- Payroll software is a tool you operate yourself, while a managed service is a team that runs payroll for you, and the right choice usually comes down to headcount and how much time you have.
- Every UK employer running payroll must submit RTI reports to HMRC on or before each payday, handle workplace pension auto-enrolment, and manage statutory pay, whichever route they pick.
- A business paying one or two people can reasonably run payroll itself through HMRC-recognised software, but the admin grows quickly once pensions, leavers, and statutory pay enter the picture.
Choosing the best payroll software UK small businesses can rely on comes down to one honest question: do you want a tool you run yourself, or a team that runs it for you?
Payroll software is the DIY route, cheaper up front but your time and your responsibility. A managed payroll service hands the whole job to someone else.
Most owners start with software while they pay one or two people. They switch to a service around five employees, when pensions, leavers, and statutory pay start eating real time.
Payroll software or a payroll service: which do you need?
The difference is simple. Software gives you the tools and leaves you holding the responsibility. A service takes the responsibility off your plate for a fee.
Both routes have to do the same legal job. Whoever runs your payroll still submits Real Time Information to HMRC on or before payday, assesses staff for a workplace pension, and handles sick pay and maternity pay when they come up.
The choice isn’t about what gets done. It’s about who does it.
Your situation | Usually the better fit | Why |
Paying just yourself as a director | Software | One payslip a month, predictable, low admin |
One or two employees, steady pay | Software | Manageable if you’re comfortable with the rules |
Growing headcount or variable hours | Service | Assessments, leavers, and statutory pay stack up fast |
No time or appetite for compliance risk | Service | A missed RTI deadline is your liability, not the software’s |
If you’re setting up payroll for a first employee, software is a reasonable start. If you’re switching because your current setup keeps going wrong, that’s usually a sign you’ve outgrown doing it yourself.
What running UK payroll actually involves
Running payroll is a lot more than working out net pay. It’s a chain of obligations to HMRC and to your staff, and each one carries its own deadline.
Before you pay anyone, you need to register for PAYE with HMRC and get your PAYE reference number. You can do this yourself, free, at HMRC. It typically takes up to five working days to arrive.
Once you’re running payroll, the recurring jobs are:
- RTI submissions: a Full Payment Submission to HMRC on or before every payday, reporting pay, tax, and National Insurance
- Payslips: every employee is legally entitled to an itemised payslip on or before payday
- Workplace pension: assessing staff for auto-enrolment, enrolling those who qualify, and paying contributions
- Statutory pay: sick pay, maternity pay, paternity pay, and the rest when they apply
- Year-end reporting: the final FPS by 5 April, plus a P60 for every employee still on your books by 31 May
- Leavers: a P45 for anyone who leaves
You also pay the tax and National Insurance you’ve deducted to HMRC by the 22nd of the following month if you pay electronically. Miss an RTI submission and HMRC penalties start automatically, so the calendar matters as much as the maths.
For the bigger picture on what an employee actually costs once you add employer NI and pension on top, see our guide to the true cost of employing someone.
Best payroll software for small businesses: what to look for
Good payroll software does the heavy lifting on compliance so you don’t have to remember every rule. The brand names most owners recognise, Xero, QuickBooks, and Sage among them, all handle the core job.
So the smarter approach is to judge software against the obligations it has to meet, rather than the logo on it.
Run any shortlist through these six checks:
- HMRC recognition: it must appear on HMRC’s list of recognised payroll software, or it can’t file RTI legally
- RTI submission built in: FPS and EPS filed directly from the software, with a submission receipt you can keep
- Auto-enrolment handling: it assesses each employee against the pension rules automatically, rather than leaving you to work it out
- Pension provider integration: it talks to your pension scheme, so contributions flow through without manual re-keying
- Payslip delivery: it produces and sends compliant payslips, ideally to a secure employee portal
- Accounting integration: it feeds your payroll figures into your bookkeeping, especially if you already use Xero for your accounts
The free HMRC Basic PAYE Tools will file RTI for you, but it doesn't produce payslips or handle auto-enrolment. It's fine for a single director and painful for anything more.
The trap to avoid is picking on price alone. The cheapest tool that leaves you doing pension assessments by hand isn’t cheap once you count your evenings.
Managed payroll services: what to look for
A managed payroll service is a provider that runs the whole cycle for you, from calculating pay to filing with HMRC. The value isn’t just convenience. It’s that the compliance risk moves to a team whose job is to get it right.
When you’re comparing providers, the feature list matters less than who’s actually accountable for what. Ask these questions directly:
- Who submits RTI? It should be them, on or before payday, not you at the last minute
- Who handles pension compliance? Confirm they do assessments, enrolment, and contribution filing, not just the pay run
- What happens when someone leaves mid-month? A good provider handles the P45 and final pay without you chasing
- What are their response times? Payroll questions are time-sensitive, so a slow reply near payday is a real problem
- Is the work done in-house or subcontracted? Plenty of “providers” pass your payroll to a third party, which adds a layer between you and the person doing the work
That last point is where providers genuinely differ. At Sleek, payroll is run by our own team rather than farmed out, which matters when a deadline is close and you need a straight answer fast.
If you want the full case for handing it over, we’ve written separately about outsourcing your payroll.
What does payroll cost?
Payroll pricing works differently for the two routes, and comparing them fairly means counting more than the headline figure.
Software is usually a monthly licence, often priced per employee or in headcount bands. The sticker price looks low, but the real cost is that plus your time. Count the hours you spend running pay, checking pension assessments, and fixing errors.
For one or two people that time is small. For a growing team it isn’t.
A managed service is typically a fee per payslip or a monthly retainer. It looks more expensive line by line, because it is, but it absorbs the admin and the compliance risk.
Payroll software | Managed service | |
Direct cost | Monthly licence, often per employee | Per-payslip fee or monthly retainer |
Your time | Significant, and grows with headcount | Minimal |
Who carries the risk | You | The provider |
Best when | Low headcount, comfortable with the rules | Growing, or short on time |
We’re not going to quote specific prices here, because software subscriptions change often and a dated figure helps nobody. For where Sleek’s payroll sits, our pricing page is the place to check.
Workplace pensions: the bit most people underestimate
Auto-enrolment is the obligation small employers most often trip over. It applies the moment you have a qualifying member of staff, not once you feel established.
Who has to be enrolled
You must automatically enrol any employee who is aged between 22 and State Pension age and earns more than £10,000 a year. That £10,000 figure is the earnings trigger for 2026/27, confirmed by the Department for Work and Pensions.
Staff earning between £6,240 and £10,000 aren’t auto-enrolled, but they have the right to opt in. You have to enrol them if they ask.
What you have to pay in
The minimum total contribution is 8% of an employee’s qualifying earnings, of which at least 3% must come from you as the employer. Qualifying earnings for 2026/27 are the slice of pay between £6,240 and £50,270, per The Pensions Regulator.
There’s also re-enrolment. Roughly every three years you have to put back any eligible staff who opted out, and file a re-declaration of compliance. It’s easy to forget precisely because it’s so infrequent, which is one more reason software or a service earns its keep.
Statutory sick pay and maternity pay: current UK rates
Statutory pay is where a quiet month of payroll suddenly gets complicated. The sick pay rules changed significantly in April 2026, so it’s worth knowing where things stand now.
Statutory Sick Pay is £123.25 a week for 2026/27, or 80% of average weekly earnings if that’s lower. Two changes are now in effect. SSP is payable from the first day of sickness rather than the fourth, and the Lower Earnings Limit has gone, so all employees qualify regardless of what they earn.
In practice, even a one-day absence now triggers a payment.
Statutory Maternity Pay runs for up to 39 weeks. The first six weeks are 90% of average weekly earnings with no cap. It then drops to £194.32 a week, or 90% of earnings if that’s lower, for the remaining 33 weeks.
Statutory Paternity Pay is £194.32 a week. These are the confirmed 2026/27 figures from GOV.UK.
The reason statutory pay catches people out is timing. It rarely comes up, so the process isn’t fresh, and it usually lands when you’re already dealing with someone being off. This is exactly the kind of thing good software prompts you on and a managed service simply handles.
If you’re a single-director company paying yourself
A single-director company paying itself is the simplest payroll there is, but “simple” isn’t the same as “optional”. If you’re taking a salary through PAYE, you still have to run payroll and file RTI.
The good news is what you don’t have to worry about. With no other employees, there’s usually no auto-enrolment duty on a sole director, and no statutory sick or maternity pay to administer. It’s genuinely one submission a month.
Where it gets more involved is the interaction between salary and dividends, which is how most directors pay themselves tax-efficiently. Getting the salary level right affects your National Insurance position and your Employment Allowance eligibility.
It’s worth understanding employer National Insurance contributions before you set it. For the full mechanics of directors’ pay, see how payroll works in a limited company.
Can I run payroll myself?
You can run payroll yourself, and for a small headcount it’s a perfectly reasonable choice. Just go in knowing exactly what you’re signing up for.
If you’re paying one or two people on steady salaries, HMRC-recognised software makes this manageable. You’ll handle the monthly pay run, file RTI on time, and keep on top of pension assessments. Plenty of small employers do this without drama.
The honest caveats are these:
- The deadlines are yours. Miss an RTI submission and the penalty lands on you, not the software
- Auto-enrolment is unforgiving. The rules apply automatically, and “I didn’t realise” isn’t a defence
- Statutory pay will test you. The first time someone’s off sick or on maternity leave, you’ll be learning the rules under time pressure
- It scales badly. What’s fine at two employees becomes a genuine time sink at six, especially with variable hours or frequent starters and leavers
The point at which most owners stop wanting to do it themselves is when the admin starts costing more in time and worry than a service would cost in money. If you’re comparing that against setting up as an employer for the first time, our guide on whether a sole trader can have employees is a useful starting point.
How Sleek helps with payroll
If you’d rather not carry the deadlines and the compliance risk, Sleek runs payroll for you with our own in-house team. RTI submissions and pension duties are handled, rather than flagged back to you as your problem.
Payroll is moving to a standalone Sleek service, built around the job of running pay properly rather than bolted onto something else. You get qualified people who are accountable for getting it right, not a helpdesk pointing you at a manual.
Disclaimer: The preceding information is not legal advice. This content is aimed to provide general guidance. For more formal or legal advice, contact Sleek directly.
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FAQs on payroll software and services
What’s the best payroll software for a UK small business?
The best payroll software is whichever HMRC-recognised tool handles RTI filing, auto-enrolment, and payslips for your specific headcount. Well-known options like Xero, QuickBooks, and Sage all cover the essentials. Choose on how well it fits your existing accounting setup and headcount, rather than the brand name alone.
Should I outsource payroll or do it in-house?
Both work, and it comes down to time and headcount. In-house through software suits one or two employees if you’re comfortable with the rules, while outsourcing to a managed service suits growing teams or anyone who’d rather move the compliance risk to a provider. The tipping point for most owners is around five employees.
Who submits RTI to HMRC, me or my payroll provider?
It depends on your setup. If you run payroll yourself with software, you submit the RTI on or before each payday, whereas a managed payroll service submits it for you. Always confirm this explicitly with a provider, because a slow or missed submission is still ultimately your liability as the employer.
What happens if I miss an RTI submission?
HMRC issues automatic late-filing penalties, which scale with how many employees you have. Continued failure to file for three months or more can trigger further penalties on top. This is one of the main reasons small employers move to software or a managed service, since both are built to file on or before payday every time.
Do I need payroll software if I only pay myself?
Yes, if you take a salary through PAYE, because you still have to file RTI with HMRC each time you pay yourself. The free HMRC Basic PAYE Tools can do this for a single director, though it won’t produce proper payslips. Paid software or a service makes it tidier, especially once you factor in salary-and-dividend planning.
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Does payroll software handle workplace pensions?
Good payroll software assesses each employee for auto-enrolment automatically and calculates the contributions, and many tools file them directly with your pension provider. Basic or free tools often don’t, which means doing assessments by hand. If you have staff who’ll qualify for a pension, treat auto-enrolment handling as a must-have, not a nice-to-have.
Can I run payroll if I’m a sole trader with one employee?
Yes. A sole trader can employ staff, and once you do, you must register as an employer with HMRC, run PAYE payroll, and file RTI on or before payday. You’ll also need to assess that employee for a workplace pension, so being a sole trader doesn’t reduce the payroll obligations that come with having an employee.
