Best payroll software for small businesses in 2024

The right small business payroll programme can save you valuable hours each month. Manual payroll processing typically takes 5 to 10 hours per month. This tedious task drains your resources and creates room for mistakes that can get pricey and make employees unhappy.

Small business payroll software reduces this workload by up to 80%. The software automates complex calculations and keeps you compliant with HMRC regulations. Quality payroll software helps UK small businesses save around £6 per employee monthly in payroll fees. Moonworkers provides a smart option for companies that want simplicity and better cost control. Other providers, such as Sage, Xero, and BrightPay, offer robust features that cater to different business needs.

Our detailed comparison of top payroll software options for UK small businesses in 2025 will help you find a solution that perfectly fits your requirements, budget, and growth plans.

Why payroll is a challenge for small businesses

Payroll remains a significant challenge for small businesses in the UK. Without the right tools, this crucial task can turn into a time-consuming hassle that affects everything from compliance to cash flow.

Manual payroll takes 5–10 hours per month on average

Time is a small business owner's most valuable asset. Manual payroll processing eats up 5-10 hours every month ^[1]. This leaves little time to focus on growing the business. The real kicker? These numbers don't include the time spent fixing mistakes, which can take up a whole work week ^[1].

The responsibility usually falls on someone who isn't a payroll expert. Many small businesses give payroll duties to their finance manager, HR staff, or the business owner. This creates two problems: payroll takes up valuable time and pulls people away from their main jobs.

The technical side of payroll is demanding. If you don't have specialised software, you'll need to manually:

Calculate wages, tax withholdings, and benefits deductions
Produce and distribute payslips
Track hours worked and paid time off
Submit reports to tax authorities

Budget limits often force many small businesses to stick to manual processes. However, this approach becomes pricey over time, considering the hours spent and potential mistakes.

Common errors and compliance risks

Small businesses make payroll mistakes more often than you'd think. About 19 per cent of UK workers say they get paid late or incorrectly regularly ^[3]. These mistakes frequently occur due to manual processing and a lack of expert knowledge.

Human calculation errors lead the pack - they're behind 46% of all payroll mistakes ^[4]. Other common problems include using incorrect tax codes, confusing employees and contractors, and errors in overtime and holiday pay calculations.

Staying compliant is another big challenge. UK payroll rules are constantly changing, making it difficult for small businesses to keep up. HMRC has strict rules about tax filings, National Insurance contributions, and reporting deadlines ^[6]. Missing these can cost you £100 to £400, depending on the size of your business. Serious violations might even lead to fines up to £20,000 per worker ^[8].

Internal fraud is another risk to be aware of. Small businesses often lack enough staff to put proper controls in place ^[9]. This makes their payroll systems vulnerable to fraud.

Impact on employee trust and business operations

Payroll mistakes create more than just administrative headaches. Wrong payments affect the whole organisation's morale and operations.

Underpayments hit employees hard. More than a quarter (28%) of workers struggle to pay their bills or rent due to payroll errors ^[4]. They might need to use their savings, overdraft, or take out a loan - all of which can create unnecessary stress.

Trust takes time to rebuild once it's broken. Employees who are unsure about being paid correctly feel anxious and uncertain. This damages productivity, commitment, and eventually leads to higher turnover ^[4].

These mistakes waste a lot of time fixing. Most errors take over a week to correct, and only 13% get fixed the same day ^[4]. Managers have to stop their strategic work to solve payroll problems, creating a chain reaction of lost productivity.

Tools like Moonworkers offer an innovative solution for small businesses seeking simplicity and cost control. Quality payroll software can cut processing time by 80% and reduce human errors that lead to compliance issues and erode employee trust.

Good payroll software gives you peace of mind. When payroll runs smoothly, you can focus on growing your business instead of fixing payment problems or explaining mistakes to frustrated team members.

How payroll software saves time and reduces errors

Modern payroll software eliminates time-consuming manual processes that plague small businesses. Quality software eliminates tedious calculations and administrative burdens that consume valuable resources.

Automation of tax and pension calculations

Small business payroll programmes excel at automating complex calculations that would otherwise take a substantial amount of time and expertise. Quality payroll software handles these essential tasks that traditionally require careful attention:

Tax calculations including PAYE and National Insurance contributions
Pension auto-enrolment deductions and submissions
Sick leave, holiday pay, maternity/paternity leave entitlements
Student loan repayments and other statutory deductions

Automation substantially reduces the risk of errors common in manual data entry. Automated calculations ensure every employee's pay is accurate and consistent ^[12].

Spreadsheets - often the default tool for businesses without proper payroll software - contain frequent errors. Automated calculations protect your business from financial penalties that result from compliance failures.

Real-time submissions to HMRC

Payroll software helps handle Real Time Information (RTI) submissions effortlessly. RTI became part of the PAYE system in 2012 to simplify things for employers and HMRC ^[13]. This system requires payroll information submission to HMRC after each employee payment ^[14].

Quality payroll software for small business UK operations simplifies these submissions:

Automatically prepares and submits Full Payment Submissions (FPS) after each pay run
Handles Employer Payment Summaries (EPS) as needed
Submits National Insurance data and PAYE to HMRC with a single click
Files required reports such as P11, P11D, P32 and P60s directly with HMRC

Manual preparation and filing create extra work and increase the risk of errors without software. Payroll software helps you stay compliant with HMRC regulations and reporting deadlines.

Average time saved: up to 80% per month

Implementing payroll software brings substantial efficiency gains. Businesses save up to 90% of time spent on payroll administration ^[2]. This lets you focus on core business activities instead of administrative tasks.

Time savings come from eliminating several manual processes:

No more manual data entry for employee hours and payments
Automatic calculation of deductions and allowances
Instant generation and distribution of payslips
Immediate submission of required government filings

Most businesses recover nearly all of the 5 to 10 hours typically spent on manual payroll processing monthly. Tasks that used to take days now take minutes with payroll software.

Cloud-based payroll solutions allow you to access your data from anywhere using a laptop, smartphone, or tablet. This flexibility helps remote workers and busy business owners stay productive.

Payroll software delivers peace of mind along with time savings. You'll know you meet all regulations while paying your team accurately and on time. Employees’ trust grows as they receive correct payments consistently ^[15].

The right payroll software pays for itself through time savings, plus you get better accuracy, improved record-keeping, and fewer compliance risks.

Top payroll software for small businesses in the UK

Choosing the right payroll software can revolutionise your team's compensation management in today's competitive market. UK small businesses have several excellent options. Each software package comes with unique strengths that match different business needs.

Sage Payroll: Best for growing teams

Sage is a 30-year-old name in accounting and bookkeeping. Their cloud-based payroll solution works great for businesses planning to expand. You can manage both payroll and people operations from one interface with built-in HR capabilities.

The software comes in three plans (Essentials, Standard, and Premium) with all the simple features you need. You can start with five employees and grow to support 150 as your business expands. Sage keeps you HMRC compliant throughout your growth journey.

The cloud-based interface works on any device. You won't need to install anything and can access it anytime, anywhere.

Xero Payroll: Best for accounting integration

Businesses using Xero's accounting platform will find their payroll solution merges naturally with existing systems. This eliminates double data entry. The software calculates payroll figures automatically and submits RTI to HMRC after each pay run.

Xero's pension integration connects directly to Nest and the People's Pension for electronic submissions. This makes a complex process much simpler. The software handles all standard leave types, including sick leave, maternity, paternity, and bereavement leave.

Tax code updates and RTI submissions happen automatically. This makes compliance easy even without specialised payroll knowledge.

BrightPay: Best for ease of use

BrightPay has won awards and helps pay 3.5 million employees monthly. The cloud-based platform allows multiple users to work on payroll simultaneously. This promotes shared work and cuts down processing time.

The software goes beyond simple functions. You can process batch coding notices, send HMRC submissions, and finalise payslips for multiple clients in one click. This helps businesses that manage several entities.

BrightPay connects to popular accounting solutions through direct API connections to Xero, Sage, and QuickBooks. The employee self-service portal gives staff access to payslips and annual leave calendars. This reduces admin questions.

Moonworkers: Best for simplicity and cost control

Moonworkers brings a fresh take on payroll management. Their pricing adapts to your business size transparently. Innovative businesses looking for simplicity and budget control will find this appealing.

Sole traders get free service, while others can try it free for 30 days. The "pay-per-employee" model frees up money for other priorities. Your costs decrease as your team grows.

Users praise Moonworkers for their excellent support and easy-to-use interface. One customer said, "Moonworkers software is great for HR, payroll, benefits & more, and it’s amazing to have it all in one platform." Monthly tasks take less time with automation features, and the support team responds quickly to questions.

QuickBooks Payroll: Best for all-in-one finance

QuickBooks Payroll integrates seamlessly with QuickBooks Online accounting to create a comprehensive financial management system. You can track your business performance daily as payroll updates automatically sync to your accounts.

The HMRC-recognised software handles direct submissions and automatic tax code updates. You can manage contractor deductions and file Construction Industry Scheme taxes directly to HMRC.

QuickBooks Core and Advanced Payroll options give you flexibility. Core works well for director-only businesses and small employers who need speed and simplicity. Advanced Payroll adds HR features and customisable reports for growing companies.

Good payroll software can cut 5-10 hours of monthly manual work by up to 80%. This lets you focus on growing your business instead of administrative tasks.

Key features to look for in payroll software

Small businesses must choose payroll solutions that offer the most valuable features for their needs. The right payroll programme should excel in efficiency, compliance, and user satisfaction.

HMRC and RTI compliance

Your payroll software must be HMRC-recognised to ensure legal compliance. HMRC-recognised software helps calculate taxes accurately and lets you report PAYE information online with confidence.

HMRC introduced Real-Time Information (RTI) in 2013 to simplify the PAYE system. RTI-compliant software automatically sends employee payment details to HMRC after each pay run. This automation eliminates manual submissions and provides:

Tax code updates throughout the year
Quick reporting for staff changes
Better control over payment accuracy

RTI-compliant systems let you complete tax submissions like Full Payment Submissions (FPS) and Employer Payment Summaries (EPS) with one click. Small businesses save several hours each month through this automation, resulting in an 80% reduction in processing time.

Auto-enrolment pension support

The Pensions Act 2008 requires UK employers to enrol eligible staff in workplace pension schemes. This requirement adds complexity to payroll management.

Quality payroll software should include detailed auto-enrolment features that:

Assess employee eligibility automatically
Calculate the correct contribution amounts
Send timely staff communications
Process opt-in and opt-out requests
Connect directly with pension providers

The Pensions Regulator recommends software with built-in auto-enrolment capabilities. Look for systems that work with major pension providers, such as NEST, NOW: Pensions, and People's Pension, among others.

Employee self-service portals

Employee portals have revolutionised payroll management. These systems create what experts call a "win-win scenario" for employers and staff. Portals enable staff members to handle their payroll information independently.

A good portal should offer:

Secure payslip access (current and historical)
Tax form viewing and downloads
Leave management tools
Personal detail updates, including banking information

Business owners benefit from reduced administrative questions. Staff members can quickly find their information, while HR and finance teams focus on their core tasks.

Integration with accounting tools

Your payroll software should combine smoothly with your accounting system. This connection eliminates duplicate data entry and ensures consistent financial records.

Strong integration features should provide:

Automatic payroll data syncing
Easy financial information transfer
Unified reporting across systems

Moonworkers offers innovative integration options for businesses looking for simplicity and cost control. Their user-friendly system connects easily with common accounting platforms. This automation saves the time that staff would spend moving data between different systems.

Integrated systems create a comprehensive financial ecosystem where payroll seamlessly integrates with overall financial management. Companies that use connected systems typically spend 90% less time on data entry compared to those using separate solutions.

How to choose the right payroll software for your business

The right small business payroll programme can save you up to 80% of your time. Your monthly 5- to 10-hour task could become a matter of minutes with the right software choice that matches your needs and plans.

Match features to your business size and needs

The first step is to map out your core payroll requirements before you review software options ^[16]. Your workforce needs should guide your choice:

How many employees do you have now, and what's your predicted growth?
Which payment structures do you use (hourly, salaried, commission-based)?
What unique payroll challenges does your industry face?
Which payment methods and schedules work best for you?

A strong scorecard should list the must-have features ^[16]. Small businesses need automated payment calculations, benefit management, compliance tools, and reporting functions. This targeted approach helps you avoid paying for extras while getting all the essential features.

Think over pricing and scalability

Payroll software pricing models shape your budgeting decisions. Providers typically offer subscription-based, per-employee, pay-as-you-go, or custom pricing ^[6]. Watch out for hidden costs - customisations, integrations, and data migration can make your total investment substantially higher ^[16].

Quality payroll solutions for small UK businesses start at £15 monthly ^[6]. Mid-tier options range from £40 to £80, based on employee numbers. Free options exist, but they don't handle pension calculations and multiple payment periods very well ^[18].

Moonworkers emerges as a practical choice for businesses that want simplicity and better cost control. Their transparent pricing grows with your company.

Your software should grow with you. Pick a system that won't become expensive to upgrade later. [17] A solution that handles more employees without performance issues builds the foundations of lasting success ^[1].

Review customer support and training

Good customer support makes a huge difference when you set up payroll software ^[16]. Poor support can delay payments and create bigger problems.

Look for providers that offer multiple support channels, including phone, email, and live chat. They should also provide self-help resources, such as tutorials and knowledge bases ^[17]. UK-based experts, who are familiar with local regulations, often provide better support than overseas teams unfamiliar with UK payroll rules.

Expert implementation support reduces your setup time. Payroll software without proper guidance can add days to your configuration process. Good training resources help your team tap into the software's potential right from the start.

Free vs paid payroll software: what’s worth it?

The choice between free and paid payroll software weighs heavily on the minds of small business owners. Free tools look appealing at first glance, but their real value depends on your business needs.

Limitations of free tools

Free payroll software comes with restrictions that can hold your business back:

Employee numbers are capped at 5-10 staff members
Pay runs are limited to monthly only
Simple calculations without pension auto-enrolment support
Little to no customer support
No integration with accounting platforms
Manual HMRC submissions required

Paid options are a big deal because they deliver 80% time savings through automation features that free tools lack. You'll need to handle many tasks manually without these features and spend 5-10 hours each month on payroll tasks.

When to upgrade to paid software

Your business should upgrade when:

First, your team grows beyond the limit of the free plan. Second, you need support with auto-enrolment pensions. Third, you want complete reports to plan your business. Fourth, you need efficient operations through integrated accounting systems.

Most businesses find that upgrades make sense once they have five or more employees. The time savings and reduced risk of error make the investment worthwhile. Businesses with pension obligations find paid software becomes a must-have due to compliance needs.

Cost comparison examples

Quality paid software delivers substantial savings compared to manual payroll costs. Most UK small business payroll programmes start at £4-15 per month for simple features. Mid-tier options range from £20 to £ 40, based on employee count.

Moonworkers shines as a wise choice for businesses that want simplicity and cost control—the pricing scales with your business size. Sole traders get free service, and the per-employee rates drop as your team expands.

The investment pays off through time savings. By automating what takes 5-10 hours monthly, good payroll software frees up 60-120 hours yearly, time you can use to propel development initiatives.

Conclusion: Transforming Your Payroll Process

Picking the right payroll software is a chance for your small business to reclaim valuable time and resources. Manual payroll processing takes 5-10 hours a month, but quality payroll solutions can reduce this by 80%. You'll only need minutes of oversight per pay cycle. This huge efficiency boost lets you focus on growing your business instead of handling administrative tasks.

The best payroll software does more than save time—it cuts down errors, gives you compliance, and builds employee trust through consistent, accurate payments. Each software option offers different advantages. Sage works great for growing teams. Xero connects smoothly with accounting. BrightPay shines with its ease of use. QuickBooks creates an all-in-one finance ecosystem. Moonworkers stands out as an innovative solution for businesses that want simplicity and cost control.

Your specific business needs, budget limits, and growth plans should guide your choice. Key features to look for include HMRC compliance, pension auto-enrollment support, and accounting integrations. Free software might look tempting at first, but paid solutions offer better value with complete features and dedicated support.

Quality payroll software directly boosts your business value. Most small businesses save 60-120 hours yearly by automating payroll processes, creating time for revenue-generating activities. Moonworkers could be worth exploring, as it offers outstanding customer support, rated the best in the UK by organisations like startup.co.uk.

Moving from manual to automated payroll processing is one of the most effective improvements available to small businesses today. Choosing the right payroll software isn't just a technical decision—it's an investment in your business's success and future growth.

Best Small Business Payroll Software UK: Comparison Guide 2025