Payroll services for small business: what to look for

Payroll looks simple until you run it. The moment you take on staff, getting people paid becomes a monthly deadline with HMRC filings, pension duties and statutory payments attached, and the penalties for getting it wrong land on you, not your employees. Here's what payroll services for a small business actually cover, roughly what they cost, and how to pick a provider that fits.

What payroll services actually cover

A good payroll service does far more than produce payslips. For most small businesses it should include all of the following as standard:

• Running each pay run and issuing compliant payslips
• Real Time Information (RTI) submissions to HMRC on or before each payday
• Workplace pension auto-enrolment: assessing staff, deductions and uploads to your provider
• Statutory payments, including sick, maternity, paternity and adoption pay
• Starters and leavers, tax codes and P45s
• Year-end filing and P60s for your team
• Directors' payroll and a sensible salary and dividend split
• CIS returns if you work in construction

Signs you've outgrown doing it yourself

• You've taken on your first employees and the rules suddenly matter
• It's quietly eating an evening every month
• You've had a late filing, or an HMRC penalty letter
• Pension re-enrolment is due and you're not sure what's required
• Staff questions about tax codes or statutory pay leave you guessing

What payroll services cost for a small business

Most providers charge a small monthly base fee plus a per-payslip amount, so cost scales with headcount rather than landing as one big bill. For a handful of employees paid monthly, it's usually a modest monthly figure. What pushes it up is frequency (weekly payroll costs more than monthly), pension administration, CIS, and anything treated as an extra rather than included.

The number that matters isn't the headline price, it's what's inside it. A slightly higher fee that covers auto-enrolment, statutory pay and year-end is usually better value than a cheap quote with three add-ons bolted on later.

Questions to ask a payroll provider

• Is pension auto-enrolment included, or billed separately?
• Who deals with HMRC if there's a query, a penalty or a coding error?
• What's your deadline for me to send hours and changes each period?
• Are statutory sick and family pay calculations part of the service?
• What happens at year end, and is that included in the fee?
• Can my staff access their own payslips and P60s?

Software you run, or a firm that runs it for you

There are two routes. Payroll software you operate yourself is cheaper, but the compliance stays your problem: your deadlines, your filings, your penalties. A firm running payroll for you costs more, but the deadlines and pension duties become their job, and you get someone to ask when something unusual comes up. Once you're past a couple of employees, most owners find the second option pays for itself in time and avoided mistakes.

Choosing the right firm

Payroll is a monthly relationship, not a once-a-year filing, so responsiveness matters more here than almost anywhere else. Look for a firm that answers quickly, tells you its cut-off dates clearly, and handles pensions without being chased.

Switch Books isn't a payroll bureau. We're a free service that matches you with a local accounting firm that runs payroll properly. Tell us your team size and how often you pay them, and we'll find a firm that fits.