KashFlow Payroll – Best for UK Businesses

KashFlow is a UK-based payroll solution designed specifically for compliance with HMRC regulations, making it a great option for small businesses needing easy tax filing.

Pros:

• Built-in HMRC compliance.

• Auto-enrolment pension features.

• Simple interface tailored for small businesses.

• Integrates well with KashFlow accounting.

Cons:

• Lacks some advanced reporting features.

• Not as widely integrated with third-party apps.

Pricing: Starts at £6.50 per month + £1 per employee.

4. Sage Payroll – Best for Compliance & HMRC Submissions

Sage Payroll is one of the most trusted payroll solutions, particularly for businesses that prioritise compliance and robust payroll management.

Pros:

• Full compliance with UK payroll laws.

• Automatic tax and National Insurance calculations.

• Secure cloud-based payroll processing.

• Integrates with Sage Accounting.

Cons:

• Interface can feel outdated.

• Higher learning curve for beginners.

Pricing: Starts at £7 per month for up to five employees.

5. Gusto – Best for Employee Benefits & Perks

Gusto stands out for its focus on employee experience, offering built-in benefits management and payroll processing in one platform.

Pros:

• Combines payroll, benefits, and HR tools.

• Employee self-service portal with benefits tracking.

• Automatic tax calculations and filings.

• Modern, easy-to-use interface.

Cons:

• Geared more towards US businesses (limited UK features).

• Higher cost than some UK-focused payroll solutions.

Pricing: Starts at £30 per month + £6 per employee.

6. Deel – Best for International Payroll

If your business hires employees or contractors globally, Deel is one of the best options, offering seamless international payroll processing.

Pros:

• Supports payments in 150+ countries.

• Handles tax compliance for remote teams.

• Automated contract generation for different regions.

• Includes freelancer and contractor payment options.

Cons:

• More expensive than domestic payroll solutions.

• Overkill for businesses with only UK employees.

Pricing: Custom pricing based on company size and global payroll needs.

 

 

Feature Comparison – What’s Actually Worth Paying For?

Not all payroll software features are essential. Here’s a breakdown of what’s worth paying for and what you might not need:

Must-Have Features

• HMRC Compliance & RTI Submissions – Ensures accurate tax filing and reporting.

• Payslip Generation – Automates the creation and distribution of digital payslips.

• Auto-Enrolment Pensions – Simplifies pension contributions and compliance.

• Tax & National Insurance Calculation – Reduces manual errors and ensures compliance.

• Payroll Processing Automation – Saves hours of manual work each month.

Essential for any small business managing payroll in the UK.

Nice-to-Have Features

• Employee Self-Service Portals – Allows staff to access payslips and tax documents.

• Mobile App Access – Useful for processing payroll on the go.

• Integration with Accounting Software – Helps streamline financial reporting.

These features can improve efficiency but aren’t critical for all businesses.

Premium Features (Only If You Need Them)

• AI-Powered Payroll Insights – Advanced analytics for tracking payroll trends.

• Multi-Currency Payroll – Useful for businesses with international employees.

• Customisable Payroll Reports – Helps with in-depth financial analysis.

Only worth paying for if your business needs complex payroll insights.

 

 

Next Steps to Get Going

Now that you know the best payroll software for small businesses, here’s how to get started:

Define Your Payroll Needs – Consider your business size, employee count, and must-have features.

Shortlist Payroll Solutions – Use this guide to pick 2-3 software options that fit your budget and requirements.

Try Free Trials – Many providers offer free trials. Test the software before committing.

Compare Pricing & Features – Look for a balance between affordability and necessary features.

Check Support & Compliance – Ensure the software provides UK payroll compliance and customer support.

Implement & Test – Set up payroll, run a test cycle, and get feedback from employees.

Optimise & Automate – Use automation features to save time and make payroll hassle-free.

Final Thought: Payroll doesn’t have to be a nightmare. The right payroll software for small businesses will save you time, ensure compliance, and keep employees happy. Take your time, test your options, and make payroll a seamless part of your business!