How does payroll software connect to pension providers, accounting software and HR?

Payroll doesn’t and shouldn’t have to work in a silo. It’s optimal to integrate your payroll software with other systems and business areas, such as pension providers, accounting software and HR systems. This can be achieved through pre-built connectors, an open Application Programming Interface (API) or standard data files.

This blog explains how each connection works with payroll, what to check before you choose your payroll software and what our payroll software, Staffology Payroll, connects to.

Key takeaways

• There are five recommended connections for payroll software: pensions, accounting, HR, time and attendance and payments.
• Payroll integration reduces manual rekeying, removing the need to type data into multiple systems.
• Payroll software can connect to other systems in three ways: pre-built connector, open API or a data file export and upload.
• When comparing payroll software, clarify which connections are pre-built and which require a custom setup via an API.
• Staffology Payroll has pre-built connectors to more than 30 systems, plus file exports and an open API for custom integrations.

What does payroll software need to connect to?

There are five systems your payroll software should connect with: pensions, accounting, HR, time and attendance and payments.

Each of these systems has a role to play with payroll, such as sending data that impacts the pay run or receiving data from payroll after it, such as pension contributions and journals.

The table below showcases what data moves in each connection and flags what happens when the connection is missing.

The goal of connecting payroll to each system is to remove a manual step, reduce the risk of errors and ensure figures match across the business.

How does pension auto-enrolment integration work?

Every pay run, your payroll software assesses each employee for auto-enrolment, calculating their pension contributions and sending the data to your pension provider.

How the data reaches the pension provider depends on what the provider accepts.

Typically, these are the accepted methods:

• API: data flows straight from payroll to the pension provider’s system.
• Provider file: payroll creates a data file in the pension provider’s designated format, which you then upload.
• Payroll and Pension Data Interface Standard (PAPDIS): payroll creates a file in PAPDIS format, a standardised format that several UK pension providers accept.
• Some API connections also work in reverse: the pension provider sends opt-out and ceased contribution notifications back to payroll, so employee records update without anyone checking the provider’s portal.

If you run more than one pension scheme, or offer different ways of giving tax relief, check that your payroll software handles each scheme and contribution method.

Examples include net pay arrangement, relief at source and salary sacrifice.

The Pensions Regulator provides more information on your employer duties.

How does payroll integrate with accounting software like Xero, QuickBooks and Sage?

When payroll is integrated with your accounting software, after each pay run, payroll creates a journal that posts wages, tax, National Insurance (NI) and pension costs to the right accounts in your ledger.

How each cost is recorded in your ledger depends on two things you set up in payroll:

• Nominal codes: each type of pay or deduction is linked to an account in your ledger. This means gross pay, employer NI and pension costs are sent to the right place.
• Cost codes: costs are tagged by department or cost centre, so finance can see what each part of the business costs.

When comparing options, check whether:

• Journals post automatically or need exporting
• You can split costs by department or cost centre

What does ‘native’ Real Time Information (RTI) and auto-enrolment support mean?

‘Native’ means the payroll software does the job without any add-ons or separate services.

• Native RTI: payroll software sends your Full Payment Submission (FPS) and Employer Payment Summary (EPS) directly to HMRC. See GOV.UK’s guidance for more information: reporting to HMRC.
• Native auto-enrolment: payroll software assesses each employee, produces the letters you must send them and calculates pension deductions.

Important: check the software appears on GOV.UK’s list of HMRC-recognised payroll software.

Should HR and payroll share employee data?

HR and payroll sharing employee data is a huge benefit; changes are entered once in HR and automatically flow to payroll ready for the next pay run.

Example use cases include new starters, leavers, pay rises and changes of hours, all of which reach payroll without any manual rekeying when integrated.

Our guides to HR and payroll integration: what data to enter once and HR software with built-in payroll vs integrated cover this in more detail.

How does time and attendance integrate with payroll?

When time and attendance is integrated with payroll, approved hours and overtime are sent to payroll before each pay run.

This means hourly pay is calculated from the same figures managers have signed off.

Hours usually reach payroll in one of two ways:

• Connector or API: approved hours flow straight into payroll.
• Import file: hours are exported as a file and imported into payroll.

It’s essential that each type of ‘time’, such as basic hours, overtime and shift premiums, is mapped to the right pay code.

How does payroll connect to payment providers?

When payroll is connected to a payment provider, it creates net pay instructions after each pay run.

Employees are paid the exact amounts calculated without rekeying.

Payments are typically made in one of two ways:

• Payment partner: payroll sends instructions directly to a connected provider, which pays employees on pay day.
• Bank payment file: payroll creates a file, such as Bacs Standard 18, which you upload to your bank.

Bacs payments take three working days to arrive, so build this timeline into your payroll calendar.

Note that some payment providers can pay through Faster Payments instead, which usually arrive within hours.

What should you ask about integrations before choosing payroll software?

When choosing payroll software, ask which of your systems connect out of the box, how each connection works and whether you can build a custom integration if it isn’t covered.

Use these questions when discussing integration with payroll software providers:

• Is my pension provider supported, and does it connect by API or by file?
• Do journals post automatically to my accounting software?
• Does HR data sync in real time or on a schedule?
• Can I import hours from my time and attendance system?
• Is there an API for anything not covered?   

What does Staffology Payroll connect to?

Staffology Payroll connects to pension providers, accounting software, HR, time and attendance and payment systems.

It offers pre-built connectors, files and an open API for creating custom integrations.

Payroll software connection

Frequently asked questions (FAQs)

Does Staffology Payroll integrate with Xero?

Yes, Staffology Payroll integrates with Xero, as well as QuickBooks, Sage and other accounting software. Pay codes are mapped to nominal codes, so wages, tax, NI and pension costs post to the right accounts.

Which pension providers does Staffology Payroll support?

Staffology Payroll connects to Nest, The People’s Pension and Smart Pension by API and file. It also connects to more than 15 other providers by file or PAPDIS, including Aviva, Scottish Widows, Legal & General and Royal London.

What is PAPDIS?

PAPDIS is the Payroll and Pension Data Interface Standard, a free, open file format for sending auto-enrolment data from payroll to pension providers. Payroll software that produces a PAPDIS file can send data to any provider that accepts it.

Can I connect payroll to a system that isn’t on the list?

Yes, you can connect payroll to other systems through an API. Staffology Payroll has an open API, so you or a developer can build a connection to systems that don’t have a pre-built connector.