Buyer’s guide to payroll software (June 2010)

Payroll software can perform various tasks as well as ensuring staff are paid the right amount on the right day, and employers must choose their system carefully, says Tynan Barton

Payroll software systems are designed to ensure employees are paid the correct amount, on time, for the work they have done under their contract of employment.

As well as ensuring staff receive the amount they are expecting on the day they expect to receive it, payroll software can calculate various elements of salary, including the deductions of tax and national insurance (NI) from gross pay. They also provide the employee with a payslip.

Annrai O’Toole, general manager for Europe at provider Workday, says: “Increasingly, systems have to be more integrated into the overall performance of the company and the individual so employers can make sure they are paying the right people the right money for doing the right job.”

A key benefit of payroll software is that these calculations can be made much more quickly than they would take to do manually. Ideally, software should be accredited by HM Revenue and Customs to allow employers to file their annual return online.

Employers will need expertise

Payroll software can be managed in different ways. First, employers can manage staff payment in-house, using software bought from a provider, but this can bring a number of challenges, says Simon Parsons, director of payments, benefits and compliance strategies at Ceridian. “Employers will need expertise in tax, NI and the operation of the software,” he says. “If they outsource, they are buying someone else’s expertise.”

Alternatively, employers can choose to outsource all or part of their payroll process. A mixed delivery or bureau system means an employer can retain a relative amount of control over employees’ personal information through the software but is not necessarily involved in the more transactional elements of the process, such as printing payslips or sending payments to the bank.

Jonathan White, new business sales manager, HR and payroll at Sage, says: “This option gives employers the best of both worlds because they can keep control of the data without having to carry out the transactional aspects.”
As well as salary, payroll software will calculate payment for overtime or bonuses, plus arrangements such as the taxation of benefits or pension contributions.

Enhanced levels of reporting

Integrating payroll software with benefits software can save time and deliver enhanced levels of reporting. All data is stored in one place and does not require the duplication of work. Staff can view their own data, select benefits options, and receive statements that calculate the impact on their tax and NI.

Michelle Keith, business manager outsourcing services at NorthgateArinso, says: “Payroll solutions, whether with benefit packages or general payroll data, ultimately have to feed through into general ledgers and costing information. It is crucial all the benefits information is accurate. Another advantage to using an integrated solution is its ability to integrate the data into P11Ds, if necessary.”

The cost of payroll software depends on the type of system, the size of the organisation and the complexity of an employer’s requirements, such as the number of benefits offered to staff. Simple payroll software can start at £75 a year for an online self-service system. An integrated system for a large organisation can cost a one-off price of around £20,000, which includes installation, training and technical support.

Key facts

What is payroll software?
Payroll software automates the process of calculating salaries, ensuring staff are paid accurately and on time. It must comply with legislation in calculating how much tax and national insurance will be deducted from gross pay, as well as other deductions from net pay, such as pension contributions.

Who has more information?
HM Revenue and Customs’ website has information on choosing a payroll system.More information is also available at Employee Benefits’ website.

Main providers include:
ADP, Bond TeamSpirit, Cascade Human Resources, Ceridian, COA Solutions, Equiniti ICS, Fluous, Logica, Midland HR, NorthgateArinso, Oracle, Sage, SAP, Softworks, Symatrix, Trace, Workday.