Payroll Services for Small Businesses UK 2026: Costs, Providers & Options Quick answer
The best payroll service for a small business depends less on employee count than on how complicated the payroll is and how much responsibility you want to keep in-house.
A small business can choose between:
free payroll software
paid payroll software
accountant payroll
a payroll bureau
managed payroll
fully outsourced payroll
Your payroll What we would compare first
1-5 staff on fixed monthly salaries
HMRC Basic PAYE Tools, Sage, Xero or accountant payroll
Small team already using accounting software
Integrated payroll software
Weekly/variable-hours payroll
Managed payroll or payroll bureau
Lots of starters and leavers
Managed/outsourced payroll
Construction + CIS
CIS-capable software or specialist payroll provider
Payroll + HR support
Integrated HR/payroll provider
You want payroll largely off your plate
Outsourced payroll
Current payroll software examples include:
HMRC Basic PAYE Tools: free for employers with fewer than 10 employeesSage Payroll Essentials: from £12 + VAT/month for up to 5 employeesXero Ignite: payroll available from £1.50 per person alongside the accounting subscriptionXero Grow: payroll for 1 person included in the current £39/month standard planXero Comprehensive: payroll for 5 people included in the current £55/month standard plan
Provider pricing changes, and payroll may form part of a wider accounting subscription.
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Payroll Cost Calculator UK Use the calculator below to estimate payroll costs based on employee numbers, pay frequency, pensions, CIS, variable pay, reporting, HR support and migration requirements.
Use the estimate as a comparison starting point rather than a guaranteed market price.
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Actual payroll costs vary by employee count, pay frequency, complexity, pensions, CIS, HR support, integrations, reporting and service level.
Payroll Cost Calculator UK Estimate your monthly payroll cost based on employee numbers, pay frequency, pension duties, CIS, payslips, reports and support level.
Pay frequency
Monthly Weekly Fortnightly Four-weekly Mixed payroll frequencies Weekly payroll usually costs more because it runs more often.
Payroll service type
Payroll software only Managed payroll service Fully outsourced payroll Payroll bureau / accountant Software is usually cheaper; outsourced payroll gives more support.
Business type
Office / admin business Retail / shop Hospitality / restaurant / café Construction / trades Care / healthcare Agency / variable staff Professional services Multi-site business Variable hours, shifts and CIS can increase payroll complexity.
Need workplace pension / auto-enrolment support?
No Basic pension submissions Full auto-enrolment support Includes pension assessment, contributions or pension file uploads.
Need CIS payroll?
No Yes, include CIS Useful for construction businesses paying subcontractors.
Variable pay complexity
Low: fixed salaries Medium: overtime / bonuses High: shifts, tips, commissions or allowances Hospitality, retail and sales teams often need more checks.
Payslip delivery
Digital payslips Employee portal Printed payslips Printed payslips can add admin and postage costs.
Need HR support?
No Basic HR advice Payroll + HR support Useful if you need contracts, absence, holiday or employment advice.
Reporting level
Basic payroll reports Management reports Advanced reports / costing / departments Departmental reporting can be useful for larger teams.
Need year-end support?
Yes No Includes end-of-year payroll checks and employee documents where relevant.
Setup / migration needed?
No setup needed Standard setup / migration Complex migration / multiple payrolls Changing provider mid-year may require extra setup.
Your estimated payroll costs
Estimated monthly cost
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Cost per employee/month
£0
Potential monthly saving
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Enter your payroll requirements to estimate your costs.
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This calculator is an estimate only. Actual payroll costs vary by provider, employee count, pay frequency, payroll complexity, pension duties, CIS, HR support, setup, integrations, reporting and service level.
How do we work?
Transparent, impartial, and data‑driven reviews made by a team of expert humans, never AI generated – here’s exactly how Compare Your Business Costs helps you find the best deals from trusted UK providers: click here
Authored by: Ally Cox (Business Technology & B2B Services Specialist 10+ Years’ Experience)
Reviewed by: James Ward (Telecoms Specialist, 12+ Years Experience)
Last Updated: October 2026
Key Takeaways
Payroll complexity matters more than headcount alone.
HMRC Basic PAYE Tools remains free for employers with fewer than 10 employees.
Employers normally need payroll software capable of reporting PAYE information to HMRC.
A Full Payment Submission normally needs to be sent to HMRC on or before payday.
Automatic-enrolment duties begin when your first member of staff starts work.
Software is usually cheaper than outsourcing, but you keep responsibility for running payroll.
Weekly payroll, variable hours, high staff turnover and CIS can make outsourcing more attractive.
Always check whether pensions, RTI, starters/leavers, statutory pay and year-end work are included.
Setup and migration can materially affect first-year cost.
The cheapest payroll system is not necessarily the cheapest way to run payroll once internal staff time is included.
What Is a Small Business Payroll Service? A payroll service helps a business calculate, process and report employee pay.
Depending on the service, it could handle:
gross pay
PAYE Income Tax
employee National Insurance
employer National Insurance
pension contributions
payslips
RTI submissions
starters and leavers
P45s
P60s
statutory payments
student-loan deductions
CIS
payroll reports
The Most Important Question: Who Is Actually Running Payroll? There are three broad levels.
1. Software Only
You enter and check the payroll yourself, and the software helps calculate and report it.
2. Managed Payroll
You still provide information such as:
hours
bonuses
starters
leavers
but a provider processes the payroll and supports you.
3. Fully Outsourced Payroll
The provider handles most routine payroll processing and administration under an agreed process.
Our View
Do not compare software, managed payroll and outsourcing as if they are equivalent products.
The price difference reflects how much work and responsibility remains with your business.
Do Small Businesses Need Payroll Software? If you run PAYE yourself, you normally need software capable of reporting payroll information to HMRC.
HMRC publishes a list of recognised payroll software.
Employers use payroll software to:
record employee pay
calculate deductions
produce payroll information
report to HMRC
HMRC Basic PAYE Tools HMRC’s Basic PAYE Tools is:
free payroll software for employers with fewer than 10 employees.
It can:
record employee details
calculate tax
calculate National Insurance
process student/postgraduate loan deductions
handle starters and leavers
generate payroll data for HMRC
produce payslips
Our View
Basic PAYE Tools is a genuine option for a very small, simple payroll.
But free does not automatically mean best.
It may become less attractive if you need:
employee portals
advanced reporting
accounting integration
strong pension workflows
HR tools
outsourced support
Payroll Providers to Compare
Provider/option Best for Type
HMRC Basic PAYE Tools
Very small simple employers
Free software
Sage Payroll
SMEs wanting dedicated payroll software
Payroll software
Xero Payroll
Businesses already using Xero
Accounting + payroll
BrightPay
SMEs and payroll bureaus
Payroll software
PayFit
SMEs wanting cloud payroll and automation
Payroll platform
Employment Hero
Businesses wanting HR + payroll
HR/payroll platform
Moorepay
SMEs wanting managed payroll + HR
Managed service
IRIS
Software, bureaus and outsourcing buyers
Software + services
Local payroll bureau
SMEs wanting payroll processed externally
Bureau
Accountant
Businesses wanting payroll alongside accounts
Accountancy service
Sage Payroll Pricing Sage currently publishes three cloud payroll tiers.
Plan Current standard monthly price Employees included
Payroll Essentials
£12 + VAT
Up to 5
Payroll Standard
£23 + VAT
Up to 5
Payroll Premium
£34 + VAT
Up to 5
Additional employee pricing currently reduces as employee numbers increase.
Our View on Sage
Sage provides a useful market benchmark because its pricing is relatively transparent so is worth comparing where you want:
dedicated payroll software
HMRC-recognised payroll
auto-enrolment tools
CIS capability on relevant products
employee documents
See our Sage Payroll guide .
Xero Payroll Pricing Xero currently bundles or adds payroll within its accounting plans.
Current standard plan examples include:
Ignite: £18/month base plan; payroll £1.50 per personGrow: £39/month; payroll for 1 person includedComprehensive: £55/month; payroll for 5 people includedUltimate: £70/month; payroll for 10 people included
Prices exclude VAT.
Our View on Xero
Xero is most compelling when payroll is being bought as part of the accounting system, not in isolation.
If you already use Xero, integration can reduce:
manual journals
duplicate data
reconciliation work
See our Xero Payroll review .
Payroll Software vs Payroll Bureau vs Outsourcing
Software Payroll bureau Outsourced payroll
Who inputs changes?
You
Shared
Shared/provider-led
Who runs calculations?
You/software
Bureau
Provider
Who checks payroll?
You
Shared
Depends on service
Cost
Usually lowest
Medium
Usually highest
Internal admin
Highest
Lower
Lowest
Best for
Simple payroll
SMEs wanting help
Businesses wanting payroll off their plate
Our View: “Outsourced” Does Not Mean Zero Internal Work Your business will still normally need to provide accurate information about:
hours
pay changes
bonuses
absence
starters
leavers
The provider cannot process correct payroll from incorrect input data.
How Much Do Small Business Payroll Services Cost? There is no reliable universal price range covering software, bureaus and outsourced payroll because they are different services.
Use these categories instead:
Payroll option Pricing approach
HMRC Basic PAYE Tools
Free for eligible employers
Payroll software
Monthly licence/employee bands
Accounting + payroll
Base accounting plan + included/additional employees
Payroll bureau
Often base fee + per employee/pay run
Managed payroll
Usually quote-based
Fully outsourced payroll
Usually quote-based
What Changes Payroll Cost?
employee numbers
weekly vs monthly payroll
number of separate payrolls
variable hours
overtime
bonuses
commission
starters/leavers
pension administration
CIS
printed payslips
HR support
reports
migration
Our View: Pay Frequency Can Matter More Than Headcount Compare:
Business A
20 salaried employees paid monthly with almost no changes.
Business B
8 hospitality employees paid weekly with:
variable shifts
overtime
starters/leavers
tips
Business B may generate substantially more payroll admin despite having fewer staff.
Payroll for Your First Employee Before paying your first employee, employers normally need to:
register as an employer with HMRC
choose payroll software or a provider
collect employee information
calculate pay and deductions
produce a payslip
report payroll information to HMRC
assess workplace-pension duties
HMRC states that employers should register before the first payday.
You cannot normally register more than two months before you start paying employees.
Real Time Information (RTI) Employers report pay and deductions to HMRC using Real Time Information.
The main submission is the:
Full Payment Submission (FPS).
HMRC normally requires the FPS:
on or before the employee’s payday.
What Is an EPS? An Employer Payment Summary may also be required in circumstances such as:
no employees were paid in the tax month
certain statutory payments are being reclaimed
Employment Allowance is being claimed
certain CIS deductions are being reclaimed
Our View
Ask exactly who is responsible for FPS and EPS submissions.
“We handle payroll” is too vague.
Workplace Pensions & Payroll Automatic-enrolment duties begin when your first member of staff starts work.
Payroll can help with:
worker assessment
contribution calculations
pension files
employee communications
ongoing monitoring
But businesses remain responsible for meeting their employer duties.
Our View: Ask What “Pension Support” Actually Means It could mean:
calculating deductions only
producing an upload file
submitting to the pension scheme
handling employee communications
These are not the same level of service.
Best Payroll Option by Complexity
Payroll profile Best option to compare
Fixed monthly salaries
Software/accountant
Variable overtime
Software or managed payroll
Weekly shifts
Managed payroll/bureau
High turnover of staff
Managed/outsourced payroll
CIS subcontractors
CIS-capable provider
Several departments/sites
Managed/integrated payroll platform
Payroll + HR
Combined HR/payroll platform
Payroll for Weekly-Paid Staff Weekly payroll means up to:
52 payroll runs per year
instead of 12.
That can create substantially more work involving:
timesheets
overtime
holiday
absence
starters/leavers
payslips
FPS submissions
Our View
Do not compare a monthly payroll quote against a weekly payroll service without checking the number of pay runs included.
Payroll for Hospitality Hospitality payroll can involve:
weekly pay
variable shifts
overtime
tips / tronc
high staff turnover
multiple venues
Look for integration with:
rota systems
time and attendance
HR
Payroll for Retail Retail payroll can involve:
hourly workers
overtime
seasonal staff
multiple stores
high starter/leaver volumes
A provider that imports approved hours from your time system can reduce manual rekeying.
See our Time & Attendance Systems guide .
Payroll for Construction Construction businesses should confirm whether the system supports both:
PAYE employees
CIS subcontractors
Relevant tasks can include:
subcontractor verification
CIS deductions
statements
returns
mixed payroll reporting
See our Construction Payroll guide .
Payroll for Care Businesses Care payroll can become complex because of:
variable shifts
overtime
different pay rates
on-call work
absence
multiple locations
The ability to import accurate time data can be as important as the payroll calculation itself.
Payroll + HR Combined payroll and HR platforms can connect:
employee records
absence
holiday
pay changes
documents
with payroll.
Our View
This becomes more valuable as employee administration grows – for a three-person business, a full HR platform may be unnecessary.
See our HR Software guide .
Payroll Bureau vs Accountant Accountant Payroll
Can work well if:
you already have an accountant
payroll is straightforward
you want one firm handling accounts and payroll
Payroll Bureau
Can be stronger if:
you need payroll-specialist support
pay runs are frequent
you have complex employee changes
Our View
Ask who answers payroll questions.
A cheap accountant payroll package is less attractive if every urgent employee query has to wait several days for a response.
Employee Self-Service Employee portals can allow staff to access:
payslips
P60s
other payroll documents
This can reduce routine requests to managers or finance staff.
Payroll Setup & Migration Switching payroll providers can require:
employee records
tax codes
year-to-date pay
year-to-date deductions
pension data
starter/leaver history
Our View
Migration should be treated as part of the purchase, not an afterthought.
Ask who validates transferred payroll balances before the first live pay run.
Can You Switch Payroll Provider Mid-Year? Yes.
But mid-year migration normally requires accurate year-to-date information so that future deductions and reporting continue correctly.
Ask whether the provider charges for:
setup
data import
parallel run
opening balances
Parallel Payroll Runs For a more complex migration, businesses may want to compare the old and new system before relying on the new payroll completely.
This can help identify:
incorrect opening balances
deduction differences
pension mismatches
employee setup errors
What Should Be Included in a Payroll Quote? Ask whether the price includes:
pay runs
payslips
FPS
EPS
starters
leavers
P45s
P60s
statutory pay
pension calculations
pension submissions
CIS
employee portal
reports
year-end work
support
Questions to Ask Before Choosing Payroll
Is the payroll software HMRC-recognised?
Who sends the FPS?
Who sends EPS submissions when needed?
How many payroll runs are included?
Do you support weekly payroll?
Are starters and leavers included?
Are pension submissions included?
Do you support CIS?
Can variable pay be imported?
Are digital payslips included?
Is employee self-service included?
Are year-end tasks included?
What does setup cost?
What does migration cost?
How are errors corrected?
What support hours apply?
Can we export all payroll data if we leave?
What is the contract term?
Common Small Business Payroll Mistakes
choosing purely by employee count
ignoring pay frequency
not checking FPS responsibility
assuming pensions are fully managed
assuming CIS is included
ignoring migration cost
not checking support response times
relying on manual timesheet re-entry
keeping payroll dependent on one employee
choosing the lowest software fee while ignoring internal admin time
When Should You Outsource Payroll? Outsourcing becomes worth comparing if:
payroll takes too long
you run payroll weekly
staff hours vary
you have frequent starters/leavers
you need CIS
pension admin is becoming difficult
payroll depends on one internal employee
errors are becoming frequent
you want less internal payroll administration
How to Calculate the Real Cost of In-House Payroll Don’t compare:
£20 software vs £100 outsourced service
without including internal staff time.
Example
If payroll requires:
5 hours/month
of an employee costing approximately:
£25/hour
the internal labour cost is:
£125/month
before the software subscription.
Illustrative example only.
Our View
The cheapest software can still produce the most expensive payroll process if it creates a large manual workload.
Our Verdict: What Is the Best Payroll Service for a Small Business? There is no single best payroll service for every small UK business.
Our starting recommendations are:
Very small + simple: HMRC Basic PAYE Tools or basic payroll softwareAlready on Xero/Sage: compare integrated payroll firstGrowing SME: paid payroll software or payroll bureauWeekly / variable payroll: managed payrollConstruction: CIS-capable providerPayroll + HR: integrated HR/payroll platformWant minimum internal admin: outsourced payroll
The five most important things to compare are:
who actually runs payroll
pay frequency and complexity
RTI and pension responsibility
support when something goes wrong
total cost including internal admin
The best payroll service is the one that gets employees paid accurately and on time while leaving your business with an appropriate level of control, workload and support.
Compare Small Business Payroll Providers
Frequently Asked Questions about Payroll Services for Small Businesses What is the best payroll service for a small business?
It depends on payroll complexity. Very small employers may use HMRC Basic PAYE Tools or payroll software, while businesses with weekly pay, variable hours or frequent employee changes may prefer managed or outsourced payroll.
Is HMRC Basic PAYE Tools free?
Yes. HMRC currently provides Basic PAYE Tools free to employers with fewer than 10 employees.
When does payroll need to be reported to HMRC?
Employers normally send a Full Payment Submission on or before the employee’s payday.
Do I need payroll software for one employee?
If you operate PAYE yourself, you normally need a suitable way to calculate deductions and report payroll information to HMRC. This may be payroll software or a provider running payroll on your behalf.
How much does Sage Payroll cost?
Sage Payroll Essentials currently starts at £12 + VAT/month for up to five employees, with Standard and Premium plans priced higher.
How much does Xero Payroll cost?
Xero currently includes or adds payroll depending on the accounting plan. Ignite allows payroll from £1.50 per person, while higher plans include payroll for a number of employees.
Is outsourced payroll worth it?
It can be if payroll consumes significant staff time, is complex or requires specialist support. Compare the outsourcing fee against both software costs and internal payroll time.
Is weekly payroll more expensive?
It often can be because there are more pay runs, submissions and changes to process. Always confirm how the provider charges for weekly payroll.
Can payroll providers handle pensions?
Many do, but the service varies. Some calculate contributions only, while others may handle files, submissions and employee communications.
Can payroll providers handle CIS?
Some can. Construction businesses should confirm support for subcontractor verification, deductions, statements and CIS returns before choosing.
Can I switch payroll providers mid-year?
Yes. Accurate year-to-date payroll and deduction information needs to be migrated so future payroll and HMRC reporting remain correct.
What should I compare before choosing?
Compare payroll frequency, employee changes, RTI responsibility, pensions, CIS, support, employee portals, migration, reporting, contract terms and total cost.
Related Payroll Guides – Payroll Services for Small Businesses Hi, I’m Ally Cox , a senior copywriter and blogger at CompareYourBusinessCosts.co.uk, the UK’s trusted platform for comparing business services.over a decade of experience in the B2B sector, I specialise in simplifying complex topics like leased lines, VoIP, business energy, HR and payroll solutions, accounting software, and EPOS systems .HR, copywriting, and business operations- from clocking-in systems to card machines and office technology .informed, confident decisions when choosing products and services that improve efficiency and save money.
