Guide
Cloud based payroll software: what changes and what does not
Updated
Cloud and desktop payroll meet the same legal duties in the same way. The differences are about access, continuity and data, and they are the ones a feature comparison is least likely to show you.
HMRC does not care where the software runs
The statutory position is identical. You "must get payroll software that reports PAYE information online, unless you're exempt", and a Full Payment Submission is due on or before each payday whichever product you use (gov.uk, gov.uk). HMRC recognition is granted to products, not to hosting models.
Desktop software has reported online for years. Cloud is not what makes payroll digital, and a vendor presenting it that way is selling the wrong distinction.
What genuinely changes
- Who holds the payroll data
- Payroll data is among the most sensitive an employer holds: bank details, salaries, National Insurance numbers, sometimes health-related absence. In the cloud the processor is your vendor, and the controller is still you.
- Where the record lives when you leave
- On desktop the data is on your machine whether or not you renew. On a subscription it is in an account that ends when the subscription does. What you can export, and in what format, is the question.
- Who can get in
- Multi-user access is the main practical gain: an accountant, a bookkeeper and a manager can work in the same payroll without passing a file around.
- When updates apply
- Statutory rates change on a fixed calendar. Hosted products update centrally; desktop products need the update installed before the first affected run.
Questions to ask before migrating
- What exactly can I export, and in what format? A report is not a record. Ask whether you can leave with the underlying payroll data.
- How long is data retained after cancellation? Payroll records have to be kept for years after the employment ends, and your retention duty does not follow your subscription.
- Who is the data processor and where is the data held? You remain the controller and are accountable for the answer.
- What happens to a part-completed tax year? Mid-year migration means year-to-date figures have to carry across correctly or the first submission after the move is wrong.
- Is the pension submission direct? Cloud products vary here as much as desktop ones, and it is per-pay-period work either way.
The migration risk nobody quotes for
The expensive part of changing payroll software is almost never the licence. It is moving year-to-date figures, employee records, pension assessment history and payment schedules without breaking the next Full Payment Submission. Where a move can wait for the start of a tax year, it is the cheaper move, because the year-to-date figures being carried across are zero.
Where this page stops
There is no official guidance ranking cloud against desktop payroll, and this page does not invent one. What is quoted above is the statutory duty, which is the same for both. The rest is a set of questions whose answers differ by vendor and belong in writing from that vendor rather than in a general comparison.