Payroll is essential for every small business with staff. And it has to be right—not paying your people properly is the fastest way to an unhappy team, which all business owners and managers will want to avoid! But with so many options on the market, it  is really confusing to figure out which one is best for you.

Running payroll is complicated. There are all kinds of issues like calculating holiday pay, bonuses and commissions, sick pay, maternity and paternity pay, or how much to pay someone who started or left mid-month… not to mention pensions and benefits. All these tasks make it hard to get payroll right and do so efficiently. That’s why most small employers choose their accountant or a payroll service to run payroll for them.

Different companies have different needs – no software product is best for all employers. It’s therefore important to select the provider that’s best for you. To help you reach the right answer for your business, our payroll experts have pulled together 12 top questions you could consider when evaluating payroll software solutions in the marketplace.

Should you outsource your payroll or run it in-house with payroll software?

This is a critical choice. Outsourcing it will cost more than running it yourself – but will mean that your payroll is run by someone skilled at payroll. You will still need to gather all the information they will need for every pay period and send that to them to enter and process. There are pros and cons to both options—if you aren’t sure which route to take, click here to help decide.

Cloud-based or Desktop based?

“Cloud-based” simply means software which you access via a browser over the internet—in contrast to desktop software which you install on one computer or a network.

The main advantage of cloud-based payroll software is that you, and whoever else at your company needs to access your payroll software, can log in to it from any device – which makes it perfect for remote or hybrid working. This is usually more secure than storing it on one computer at your office and means that you shouldn’t need to worry about extra backups.

A second advantage of cloud-based payroll software is that it is far easier to connect it to other cloud-based apps—such as your accounts software or your HR or time tracking software.

You normally subscribe to cloud-based payroll software, paying for what you need every month—unlike desktop software which you would normally buy as a one-off purchase. It’s very similar to the difference between Office 365 and the older desktop versions of Microsoft Office.

You may also want to consider updates; cloud software is typically updated automatically by the producer, so you won’t need to even think about it, whereas you will need to download and install updates to desktop software when they are made available by the producer.

Does it offer all the core payroll elements you need?

While all HMRC approved payroll software needs to do the basics, some offer far more help than others. For example we strongly recommend that you choose a payroll product which can do all sickness and Family Leave calculations for you, whether you offer statutory or enhanced benefits. It will make your life much easier— and while most payroll softwares offer this, not all do.

What support do you need?

Some payroll software has excellent phone-based support, while some only offers email support. What you need will depend on how complex your payroll needs are, and how much whoever operates your payroll software knows. The key is to make sure you get a package which offers you the sort of support you think you are likely to need. The best way to check the support for yourself before you buy is to actually try it out—contact the support team and see how well they answer you.

How long will it take to run payroll?

This is a key question. You should think about where you will get the information from, such as new starter details, any leavers, and any changes for other staff. If you have people on an hourly rate who need to fill in timesheets, you should factor in whatever time it takes to calculate their wages. Some payroll software has HR and timesheet tools built in so that this won’t take any time at all when you run payroll—others don’t. If you have a small monthly payroll with salaried staff, it won’t matter as much as if you have several pay schedules with a mix of weekly and monthly paid people.

Once you have seen how much quicker and more accurate it is to run payroll with an integrated HR and timesheet software, you will probably never want to use anything else. But most small business payroll software in the UK sill doesn’t integrate widely to other small business HR / time-keeping apps.

With our company it used to take about three hours to run payroll using one of the UK’s most popular desktop payroll software products.  It now takes less than 5 minutes using the cloud-based payroll software we now use. How much is that time saving worth to you?

Integration to your pension company

Lots of payroll software links directly to pension companies these days, and let you send your pension data directly to your pension company with just a few mouse clicks. This cuts out the risk of getting the data wrong and will save a typical small company half an hour to an hour every month. The key is to make sure that the payroll software you want to use does have an integration to the pension company you use.

Integration to accounting software

Payroll costs are usually one of the biggest costs for most small companies. It is really important to be able to get your payroll information accurately and quickly into your accounts software. The first question to ask is whether your preferred payroll software calculates a Payroll Journal for you. If not, it could take an hour or more to create that journal manually. Most good payroll software on the cloud will calculate the journal for you. You should then check if the payroll software integrates to your accounting software. There are plenty of cloud payroll software’s which integrate to Britain’s most popular cloud accounting software – XeroQuickBooks Online and Sage, so it’s probably wise to choose a package which will integrate to the software you use.

How easy is it to use?

Most small businesses don’t have an in-house payroll expert, so payroll is either outsourced or gets done by a director or the Office Manager or Book keeper – people who are smart and know quite a bit about finance, but not all that much about payroll.

Older payroll software needed training to be able to use properly. If you search for Payroll training online, you will still find lots of courses for old desktop based software. There is more and more payroll software now which is easier to use than that—but some are very, very much easier to use than others. You should be able to see this for yourself very quickly from a demo or video. We are all different, and some might like one way of doing things and others a different way. The key is to find a product that you find easy to use.

Some software automates more aspects than others, and will remind you about things to consider… such as if you paid someone commission last month but aren’t currently doing so this month, it will make that clear. (Unlike desktop payroll packages which require you to remove any bonus or commission you paid last month, otherwise they will automatically repeat next month – forcing you to do two tasks every time you want to pay someone a bonus.)

You should be able to look at the online help any payroll software offers, and decide for yourself whether it is helpful enough. By the time you look at two or three you will know what good looks like – standards vary widely from one product to the next.

And please, please try any product you are considering using before you finalise your decision. Most software offers a free trial – try a few different ones and choose whichever products works best for you.

Can you trust it?

It’s good to start with HMRC approval—HMRC check to see if payroll software works at a fairly basic level, and they publish a list on their website of all the software which passes. Some payroll software is designed and managed abroad, or by smaller British companies which have not invested in all the features you might need. And even some payroll software which HMRC has approved doesn’t meet all UK laws. It is understandably hard for any overseas company to keep up with the changing law in the UK, which often changes due to court cases as well as new laws made by parliament. For example, holiday pay law changed recently, but only some UK payroll software has been updated for the new law.        

How long has the company been around? Do they have International Standards certificates? – ISO 9001 and ISO27001 are the main ones to look for.

Looking at reviews never hurts, but we would urge caution with payroll software reviews. Lots of the reviews we have seen (including from some magazine websites) are clearly written by people who have not used payroll software and don’t know much about payroll – which creates a danger of the blind leading the blind… We suggest looking at the actual comments in any reviews to see which feel written by someone you would want respect. And if in doubt, ask your accountant or other business owners / managers you know.

Can it grow with you?

Whatever size your business is today, if you expect to grow quickly it’s wise to try to pick a payroll software which can last for a good few years. It can be hassle to change payroll systems, so try to find one now which will last you a good long time.

It’s therefore worth thinking about what you might need tomorrow – are there apps that you don’t use now but which you expect to start to use soon? It might best to choose payroll software today which works well with any of those apps that are relevant.

Some payroll software has good links to HR software, which is important for growing and medium sized businesses. There is so much admin involved with employing staff that it makes enormous sense to use HR software for that, and no sense for most companies to use HR software which doesn’t seamlessly integrate to good payroll software.

Equally, new and very small employers might want to choose a payroll product which they can instantly upgrade to HR Support if they ever want to, with no setup charges or time needed. There are not many payroll products which offer that, but there are some.

At the moment lots of payroll software is starting to work with companies to let you pay salaries from within the payroll software by clicking on a button. This saves the chore of having to re-enter data to your bank, or exporting a BACS file and sending it to a BACS bureau or trying to upload it to your bank. citrus HR payroll uses Comma, for example. If this appeals to you make sure you choose a products which can support payment partners like this.

Will your staff love it?

This might seem like a strange question – after all, your team won’t use the software to run payroll!

But most good payroll software now includes an online “portal” your people can log into to access their payslips. This avoids the risk and hassle of emailing payslips, and means that your team can’t lose them, and won’t ever need to ask you to re-send them a payslip! Some of these portals are easier and nicer to use than others—it’s best to try to find one your people will like using.

How much does it cost?

Desktop payroll software is usually a fixed price for a year, regardless of how many people you employ. You would need to buy it again each year to take into account the new tax data and rules for the next financial year.

Cloud-based payroll software almost always charges a set amount either per payslip or per employee. If you have weekly payrolls, then paying per payslip will cost more than paying per employee per month- but you will be using it about 4 times as often, so maybe that’s reasonable.

Most payroll software aimed at small companies publish their prices on their websites. If you can’t see a price without asking for a formal quote, that’s usually a sign that the software producer mainly deals with larger companies. Most small company payroll software producers charge around £1+VAT per payslip or employee per month – but some do charge considerably more than this. If a company charges more but offers you a particular feature that you really need, that could still be the best fit for your company – value matters more than price.

You should check for any extras – some software producers charge extra for support, some charge extra for certain reports, or extra features (such as P11Ds).

As you can see, there is plenty to consider when choosing the right payroll software product. If you’re feeling a bit daunted by this, why not try this – look at the payroll software product offered by your accounting software company, and two others. You could consider our product, or search the web for “UK payroll software for small business” and select one or two of the products that you find there. Or ask your accountant or any friends you have who run businesses.

It’s best to start with a list of what you need—for example where you get your data from at the moment (eg salaries, or a time and attendance tool) and what other apps you might want to connect your payroll software to. Then consider whether you want cloud-based or desktop software.

There is no payroll software in the UK today which is the best fit for every small company. Your task is to find the one which is the best fit for your needs. We hope this article helps.

This post was written by citrusHR who are an exhibitor on the HRTech247 HCM – Full Platform and Employee Engagement floors. You can visit their HRTech247 exhibition stand here.

The content of this blog is for general information only. Please don’t rely on it as legal or other professional advice as that is not what we intend.