Benefits, sick pay, umbrellas, AI and security: what will move payroll software in 2027

These five payroll software trends are grounded in confirmed UK rules and official guidance available on 5 September 2026. They are not predictions about sales or product winners. Each item identifies a change that an employer in England can test in its own software plan.

1. Benefits will move closer to the regular pay run

From 6 April 2027, employers must payroll Income Tax and Class 1A National Insurance contributions for specified taxable expenses and benefits, including company cars, fuel, vans and employer-provided medical benefits. HMRC's interim guidance on the default operation sets out the current scope and says other benefits can be payrolled voluntarily.

This raises practical questions about benefit inputs, corrections, employee communications, Class 1A calculations and reconciliation. Buyers should ask suppliers to demonstrate the 2027 process using realistic changes during a pay period, not just show a feature label.

2. Statutory sick pay logic needs a fresh baseline

The February 2026 HMRC Employer Bulletin records two changes effective from 6 April 2026: removal of the lower earnings limit and payment from the first full day of sickness. It also states that eligible employees receive 80 per cent of normal weekly earnings or the uprated flat rate, whichever is lower.

For a 2027 assessment, verify that ordinary and retrospective absence cases follow the current rules. Check the evidence shown to the operator, because a correct-looking total without an intelligible calculation is difficult to audit.

3. Umbrella-company data will face closer scrutiny

Under HMRC's PAYE rules for labour supply chains, an agency with the end-client contract, or the end client where no agency is involved, is responsible for ensuring that PAYE is operated correctly. The rules apply to relevant worker payments from 6 April 2026.

Software cannot discharge that responsibility on its own. However, systems may need clearer supplier records, exception reports and retained evidence. Employers should map what information is received, who reviews it and how a concern is escalated.

4. Artificial intelligence will require visible controls

HMRC's guidelines for generative AI in commercial tax software expect transparency, reliable source data, human oversight, security and ethical use. The guidance also makes clear that HMRC does not endorse a developer or product.

An AI assistant may help explain an exception or organise a query, but its answer should not become an unreviewed payroll instruction. A credible trial records sources, model limitations, user corrections and the route for complex questions.

5. Security evidence will become part of comparison work

Payroll platforms hold attractive personal and financial data. The NCSC's Software Security Code of Practice gives customers a voluntary baseline for supplier discussions, covering the security expected of organisations that develop or sell software.

Procurement teams can translate that baseline into requests about vulnerability handling, updates, incident information and ownership. The useful trend is not a claim that every product is becoming secure. It is the growing need for buyers to demand evidence and contract clarity before relying on a service.

These changes point towards more integrated payroll, benefit, workforce and assurance work. Recheck the linked guidance before publication and again before configuring a 2027 pay run.