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Part of Payroll software for recruitment agencies UK: timesheet tools
Payroll software for recruitment agencies UK: timesheet tools
How UK recruitment agencies choose payroll software for timesheets, agency worker rules and umbrella payroll, with checks on compliance and pay accuracy.
What to take away
- Recruitment payroll software must read timesheets, apply assignment rates and pay PAYE, umbrella and CIS workers from one run.
- The National Minimum Wage Act 1998 covers agency workers, so every recorded hour carries a floor rate worth flagging.
- Holiday pay on variable hours, auto-enrolment and umbrella deductions are the duties general payroll tools handle worst.
- Test timesheet import, rate separation and the audit trail with your own data before signing.
Why recruitment payroll is not standard payroll
A recruitment agency pays people who are not its permanent staff. Workers move between assignments, rates change mid-week, and one run can include PAYE workers, umbrella workers and CIS subcontractors. General payroll software assumes a fixed salary and a stable headcount.
Volume arrives in spikes. A branch might process 40 timesheets in a quiet week and 900 before a bank holiday. Software that rejects a whole file over one bad row will fail at the wrong moment.
The National Minimum Wage Act 1998 covers agency workers, so each hour on a timesheet carries a minimum rate. Without an automatic comparison, someone checks it by hand every period and eventually misses one.
Construction agencies also need CIS deductions, which change the net pay figure for the whole assignment. Our notes on payroll software for CIS subcontractors set out what changes in a weekly run.
Timesheet-to-payroll workflow, step by step
- Capture hours at source. A timesheet app or client portal should timestamp each shift against a named worker and assignment.
- Validate before approval. Compare submitted hours with the booking, flag missing breaks and block duplicate shifts.
- Apply the rate matrix. Keep pay rate, overtime bands and shift premiums separate from the client charge rate.
- Split by worker type. Each group needs a different output: a payslip, a payment advice or a deduction statement.
- Submit and reconcile. Send the Full Payment Submission, then match the bank file total against the accepted submission.
Agency worker rules, umbrella payroll and the paperwork
The Employment Rights Act 1996 requires an itemised pay statement showing gross pay and every deduction. For an agency worker on variable hours, that statement is the document most likely to trigger a query, so holiday pay and umbrella margin should appear as separate lines.
Umbrella payroll adds a party. The agency pays an umbrella company, which employs the worker and takes its margin and employer National Insurance from the assignment rate. Your software must hold the umbrella's details without generating a payslip for someone it does not employ.
Data handling sits alongside this. You store right to work documents, bank details and assignment histories for people who are not employees in the ordinary sense. The ICO's UK GDPR guidance is the reference for retention and access requests.
Agencies paying workers directly also carry auto-enrolment duties, including frequent joiners and short assignments. payroll software with auto enrolment needs to cope with postponement and opt-outs without a spreadsheet.
What to test before you buy
Ask for a sandbox and load your own data. A file with 200 timesheet rows, three mid-week rate changes and one deliberately rejected line tells you more than a scripted demo.
Check three things in particular:
- Rate separation: can the system store a pay rate and a charge rate for one shift and report the margin?
- Audit trail: can you see who changed a rate, when, and what was paid before the change?
- Reporting: can you export a margin report per assignment and a deduction breakdown per worker without raising a ticket?
Budget one full parallel pay cycle as well. Matching net figures against the old process is the cheapest assurance you will buy.
Common questions
Does payroll software handle umbrella companies?
Yes, within limits. It records the umbrella company, the assignment rate and the payment output, but the worker's own payslip stays with the umbrella. Check the tool does not count employer costs twice.
Can one system pay PAYE, umbrella and CIS workers?
The better recruitment payroll tools can, but test the deduction logic for each group separately. CIS deductions and umbrella margin are often the weakest parts of a general payroll product.
Do agency workers count for auto-enrolment?
Yes, if you pay them directly through PAYE, the duties in the Pensions Act 2008 apply. Short assignments make postponement and re-enrolment the parts worth testing.
How long does switching take?
For a single-site agency, allow a fortnight of setup plus one full parallel pay cycle. Multi-branch agencies with separate client portals should plan a phased roll-out by branch.