How can payroll software help small businesses?

confident japanese owner standing at his coffee roastery.jpg s1024x1024wisk20crErlLV cz | How can payroll software help small businesses?
By Anthony Wolny | 7th June 2024 | 7 min read

Owning a small business (SME) is exciting, but it also has its fair share of challenges, payroll being one of them.

Let’s face it, you didn’t start your business with the intention of managing payroll – you want to pursue your spark and passion!

However, people won't work for free.

This is where payroll software comes in! While software is mandated by HMRC so you can report PAYE information online, many business owners opt for more extensive payroll software to further ease their burden.

But how does a modern, best-of-breed solution differ from a more basic software like HMRC’s free system?

We've explored how payroll software can be a game-changer for businesses.

Benefit one: easily calculate statutory sick pay

People get sick, that is an unavoidable part of life.

So, if you employ even one person, Statutory Sick Pay (SSP) needs to be a consideration and you must pay your people SSP when they fall ill.

Note: you can choose to pay the minimum SSP or provide a higher rate of sick pay, but that’s at your discretion.

Statutory sick pay applies if your employees:

  • Have an employment contract
  • Work at your business
  • Meet the minimum pre-tax earnings (£123 per week)

You don’t have to pay sick pay if your employees:

  • Already received 28 days of sick pay this year
  • Recently received Employment and Support Allowance
  • Are pregnant or receiving maternity pay
  • Are in the armed forces
  • Are in police custody

Managing sick pay can be confusing, particularly when using manual software to calculate and track employees' entitlements.

Modern payroll software takes the hassle out of this process by automating calculations based on your employee's earnings and absences.

Here’s an example to illustrate: Ben owns a plumbing business and uses payroll software to pay his employees. When his head plumber, Raj falls ill and needs to take time off work, Ben’s payroll software automatically calculates Raj’s sick pay. This saves Ben from having to manually calculate the figures.

Free guide: From start-up to success

Download here

Benefit two: producing payslips is easy with good payroll software

By law, you must give your employees payslips.

However, producing and distributing payslips can be time-consuming.

Best-of-breed payroll software, like Staffology Payroll by IRIS, simplifies the process by automatically generating accurate payslips.

Software also calculates all the information required by law, including:

  • Gross pay and net pay
  • Variable deductions, such as Income Tax
  • Fixed deductions like loan repayments
  • Part payments
  • Hours worked

For example: Sam owns a small café. She used to spend hours every month preparing payslips but now, her new payroll software does this for her, freeing up hours of Sam’s time.

More content: Should you be using online payslips?

Read here:

Benefit three: National Living Wage and National Minimum Wage compliant

You must pay your employees at least the National Living Wage or National Minimum Wage.

All employees over 21 are entitled to a National Living Wage of £11.44 per hour, and anyone who is of at least school-leaving age must receive the National Minimum Wage, varying from £6.40 to £8.40 per hour.

Rather than manually calculating wages, which is time-consuming and prone to human error, many small business owners rely on the automation found in their modern payroll software.

Good payroll software automatically calculates payments based on the hours worked, ensuring minimum wage rates are adhered to.

Benefit four: payroll software complies with tax codes

Tax codes are in place to ensure every employee is paying the correct rate of tax.

While this is helpful, employers still need to complete the necessary tax calculations as dictated by each employee’s tax code.

Additionally, it can sometimes take a while for HMRC to update people’s tax codes when circumstances change (e.g. an employee receives a pay rise), which can negatively impact your payroll.

Thankfully, specialist payroll software automatically applies the correct tax codes based on each employee's circumstances.

Not only can it save you hours of manual calculations, but you can rest easy knowing your employee’s tax codes are automatically up to date.

Benefit five: setting up and managing workplace pension schemes

Employers must now enrol all employees in a workplace pension scheme.

Automatic enrolment, also known as auto enrolment, is a Government initiative that requires employers to automatically enrol eligible employees into a workplace pension scheme.

While this system is referred to as ‘auto enrolment’, employees have the option to opt-out.

More content: Simple guide to automatic enrolment

Read here

Your payroll software should simplify the auto-enrolment process by automating pension scheme setup and management, including getting employees started with a workplace pension and calculating contributions.

For example: Jingxiao runs a small fashion design business. With payroll software, Jingxiao can easily set up and enrol her staff on a workplace pension scheme. Her software also handles contribution calculations, making it straightforward for Jingxiao to meet her pension obligations.

Flexible and powerful payroll solutions

Payroll is challenging and complicated, but it doesn’t have to be.

We have expertly crafted payroll solutions to meet the needs of any business.

Whether you’re looking for modern payroll software to run your payroll in-house or looking to outsource your payroll to our experts, we’ve got a solution for you.

“I wholeheartedly recommend Staffology payroll as it has reduced our repetitive payroll processing time by a third. Prior to using Staffology our payroll processing took 3 weeks and required 3 staff members on average. With the use of Staffology, we have one staff member working intermittently on payroll over 3 days.”- Jamil Raja – J.Raja & Company

Find the perfect payroll solution for you – click here.