Payroll System

Do You Need A Payroll System?

Provided your business has employees, you need a payroll system running in order to succeed. Apart from streamlining HR operations, a payroll system ensures that the Income tax & National Insurance deductions and other legal obligations are met. With that said, how then, do you find the best payroll system for your business?

Some businesses used to rely on manual payrolls but since the introduction of HMRCs Real Time Information (RTI), new requirements have made it impossible to virtually depend on the old systems. Every time a business runs a payroll, it is required by RTI to submit information electronically to HMRC. This is also done through the RTI systems.

Many businesses face challenges putting up with the complications of the auto-enrollment system of pension contributions. The free HMRC Payroll Tool is an option for businesses with fewer than nine employees. However, the major downside with using basic HMRC Payroll System is the time consumed and the inability to be used with firms that take on more employees. Firms that use basic HMRC do outsource their payroll upon expansion or transfer the employees’ data to an electronic payroll system.

Majority of the payroll systems already in place are integrated with features that enable them to handle RTI and process auto-enrollment. It is possible to complete key payroll forms and submit them to HMRC. Delay penalties in filling information and errors are greatly minimized because the payroll system does all the calculations.


  • The system helps in avoiding calculation errors and saves time. There are many allowance changes and rates involved.
  • Helps simplify complicated calculations such as pension contributions and student loan repayments.
  • The payroll system alerts you when anything looks odd, especially when you are inputting data.


  • There is a risk of losing data to system crushes, payroll errors and virus attacks, especially when tax rules are improperly implemented


Picking a Payroll System

Any payroll system processes the data at hand and clearly shows the deductions. Whichever choice you make, ensure that the payroll system gets recognized by HMRC and that it can compute income tax, NI and taxable benefits. Sage, Intuit and Iris are some of the renowned payroll software providers for small-scale firms. Also note that payroll service providers have different policies. Some charge an extra fee for every additional employee while others make monthly or annual charges for their services. However, the good news is that most payroll system providers allow their clients to run their trial version for free. You can always inquire from your accountant or other small scale businesses about the type that they use.


Payroll System Management

Most businesses opt to outsource their payroll in order to cut on costs and save time. Perhaps, this happens because of the low fee charged by dedicated payroll bureaus. The do a pretty good job provided you present to them payroll details. Alternatively, outsourcing to an accountant may be given consideration too but it comes with a higher cost. Another option could be to upgrade the existing payroll systems and let the accountant do his or her work. Outsourcing may seem like the last option but when administrative costs and time are taken into consideration, one realizes that it is a much better way to go. Generally, costs will normally depend on the number of employees in a given business. Usually, accountants get notified when a new employee starts a job in order for them to manually update their own. This is why using a recognized electronic payroll system is more preferred because of the ability to process all the information as required by the HMRC.


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