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The IT Zone guide to payroll services and software - 2008 update
A catalogue of payroll providers and points to watch in 2008 prepared by technology editor John Stokdyk.
CONTENTSIntroduction - The Carter timetable
New in-year forms for 2008/09
HMRC online accreditation scheme
HMRC Employer's CD
Cash incentives still available - but smaller
Listings - payroll software and service providers
Corporate HR & payroll outsourcers
Enterprise software incorporating payroll
Integrated HR/Payroll software developers
New wave online payroll as a service providers
SME accounting software incorporating payroll
SME payroll software developers
Payroll bureaux that develop and sell software
Payroll outsourcers/bureaux
Payroll programs with links to tax & practice software
Payroll recommended for running a bureau
Niche suppliers
Specialist P11D applications
CIS software options
Further reading
Introduction - the Carter timetable
The change to a new payroll year in April will not be as fraught as it might have been if Lord Carter had stuck to his original recommendation to bring in mandatory e-filing for in year (P45 and P46) forms from April. Larger organisations with 250+ employees have an extra year to prepare and mandatory efiling will be imposed on mid-size and smaller companies in successive years.
The extra year's grace was to ensure HMRC could ready all its systems to handle the workload, but finance and payroll managers would be well advised to use this period of grace to research and plan for how they will handle the new requirements. This updated IT Zone guide is designed to highlight the systems and software available to handle the workload.
New P45s and P46s for online filing
As part of the move to online filing next year, new format P45 and P46 forms, plus a new pension disclosure form, P46 (Pen) are being introduced in October and can be used from that date. From April 2009, if a company is required to file its year end reports online, it will also have to file Parts 1 and 3 of the P45, plus the P46 and P46(Pen) using a system that has been accredited by the HMRC (see below). Failing to do so will incur penalties rising from £600 per year for 50+ employers up to £3,000 for the largest firms. The new P45 format includes fields for gender and birthdate details - so these should be included on the specifications for any update to your payroll system.
HMRC resources: Accreditation for online filing
The first port of call for anyone considering their online PAYE requirements is the Inland Revenue's PAYE Online Services page. It explains which forms are covered and includes information on how employers and agents can register to use the services, FAQs and a list of approved electronic form suppliers, which now includes 123 developers.
It is already possible to file the in-year forms electronically, but this is only done by a minority of organisations, and only 34 of the internet PAYE software developers were equipped for P45s and P46s at the time of publication. HMRC will accept electronic submissions via Electronic Data Interchange (EDI) as well as through the PAYE Online internet portal. Since EDI is commonly used by larger employers and bureaux who file huge numbers of records, the developers' batting average is higher, with 18 of the 20 accredited EDI products approved for in-year forms.
As well as accrediting online filing mechanisms, HMRC also operates a separate scheme under its Payroll Standard. While some of the biggest payroll providers have given the standard a miss, more than 50 payroll software developers have gone through the process and are recorded on HMRC's list of accredited products and suppliers. It is worth checking both accreditation lists as part of any research - some of the products on the Payroll Standard list do not yet have approval to submit the in-year forms, although this will no doubt change as the new regulations come into force.
HMRC Resources: Employer's CD
In addition to the PAYE Online forms that let companies type data on-screen into end of year forms such as P14s, P35s, P9s and P11Ds, HMRC sends employers a CD-ROM with extra reference material and software. The CD calculator can work out tax and National Insurance Contributions due and compile the total figures at year end. For a one-year experiment, HMRC will include a facility on the 2008 CD that will let employers with fewer than 10 employees file the year end totals online. The development is not popular with smaller payroll software developers, who see the free mechanism as direct competition to their products. HMRC has advised the industry that it will not develop the CD-ROM into a full payroll product and has promised that it will review the use of the CD-ROM program in the autumn before deciding on any further free software initiatives.
Incentive payments still available - but smaller
Lord Carter's greatest legacy has been the cash incentives he proposed to encourage companies to file online. So many employers took up the offer that the government has paid out hundreds of millions of pounds since 2005 - but there's still more available for businesses with fewer than 50 employers. If you work for a small company that hasn't already gone online voluntarily before it becomes mandatory in 2010, you can get £100 credited to your PAYE payment record if you successfully file your 2007/08 return online by the 19 May this year, and there's another £75 available next year. To qualify for the incentive, both P14s and P35s must be filed online with payroll software that meets HMRC's Quality Standard.
This guide to payroll systems starts with the biggest suppliers and moves down to small business and specialist options. No listing of this sort can be completely comprehensive. If you are, or know of a software developer that is not featured in this article and should be, please contact the editor.
Corporate HR & payroll outsourcers
If you decide to outsource your payroll to a bureau or full managed service, you can take advantage of the expertise of people who do nothing but deal with payroll all day. But you also lose a degree of control - the most cost-effect solutions depend on doing things the outsourcer's way. Once you start looking for external suppliers, the choices are mind-boggling, ranging from full-service corporate outsourcers such as ADP, Ceridian Centrefile and Northgate who will handle all your HR needs, to local accountancy firms and payroll bureaux who would be happy to relieve you of the weekly/monthly admin burden.
The top HR/payroll consultancies listed here can take full responsibility for all of your company's HR activities and effectively become a co-employer of the workforce. If you want, they will take full legal responsibility for employees - including hiring and firing, training, development and remuneration. Such organisations present themselves as partners for the business, and undertake to deliver all the HR processes needed to achieve your strategic objectives. If you are talking to these consultancies, the scale of operations and their involvement with clients is such that filing PAYE returns is unlikely to be your main topic of conversation.
Enterprise software incorporating payroll
If you're already running an ERP suite that handles most of your business and finance operations, it's likely it will handle your payroll too. The larger ERP families such as mySAP and Oracle and its subsidiaries have moved to Web-based eHR applications. Implementing these systems is not a trivial activity; it should be part of a strategic plan for the organisation rather than a point solution for payroll.
Mid-range ERP suppliers
The names listed above are all international software houses serving large corporations. But several UK software houses provide similar capabilities, including payroll, to small and medium size companies.
Integrated HR/Payroll software developers
Changes to payroll systems can often stimulate companies to look more widely at its business processes. For those companies who look beyond payroll as more than a monthly chore or the poor relation of the finance department, upgrading payroll software to accommodate Lord Carter has proved to be a stepping stone towards integrated HR & payroll. The integrated software suppliers in this bracket systems have prospered in the past few years by compiling centralised databases for both HR and payroll fuctions - leading to better reporting and budgeting on headcount and "human capital" costs. Installing integrated HR and payroll systems can involve tens of thousands of pounds and demands significant organisational commitment. It's not something to consider with a tight deadline, but a standalone payroll module from these companies could provide a first step towards a new, integrated approach.
New wave "payroll as a service" providers
Web-hosted "self-service" HR and payroll applications are now the norm among corporate users, but if you're a smaller organisation there are a host of new online providers looking for your business. Karen Paterson, who set up the Patersons online service, argues that outsourcing the entire payroll to an online service means not only that the year-end and in-year returns will be taken care of, but so will any upgrades to the payroll software. MidlandHR's payroll & legislation adviser John Black notes that the ever-increasing complexity and costs of complying with employment legislation and regulation are making outsourcing even more attractive. "The advent of mandatory in-year electronic filing may give this further impetus as it’s no longer just a year-end issue," he says. Patersons and companies such as Abel Internet and NetPayDue.com were providing web-based systems before the initial Lord Carter deadline fell in 2005, but several others emerged in online rush that followed. The majority of the new entrants (with the exception of Jersey-based Multiwage.com) specialise at the low end of the market, handing straightforward payroll runs for SMEs. Others such as Altus and SAA Consultants, specialise in providing connections to online services via the Government Gateway, but do not supply the payroll application software. Avco provides a similar gateway service for EDI filing.
SME accounting software incorporating payroll
Many companies employing fewer than 250 people run accounts software that has a companion payroll module. This is the reason why Sage, the leading supplier of accounts software, is also the market leader for payroll. If you are keeping the payroll function in house, your existing accounts supplier is a logical place to start, unless the program cannot handle online returns or lacks particular features you want from your payroll.
SME payroll software developers
These are the payroll specialists, who might be characterised as the "does what it says on the tin" brigade. Their programs are often popular with payroll managers, as they may include extra features to make their life easier. Payroll specialists can usually offer a lower price because they don't have to hire programmers for all the other modules that come from suppliers offering payroll along with accounting and HR functions.
Payroll bureaux that also develop and sell software
Haven't made your mind up about in-house or outsourced payroll? Then you might consider a company that runs a payroll bureau, but can supply you with your own software later if you want to take it in house.
Payroll outsourcers/bureaux
If you are determined you want to outsource your payroll, here is a small selection of suppliers. Check your local telephone directories and Web search engines for other potential bureaux such as local accountancy firms. Remember to decide what level of service you want - just someone to check the data and run the calculations, or a full managed payroll service? The Payroll outsourcing debate article explains some of the differences.
Payroll programs with links to tax & practice software
Accountants reading this article may be running specialist practice management programs from the likes of IRIS or Star. If it's staying in-house, it's much easier to use a single, integrated system and deal with one supplier. PC accounts specialists Sage and MYOB feature on this list too, because of the accountancy practice software they also sell. In practice, many accountants will run several book-keeping packages, which can make life easier when importing and auditing clients' payroll data. Or they might run a payroll bureau using their preferred in-house system or a hosted online service.
| Payroll product | Market share % | Likely to recommend % |
| Sage Payroll | 34% | 93% |
| IRIS PAYE-Master (formerly Freeway) | 24% | 70% |
| IRIS Payroll Professional (formerly Intex Earnie) | 5% | 81% |
| TAS Payroll | 5% | 90% |
| Star Payroll | 4% | 74% |
| Superpay | 4% | 91% |
| QTAC Payroll Professional/Manager | 3% | N/A |
| QuickBooks Payroll | 2% | N/A |
| Moneysoft Payroll Manager | 2% | N/A |
| Sage Instant Payroll | 2% | N/A |
The ICAEW IT Faculty's league table from the 2006 'IT in Practice' survey indicates that as well as having the largest share of the market, Sage Payroll has a loyal customer base among practitioners, with strong showings for, Superpay and TAS Payroll. IRIS PAYE-Master has a relatively strong market share, but came out badly in satisfaction ratings, with 34% of accountants reporting a critical business failure in the wake of problems with the 2006 upgrade to version 5. As a results, only 70% of accountants would recommend the product, the lowest rating among the practitioners' top six (satisfaction/recommendation ratings not available not available for other programs due to sample sizes).
Payroll recommended for running a bureau
In theory, any payroll application that is capable of handling multiple companies can be adapted to run a payroll bureau. But bureaux managers and their clients will often want extra reporting and admin features. The suites catering for accountancy firms in the section above are a good place to start, as this is a major business opportunity for suppliers. The following list includes bureau solutions recommended by AccountingWEB members:
Niche suppliers
If you've got this far down the list and haven't found a suitable supplier yet, chances are you're after something very specific. Do you work in an industry like construction that demand specific payroll treatments? Maybe there's a supplier for you here:
CIS software options
The debate continues about whether the new Construction Industry Software Scheme starting in April 2007 should be a payroll or accounts payable responsibility. Such nuances have not got in the way of software developers, who have been coming up with programs to ease the transition to the new online registration and reporting processes. This topic will be covered in more detail in a dedicated AccountingWEB supplement in late February 2007.
Further reading
Some of the articles that may provide further assistance in your payroll quest include:
Number of comments: 2
AccountingWEB.co.uk 27-Feb-2008
Categories: IT Features, Business Features, Software
Times read: 16135
I am a member of various payroll specialist groups, so I am privy to certain technical details relating to online filing. We use this to guide the development of our online payroll service.
There is no penalty for failing to send these forms electronically until the last quarter of 2009/10, which technically means that nobody is compelled to do it until 6th January 2010. Even then, no penalty is due for the first 5 items that you fail to file. The details are in Statutory Instrument 2007 No 2969.
HMRC have scheduled some changes to these electronic forms in April 2008, October 2008 and April 2009, each of which carries the risk of teething problems. If you use an installed software product to file these returns, you may have to upgrade it for each of these changes.
There are also a few instances where you won't be able to use these forms. HMRC's current position is that you will only be able to file these forms in the same tax year as the relevant starting or leaving date - for example, if an employee starts on 5th April, you will need to file their P45 or P46 electronically before midnight that day. If you can't do that, you'll need to send it in on paper. I expect they'll take a closer look at this policy in the next year or so.
I understand from HMRC's staff that there is currently a widespread problem of large numbers of employers who don't send in any forms P45 or P46. Once the penalties come in, this could keep HMRC very busy for a while.
By all means, you may choose to file these forms electronically before the penalties come in, but you may need to occasionally use the paper forms. The paper forms are also changing in April 2008, October 2008 and April 2009.
I have been using Moneysoft since last April & have found it really excellent.Not only is it inexpensive but also easy to use.It has CIS built in & online filing of P45/P46 already. I can also send payslips & summaries as pdf documents..Frankly,I cannot think why anyone would want to use more expensive packages
