The 4 best payroll software providers for the UK’s Small Businesses in 2020

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Running your own payroll is a popular choice amongst UK small businesses, especially when taking on your first few employees. However, it is also important you get payroll right – and for that you will need the right software.

When looking for a payroll solution, whether it is paid-for or free, you need to make sure that it is capable of reporting to HMRC in real-time, every time you pay an employee. This is known as being Real-Time Information (RTI) compliant. HMRC regularly checks payroll software to evaluate whether they are RTI compliant and it keeps a list of approved software suppliers.

Every business will have different requirements, but you will need payroll software that:

  • Records employee details
  • Calculates statutory pay
  • Calculates pay and deductions
  • Reports in real-time to HMRC
  • Calculates how much you need to pay HMRC

Some software packages have comparatively limited features, and this is particularly common for free options so make sure you properly evaluate your options before deciding.

We have taken four of the UK’s most popular small businesses software products and reviewed areas such as usability, features, connectivity and price and put together a brief guide to help you make the right choice for your payroll needs.

We are also taking as read that each provider will do as standard items such as printing out payslips, P60s and employer’s reporting, and we have only included payroll providers that are compliant with GDPR legislation.

The contenders:

Quickbooks LogoXero LogoFreeagent LogoBright pay logo

Firstly, if you are not familiar with all the payroll  providers featured in our review, here is a quick overview of each:

QuickBooks is an accounting software package developed and marketed by Intuit. QuickBooks products are geared mainly toward small and medium-sized businesses managing payslips, pensions and statutory pay, then making real-time submissions to HMRC. Your payroll data is connected to your other accounts, so you get the complete picture of your business – anytime, anywhere. There is one interface to understand and pay just one bill.

QuickBooks has three payroll products: Simple, Essentials & Plus with prices currently ranging from £6-15 per month.

Xero, our second contender and probably the best-known supplier in our list, has been around since 2006 and its SaaS accounting software has over 2 million subscribers. Like QuickBooks, you can subscribe for a Xero payroll only plan if you are using different accounting software.

Xero allows you to enter a pay run, make bulk payments and email or print pay slips for employees in line with government legislation. Web access (or via the Xero Me mobile app) gives employees self-service options, making their life and yours, so much easier.

Xero has three different plans to choose from: starter, standard or premium with prices currently ranging from £10 – £30 per month

FreeAgent payroll is our third option. Its easy-to-use HMRC-recognised payroll software allows you to run your monthly payroll and file the PAYE and National Insurance contributions that have also been calculated directly to HMRC.

FreeAgent automatically generates payslips for all your employees each month which you can view and edit online and print them off as PDFs. At the end of the tax year, you can generate P60s for all your staff members too.

The Freeagent subscription package is totally different from our first two contenders in that it charges are based on the type of business you run (i.e.: Limited Company, Partnership/LLP or Sole Trader) rather than the services you use and includes payroll as standard.  

Their monthly pricing start from £9.50 for Sole Traders, £12 for Partnerships & £14.50 for Limited Companies.

If you are a NatWest or RBS business current account holder you can get full access for free, as long as you retain your bank account.

Brightpay is our final contender, and is the only service that offers an optional cloud add-on to your desktop payroll software that includes an automated cloud backup, online employer dashboards, annual leave management, client payroll entry and approval and an employee self-service portal.  

BrightPay includes payroll journal API integration with several accounting packages, including Xero, Sage One, QuickBooks Online, FreeAgent, Kashflow, AccountsIQ and Twinfield. This allows users to send the payroll journal directly to the account’s software from within BrightPay. They process payroll for over 250,000 business in the UK & Ireland.

They provide a variety of pricing packages, which you can view here.

Round 1: Usability. The Winner is.…FreeAgent

Quickbooks LogoXero LogoFreeagent LogoBright pay logo
Usability3 stars1 star gold4 stars gold

4 stars gold= the best performer

1 star gold= the worst

Aimed squarely at the SME and freelance space, FreeAgent has developed a reputation for developing unfussy software that is simple to use and has a very intuitive User Interface (UI).

With an excellent ‘tax timeline’ users can easily see what is owed to HMRC and when it needs to be paid and the employer reporting is again, easy to use and fuss-free.

tax timeline

Xero has an excellent interface but due to the extra functions available in the software, it is naturally a little more complicated. RTI reporting is simple and the UI is clean and uncluttered.

Since producing its online offering, QuickBooks has come in for some criticism of its UI, some of which is justified. Bridging the gap between small and medium companies, the software is perhaps aimed more at professional finance users (such as accountants and bookkeepers) so some of its functions are a little harder to understand and find.

Brightpay is a professional payroll service offering, and as such, has a myriad of functions and services. This means that the interface is less developed than the others and naturally is more difficult to use for the business owner who may only need it to produce payroll once a month but it is perfect if you are doing payroll all-day, every-day.

Round 2 – Features. The winner is ….BrightPay

Quickbooks LogoXero LogoFreeagent LogoBright pay logo
Features3 stars1 star gold4 stars gold

Given that BrightPay is a professional software solution you would expect it to have many more features available to the user. With the option of extending the software to include Bureau functionality, several payrolls can be run from the one program at the same time and BrightPay has superb functionality for more advanced elements such as pensions, payments and deductions.

QuickBooks has a remarkably wide range of functions, such as extensive pay schedules and the ability to run international payments in multi-currency formats and even make payments in overseas currencies using services like TransferWise.

Xero payroll also boasts a stunning array of tools that only a few years ago would have been the preserve of ultra-expensive top-of-the-range software. Including flexible payment calendars, multiple pay rates and built-in timesheets, the software is set up as a real employment solution for small to medium companies.

FreeAgent suffers a little on the functionality scores but for understandable reasons. The software is specifically aimed at smaller businesses who may only have a few employees and that will not need the vast functionality of BrightPay. Consequently, functionality is sacrificed to make the UI more intuitive and the price cheaper.

Round 3 – Connectivity. The winner is ….Xero

Quickbooks LogoXero LogoFreeagent LogoBright pay logo
Features3 stars4 stars gold1 star gold

One of the biggest advantages of using online software is the ability to connect with other online software and service providers by simply changing a few settings or downloading their app. It is also important to note that arguably the biggest drain on the time of any payroll staff is servicing enquiries from employees and we are awarding extra points here for having self-serve options.

Xero is the clear winner here simply for its excellent self-serve capability. Employees can download the Xero Me app to their phone and instantly get access to their own encrypted e-payslips and payroll information. It also has a good range of addon apps in their marketplace that extends the usability of payroll by adding on extra services such as HR Partner or UpSheets. Ironically, you can even connect Xero payroll to Quickbooks accounts!

Quickbooks is a close second on employee connectivity and although the app for this provider is slightly less usable than Xero the software does have a much wider availability of add-ons in their app store and so the gap is very small indeed.

BrightPay has a less refined connectivity method and some of the integration is achieved by export/imports but it does score well in one respect. By showing its background as a bureau software, Brightpay will link directly to many pension providers to allow auto-upload of contribution records and as such will remove an irksome chore from the payroll schedule. FreeAgent has a less developed marketplace for its integrations but there are still some very well-known and usable apps including Zapier and Simple-Simon.

Round 4 – Price. The winner is ….Freeagent

Quickbooks LogoXero LogoFreeagent LogoBright pay logo
Features3 stars4 stars gold1 star gold

Pricing for payroll software often changes depending upon how many employees you have. This means that a solution that might look cheap when you have 1 staff member becomes expensive when you have 30, so please bear this in mind when it comes to choosing, if you are basing your decision on price.

Where FreeAgent lost on features it makes up for in price. If you are looking for an integrated solution for your bookkeeping and payroll then the mere fact that FreeAgent bundles payroll in with its accounting solution makes it a clear winner. That having been said if you are looking for just  payroll, then it is still keenly priced at only £9.50 pm for the first six months and £19.50 thereafter.

Xero has a simple payroll pricing plan at £5 per month for the payroll module and £1 per employee. The fact that this includes all the payroll functions makes it relatively cheap, especially if you only have one or two employees but the price could mount up quickly once you expand.

Bear in mind that if you want to add on the accounting function, you will pay a minimum of £10 per month extra.

Quickbooks charges £4 per month for the package and then £1 per month per employee but if you want the advanced payroll features, you will pay £8 per month plus £1 per employee. If you need to add on accounts, then the monthly subscription will be at least another £12 per month.

BrightPay has a somewhat complex pricing method that depends upon how you want to use the software. If you simply want to use Brightpay on your desktop then the price is a very reasonable £49 per year for one company and multiple employees. However, if you want to use the benefits of its online offering then you’ll pay an extra £199 per year for one employer and multiple employees and should you have multiple businesses then you could pay as much as £499.

Conclusion of the best software. The winner is ….

Quickbooks LogoXero LogoFreeagent LogoBright pay logo
Usability3 stars4 stars gold1 star gold
Features3 stars1 star gold4 stars gold
Connectivity3 stars4 stars gold1 star gold
Price3 stars4 stars gold1 star gold

As you can see the best choice of software really depends upon your situation.

If you are a very small employer who wants an easy to use system at a great price, then FreeAgent fits the bill.

If you have multiple companies with very complex payrolls, then you might be better looking at BrightPay.

For the remaining payroll software providers,  then you cannot go far wrong with Xero and QuickBooks that have offerings that are very similar in terms of price, features and connectivity although we do very much like the Xero ME app.

Our Payroll Services – Designed For Your Business

We provide a simple yet comprehensive service to our clients at a low fixed monthly cost. As a business ourselves, we know how important payroll is, therefore we will be able to understand the requirements that are going to mean the most to you and your business to get the most from the software.

Our fully compliant payroll package has a fixed price, which includes a dedicated payroll manager, and a response time of within 24 hours.  We will also complete any HMRC reporting, provide P60s or P45s, provide tax related advice to your staff so you can focus on growing your business rather than your payroll admin.

We are a Xero Payroll Gold Partner & QuickBooks Payroll Specialists so we can run your payroll on your existing software. If you would like help choosing the right payroll package for your small business or talk about running your existing payroll with us, then please do get in touch.