How To Choose SaaS Payroll Software
The non-negotiable first filter: Any UK payroll software you consider must be on HMRC’s recognised software list and must support Real Time Information (RTI) submissions. Everything else — features, integrations, price — is a secondary consideration. Get this wrong and you face HMRC penalties from day one.
In this guide:
Choosing payroll software is one of those decisions that feels administrative until it goes wrong. A payroll error doesn’t just inconvenience employees — it creates HMRC penalties, erodes trust and can expose directors to personal liability for PAYE failures. The software you choose needs to be reliable, compliant and connected to the rest of your HR and finance stack.
This guide focuses on the specific requirements of UK businesses — HMRC RTI, auto-enrolment, P60s, statutory payments — and helps you find the right tool for your company size and complexity.
UK Payroll Compliance Requirements You Can’t Ignore
Before evaluating features or pricing, get clear on what UK law requires your payroll software to do:HMRC Real Time Information (RTI)
Since April 2013, all UK employers must submit a Full Payment Submission (FPS) to HMRC on or before every payday, reporting each employee’s pay, tax and National Insurance contributions. This is not optional and there is no grace period. Your payroll software must handle RTI submissions directly to HMRC’s system. Any software marketed for UK use should do this — but always verify it is on HMRC’s recognised payroll software list before purchasing.Workplace Pension Auto-Enrolment
Under the Pensions Act 2008, all UK employers must automatically enrol eligible workers into a qualifying workplace pension scheme. Eligible workers are those aged 22–State Pension Age earning over £10,000 per year. Employer minimum contributions are currently 3% of qualifying earnings; employee minimum is 5% (including tax relief). Your payroll software needs to:- Assess worker eligibility each pay period
- Calculate qualifying earnings correctly
- Send contribution data to your pension provider
- Generate opt-out and re-enrolment management
- Produce the required communications to employees
Statutory Payments
Your payroll software must correctly calculate and apply Statutory Sick Pay (SSP), Statutory Maternity Pay (SMP), Statutory Paternity Pay (SPP), Statutory Adoption Pay (SAP) and Shared Parental Pay (ShPP). These have specific eligibility rules, waiting days and calculation methods. Getting these wrong creates real financial and legal exposure — verify your software handles all statutory payment types before deployment.PAYE, National Insurance and Tax Codes
Your software must handle all NI categories (A, B, C, H, J, M, Z for various employment types), process P45s and P46s for starters and leavers, apply the correct tax codes (including emergency codes, week 1/month 1 codes, and Scottish rates), and issue P60s by 31 May each year. Directors’ NI (which uses an annual method rather than monthly) is a specific calculation that some basic tools handle poorly — flag this if relevant.How to Evaluate Payroll Software
Once compliance is confirmed, evaluate on these dimensions:- UK compliance depth: RTI, auto-enrolment, all statutory payment types, P60s, Directors’ NI. This is table stakes but the depth of implementation varies.
- Integration with your accounting platform: If you’re on Xero, does the payroll software push journal entries automatically? If you’re on QuickBooks, is the integration native or via a third-party connector?
- Integration with your HR software: New starters, leavers, salary changes and employment changes should flow from HR to payroll without manual re-entry.
- Employee self-service: Can employees access their payslips, P60s and P11Ds digitally? Does the portal work on mobile? This reduces payroll admin queries significantly.
- Support quality: Where is support based? Is it available during payroll runs (typically last week of the month)? What is the SLA for urgent payroll queries?
- Complex pay handling: If your workforce has commission, overtime, multiple rates, shift differentials or expense reimbursements, test these scenarios before committing.
- Reporting: Can you export payroll data in the format your finance team needs? Are variance reports, headcount reports and cost-centre breakdowns available?
- Data security and backups: Is data stored in UK/EU data centres? Is the system ISO 27001 certified or equivalent?
Main UK SaaS Payroll Software Compared
| Software | Best for | HMRC RTI | Auto-enrolment | Pricing model | Key integration |
|---|---|---|---|---|---|
| BrightPay | SMBs; bureaus; strong UK focus | ✅ | ✅ Built-in | Per employee/year | Xero, Sage, AccountsIQ |
| Sage Payroll | Established UK businesses; Sage accounting users | ✅ | ✅ | Monthly subscription | Sage 50, Sage Intacct |
| Xero Payroll | Xero accounting users; up to ~100 employees | ✅ | ✅ | Included in Xero plans or add-on | Native Xero; Hubspot |
| Pento | Tech companies; complex pay structures; SaaS businesses | ✅ | ✅ | Per employee/month | HiBob, Personio, Xero, QuickBooks |
| Moorepay | Mid-market UK; managed payroll option | ✅ | ✅ | Contract-based | HR module included |
| IRIS Payroll | Accountancy practices; bureaus; larger businesses | ✅ | ✅ | Per licence / per employee | IRIS accounts suite; Sage |
| SD Worx | Enterprise; multi-country payroll | ✅ | ✅ | Enterprise contract | SAP, Workday, HCM platforms |
| ADP | Enterprise; multi-country; 100+ employees | ✅ | ✅ | Enterprise contract | SAP, Oracle HCM, Workday |
Best Payroll Software by Company Size
1–20 employees
BrightPay or Xero Payroll (if you’re already on Xero accounting). Both offer competitive pricing at low employee counts, strong UK compliance, and simple interfaces that work without a dedicated payroll administrator. BrightPay is particularly well-regarded in the UK for its auto-enrolment handling and active product development. Avoid: Enterprise platforms (ADP, SD Worx, Moorepay) — implementation cost and complexity far exceed what you need.20–150 employees
Pento is strong at this size if you’re a tech or SaaS company — modern API-first integration with HR tools like HiBob and Personio, handles variable pay well, and UK-based support. Sage Payroll and BrightPay Connect are solid alternatives for more traditional businesses. At this size, HR-payroll integration becomes important — data entry errors multiply with headcount, and a native integration between your HRIS and payroll software pays for itself quickly.150–500 employees
Moorepay becomes viable — their managed payroll service is attractive if you want to reduce in-house payroll headcount. IRIS Payroll handles complex pay structures and larger-scale reporting well. Pento and advanced Sage options also work at this scale depending on complexity.500+ employees
ADP, SD Worx or enterprise-grade platforms that integrate into your HCM system (Workday, SAP SuccessFactors). At this scale, multi-country capability may also be relevant, and vendor-managed payroll support becomes a genuine risk mitigation tool.Integrating Payroll with HR and Accounting Software
The most common payroll inefficiency in growing businesses is running payroll in isolation — new starters are set up manually, salary changes are entered twice, leavers are sometimes missed. Solving this requires integration between three systems:- HRIS → Payroll: New starter data (name, NI number, start date, salary, tax code) flows automatically. Contract changes update payroll without separate data entry. Leavers trigger the P45 process automatically.
- Payroll → Accounting: Payroll journals post directly to your nominal ledger. Cost-centre allocations are applied automatically. No manual journal entry.
- Payroll → Pension provider: Contribution files sent automatically each pay period. Opt-outs and opt-ins recorded. Re-enrolment triggered on schedule.
- HiBob + Pento + Xero
- Personio + Pento + Xero
- BambooHR + BrightPay + Xero
- Employment Hero (combined HR + payroll) + Xero
- Workday (enterprise HCM) + ADP (enterprise payroll)
How Payroll Software Is Priced
UK payroll software uses several pricing models. Understanding them prevents surprise costs:- Per employee per month (PEPM): The most common SaaS model. Typically £3–£12 per employee per month for SMB tools. Variable cost scales with headcount — predictable but can get expensive at mid-market scale.
- Annual licence: Used by some traditional providers (IRIS, older Sage tiers). Fixed annual cost for a headcount band. Can be cost-effective for stable headcount.
- Managed service fee: Moorepay, ADP and similar offer managed payroll where the vendor runs the payroll function, not just provides software. Priced per payslip processed or as a percentage of payroll value. Expensive in absolute terms but includes compliance accountability.
- Bundled with accounting or HR platform: Xero Payroll is included in higher-tier Xero plans. Employment Hero bundles HR and payroll. These offer good value if you’d be paying for the platform anyway.
How to Switch Payroll Software Without Disruption
Switching mid-year is more complex than switching at tax year end (5 April) but is often necessary. Key steps:- Export all historical payroll data from your current provider — employee records, year-to-date figures, cumulative NI and tax, statutory payments already made.
- Choose your go-live date carefully. Tax year end (April) is cleanest. Mid-year is possible but requires importing YTD figures accurately — errors here mean incorrect P60s.
- Run parallel payrolls for 1–2 months. Process payroll in both systems and compare outputs before switching over. This catches configuration errors before they affect employees.
- Migrate pension records. Ensure your auto-enrolment history transfers — opt-outs, postponement notices, contribution records.
- Update HMRC. Notify HMRC of the new PAYE reference if it changes, and ensure your FPS submissions are consistent across the changeover.
- Test employee self-service. Ensure employees can access historical payslips and documents from the new system before go-live.
Frequently Asked Questions
What is HMRC RTI and do all payroll software products support it?
RTI (Real Time Information) is the HMRC requirement to submit payroll data on or before every payday. It has been mandatory for all UK employers since 2013. Any software marketed for UK businesses must support RTI. Always verify the product is on HMRC’s recognised payroll software list before purchasing.What is the best payroll software for small UK businesses?
For under 50 employees: BrightPay (strong UK focus, excellent auto-enrolment), Xero Payroll (best if you’re already on Xero accounting), Sage Payroll (established provider, good support), or Pento (modern SaaS, good for tech companies). The best choice depends on your existing accounting platform and pay complexity.Should payroll software integrate with my HR system?
Yes — integration eliminates duplicate data entry, reduces new starter errors and creates a single source of truth. At 20+ employees, the time saved and error rate reduction typically justifies any integration premium. Check which HR platforms your payroll software integrates with natively before committing.Hiring HR or payroll professionals?
Live Digital works with SaaS and tech companies to recruit HR Operations, People Ops and payroll specialists who understand modern HR tech stacks — including implementation and ongoing management of payroll and HRIS platforms.
Talk to our HR recruitment team