Guide
Payroll software for a small business: what you actually have to buy
Updated
A small employer has the same legal duties as a large one and a fraction of the administration to absorb them. The question is not which product is best but which duties you are prepared to carry out manually.
What the software has to do, according to HMRC
Gov.uk sets out what payroll software is for: "recording your employees' details", "working out your employees' pay and deductions", "reporting payroll information to HMRC", "working out how much you need to pay HMRC" and "calculating statutory pay, for example maternity or sick pay" (gov.uk). The reporting duty is not optional: you "must get payroll software that reports PAYE information online, unless you're exempt".
The free route and where it stops
HMRC publishes its own free product, Basic PAYE Tools. It is described as being for "businesses with fewer than 10 employees" and gov.uk states plainly that it "is not designed for agents or bookkeepers" and "has some limitations" (gov.uk).
Fewer than 10 employees is a design boundary, not a licence condition that stops you at the tenth hire. The practical question is what falls outside the tool, because those tasks do not disappear: they move onto somebody's desk.
The duties that sit alongside payroll
- Payslips. Most workers have a legal right to an itemised payslip on or before payday (gov.uk). If the software does not produce them, you do.
- Automatic enrolment. Every employer with at least one member of staff has duties to assess workers and enrol those who qualify (thepensionsregulator.gov.uk). Assessment happens every pay period, not once.
- Reporting on or before payday. A Full Payment Submission goes to HMRC each time you pay someone, not monthly in arrears (gov.uk).
- Year end. Final submissions and employee statements are a separate annual process (gov.uk).
What actually separates the products at this size
Feature lists converge quickly, because the statutory calculations are the same everywhere and HMRC recognition is a pass or fail. The differences that matter to a business under about twenty staff are narrower than the marketing suggests.
- Whether pension assessment is included or bolted on
- Automatic enrolment assessment every pay period is the duty most often sold separately, and it is the one that recurs most often.
- Whether the pension provider is supported directly
- A direct submission to your scheme is a different amount of work from exporting a file and uploading it each month.
- How pricing scales with headcount
- Per-employee pricing and banded pricing diverge sharply at the point a small employer is most likely to grow through.
- Whether an accountant can access it
- Basic PAYE Tools is explicitly not designed for agents. If a bookkeeper runs your payroll, that decides the question on its own.
Why this page publishes no prices
Payroll pricing is quoted per employee per month, per payroll run, or per band, and vendors change the basis more often than the amount. Any figure written here would be stale before it was useful and would flatter whichever pricing model it happened to match. The comparison table on this site records what each product does; ask for a written quote at your actual headcount and pay frequency, because that is the only number that is about you.