Choosing payroll software and suppliers with HMRC evidence and scenario testing

There is no payroll product that is best for every employer in England. Selection depends on the precise pay-cycle workflow, employee situations, pension arrangement, accounting environment, access model and support need. A credible comparison must use the same scenario and current evidence for every supplier.

The evidence check for this guide was completed on 5 September 2026. Named product features and availability are first-party statements unless explicitly described as independently tested. Prices, plans, integrations and HMRC recognition can change.

What to take away

No single payroll product suits every employer, so selection depends on workflow, employees, pensions, accounting and support needs.
HMRC's recognised software list is not a ranking and does not prove suitability, security, support or fair contract terms.
Compare suppliers using one reference scenario, scoring requirements before testing to avoid favouring familiar products.
Employers with fewer than ten employees and a simple pay pattern: HMRC Basic PAYE Tools.
Accounting-integrated small employers and bureauxBrightPay and Sage payroll products.
Employers already on Xero, QuickBooks or FreeAgent accounting: the payroll product sold with that platform.
Reopen all decisive sources before a 2027 purchase because prices, plans and HMRC recognition can change.

Define the job before listing suppliers

Start with the employer, not a generic feature matrix. Record:

Employer facts to record first

Legal employers and PAYE schemes
Active and seasonal employee ranges
Weekly, fortnightly, four-weekly or monthly runs
Salaried, hourly, variable and director cases
Starters, leavers and statutory payments
Workplace pension scheme and tax relief
Payroll operator, approver and submitter roles

Define the job

legal employers and PAYE schemes;
active and seasonal employee ranges;
weekly, fortnightly, four-weekly, monthly or other runs;
salaried, hourly, variable and director cases;
starters, leavers and statutory-payment needs;
workplace pension scheme and tax-relief method;
time, HR, accounting and payment systems;
payroll operator, approver, submitter and support roles;
required reports and audit evidence;
implementation deadline and risk tolerance.

HMRC's find payroll software guidance tells employers to consider features such as payslips, pension deductions, pension payments, different pay periods and specific reports. It also warns about continuity of payroll IDs when changing software.

Convert the employer facts into essential, useful and irrelevant requirements. A missing essential item can eliminate a candidate. Do not let an attractive non-essential function compensate for inability to complete the core payroll.

Understand the recognised-software list

HMRC's recognised payroll software directory contains free and paid products that can report PAYE online. At the date checked, it included a broad range of employer, bureau and wider business products.

What HMRC listing does not prove

Suitability for the employer's pay pattern
Support for the chosen pension provider
Accessible operation and secure configuration
Reliable customer support and fair contract terms
Successful migration and acceptable total cost

HMRC states that it cannot recommend one product or service over another and is not responsible for problems with purchased software. A listing does not prove:

Beyond the recognised list

suitability for the employer's pay pattern;
support for the chosen pension provider;
accessible operation;
secure configuration;
reliable customer support;
fair contract terms;
successful migration;
acceptable total cost.

Capture the exact product and date. Do not infer that every product from the same supplier is recognised or that recognition applies to functionality beyond online PAYE reporting.

Six UK payroll tools compared by employer case

The following entries meet a limited inclusion method: HMRC's own tool or a product represented on the recognised directory, plus a current first-party UK payroll page.

Prices below are indicative UK list ranges before VAT and change often. Confirm the current pricing page before deciding.

Six UK payroll tools compared

Plan tiers

HMRC Basic PAYE Tools: Single free tool
BrightPay: Desktop, Desktop with Connect, Cloud
Sage payroll products: Sage Payroll, Sage 50 Payroll, Sage People Payroll
Xero Payroll: Starter, Standard and Premium accounting plans
QuickBooks Payroll: Standard payroll added to Simple Start, Essentials and Plus
FreeAgent Payroll: Payroll inside FreeAgent accounting

Indicative annual cost (typical, ex VAT)

HMRC Basic PAYE Tools: £0
BrightPay: Roughly £100 to £350 for desktop editions; cloud charged per employer per month
Sage payroll products: Cloud typically from around £120 plus a per-employee charge; desktop licensed annually
Xero Payroll: Accounting plan typically around £240 to £660, plus payroll charges per employee
QuickBooks Payroll: Add-on typically from around £60 plus a per-employee charge
FreeAgent Payroll: Free with an eligible NatWest, RBS or Mettle account; otherwise roughly £230 to £400

Employer case it fits

HMRC Basic PAYE Tools: Under ten employees with a simple pay pattern; not designed for agents or bookkeepers
BrightPay: Small employers and bureaux wanting pension connections and employee communications
Sage payroll products: Accounting-integrated smaller employers and payroll professionals
Xero Payroll: Employers already running Xero accounting
QuickBooks Payroll: Employers on QuickBooks accounting needing statutory payments and pensions
FreeAgent Payroll: Micro employers and contractors already on FreeAgent accounting

HMRC Basic PAYE Tools

HMRC's Basic PAYE Tools page describes free software for employers with fewer than ten employees. It can perform most payroll tasks, including tax and National Insurance calculations and sending information to HMRC.

The page says it is not designed for agents or bookkeepers. It also publishes operating-system and hardware requirements, explains updates and warns not to uninstall an existing version because payroll data would be lost.

This makes Basic PAYE Tools a research candidate for a very small employer with a comparatively simple process. Investigate payslips, automatic enrolment, multi-user work, remote access, backup and connected accounting separately. Check the current service-availability page before relying on a platform assumption.

Typical cost: free, so the cost to compare is operator time.

BrightPay

BrightPay's current product comparison distinguishes desktop, desktop with Connect and cloud offerings. The supplier lists features for HMRC submissions, coding notices, automatic enrolment, pension connections, employee communications and accounting integrations, with differences between configurations.

The employer and bureau contexts should be evaluated separately. Verify the selected edition, operating-system needs, client or employee limits, migration, data hosting, pension providers, support and commercial terms. Treat usage and satisfaction figures on supplier pages as vendor claims until methodology and independent evidence are reviewed.

Typical cost: desktop editions roughly £100 to £350 a year, with cloud editions charged per employer per month.

Sage payroll products

Sage's UK payroll software page describes a product family rather than one interchangeable tool. It positions offerings for smaller employers, payroll professionals, advanced needs and higher-volume organisations.

Identify the exact product before collecting evidence. A capability described for Sage 50 Payroll or Sage People Payroll should not be attributed to another edition. Ask for plan limits, deployment model, batch functions, employee self-service, pension support, accounting connection, migration, implementation and full contract cost.

Typical cost: cloud payroll from around £120 a year plus a per-employee charge, with desktop editions licensed annually.

Xero Payroll

Xero's UK payroll features page describes PAYE reporting, different pay frequencies, statutory leave and payments, workplace pensions, payroll reports, employee self-service and links with Xero accounting and other tools.

This may be relevant where an employer wants payroll inside an accounting platform. Compare the whole required plan, per-person allowance, add-ons and implementation. Test the named pension connection and every required employee situation.

Typical cost: the accounting plan runs to roughly £240 to £660 a year, with payroll charged per employee above the included allowance.

QuickBooks Payroll

Intuit's UK payroll page describes HMRC submissions, statutory payments, accounts integration, time-related functions, pensions and employee self-service. Its linked plan comparison distinguishes Core, Premium and Elite features, including pension connections and user allowances.

Select one plan for assessment. Capture what requires the accounting subscription or another module. Test the promised automated steps, support route, payroll corrections, migration and export. Do not combine the strongest capability from every tier into one comparison row.

Typical cost: an add-on from around £60 a year plus a per-employee charge.

FreeAgent Payroll

FreeAgent's payroll feature page describes payroll integrated with its accounting product, covering RTI submissions, pay and deduction calculations, payslips, P60s, pension contributions and reporting.

The supplier's filing-support article identifies circumstances where payroll functionality is unavailable, showing why account type and use case must be checked. Confirm pay frequencies, pension tasks, statutory cases, corrections, employee access and migration for the employer.

Typical cost: free with an eligible NatWest, RBS or Mettle account, otherwise roughly £230 to £400 a year.

Worked reference scenario: 14 employees

Scenario: 14 employees paid monthly, with a weekly run for hourly and variable-pay staff, starters and leavers during the year, one workplace pension provider, Xero accounting, two payroll users and remote approval.

Outcomes below follow published product scope, not independent testing.

Worked reference scenario

Advantages

BrightPay: shortlisted. The published comparison covers HMRC submissions, automatic enrolment and pension connections across desktop and cloud editions.
Sage payroll products: shortlisted for Sage Payroll or Sage 50 Payroll, because the scenario sits below the advanced and higher-volume editions.
Xero Payroll: shortlisted and the closest fit on integration, because the employer already runs Xero accounting.

Drawbacks

HMRC Basic PAYE Tools: excluded. The published page describes the tool for fewer than ten employees, so it does not cover this headcount.
QuickBooks Payroll: excluded, because payroll sits inside QuickBooks accounting and this employer runs Xero.
FreeAgent Payroll: excluded, because payroll is tied to the FreeAgent accounting product this employer does not use.

Shortlist outcome: BrightPay and Xero Payroll proceed to a paid pilot, Sage Payroll stays as a fallback, and the other three are removed.

Build a like-for-like comparison

Create one reference scenario and send it to every shortlisted supplier. Use a structured evidence table:

Like-for-like evidence table

Requirement

HMRC-listed product: Directory check
Pay frequencies: Product record
Pension exchange: Supplier and provider
Migration: Implementation record
Permissions: Security documents
Support: Contract and service page
Exit: Terms and export guide

Test

HMRC-listed product: Listing checked
Pay frequencies: Calendar setup
Pension exchange: Accepted test file
Migration: Parallel reconciliation
Permissions: Role exercise
Support: Test escalation
Exit: Complete export

Result

HMRC-listed product: Point in time
Pay frequencies: Scenario only
Pension exchange: Named scheme
Migration: Test population
Permissions: Configured edition
Support: Stated hours
Exit: Format tested

Requirement	Source	Test	Result	Limitation	Expiry
Exact HMRC-listed product	Official directory	Listing checked	[result]	Point in time	[date]
Required pay frequencies	Product record	Calendar setup	[result]	Scenario only	[date]
Pension-provider exchange	Supplier and provider	Accepted test file	[result]	Named scheme	[date]
Migration	Implementation record	Parallel reconciliation	[result]	Test population	[date]
Permissions	Security documents	Role exercise	[result]	Configured edition	[date]
Support	Contract and service page	Test escalation	[result]	Stated hours	[date]
Exit	Terms and export guide	Complete export	[result]	Format tested	[date]

Distinguish "supplier stated" from "buyer tested" and "independently verified". A demonstration is useful evidence of what the presenter showed, not proof that an ordinary operator can complete the same task.

Score requirements before testing. Weighting after seeing results invites the team to favour a familiar or commercially attractive supplier.

Evaluate automatic enrolment as a workflow

The Pensions Regulator's payroll-software checklist asks whether a process can assess staff, hold required data, calculate contributions using the correct tax-relief method, generate provider information, support communications, handle worker requests and retain records.

Automatic enrolment workflow tests

Assessment at relevant ages and earnings
New starters and changing eligibility
Contribution bases and rounding
Employer and worker contribution results
Opt-in, join and opt-out cases
Postponement and re-enrolment where in scope
Provider file, rejection and reconciliation

Apply those prompts to the named pension scheme. Test:

Evaluate automatic enrolment

assessment at relevant ages and earnings;
new starters and changing eligibility;
contribution bases and rounding;
employer and worker contribution results;
opt-in, join and opt-out cases;
postponement and re-enrolment where in scope;
provider file or connection;
rejection, correction and reconciliation;
record and communication responsibilities.

A product may handle calculation while the pension provider handles another step. The contract and operating guide should make the boundary visible.

Perform vendor due diligence

Verify the contracting entity and distinguish vendor, reseller, implementer and service provider. Obtain evidence for the exact hosted or desktop product.

For personal data, determine controller, processor and sub-processor roles. Review locations, transfers, retention, access, logging, incident support, export and deletion. The ICO's controller-processor contract guidance provides a current prompt for the processing details and terms that may be required.

Security review should cover development, vulnerabilities, dependencies, authentication, privileged support, encryption, customer separation, monitoring, backup and restoration. Request evidence proportionate to payroll risk. A certificate can support diligence but does not answer every architecture or operating question.

Review service dependencies and financial continuity. Ask how customers are notified of incidents, tax-year releases and end-of-life decisions. Match support hours and escalation to the employer's pay schedule.

Calculate the full cost

Use a twelve-month scenario and, where appropriate, a multi-year view. Include:

Full twelve-month cost items

Base subscription and employee charges
Extra pay runs and add-on modules
Setup, migration and training
Payment or document-delivery charges
Internal operator and reviewer time
Renewal and price-change terms
Exit and transition assistance

base subscription;
employee or employer charges;
extra pay runs;
accounting, HR, time or pension modules;
setup and migration;
training and implementation support;
payment or document-delivery charges;
internal operator and reviewer time;
contract renewal and price-change terms;
exit and transition assistance.

State VAT treatment and promotional expiry. A discounted first period is not the recurring cost. Where no price is published, treat the cost as unknown until a written offer arrives.

Most UK cloud payroll products combine a base subscription with a per-employee monthly charge. Desktop editions are usually licensed per employer per year.

Measure support burden during a pilot. A nominally cheaper product can cost more when setup and repeated manual work are included, while a broader bundle can be wasteful if the employer does not need its other functions.

Run a controlled implementation

Once a supplier is selected, preserve the old system as authoritative until acceptance. Clean and validate source data, agree opening figures and restrict migration access. Take particular care with payroll identifiers.

Controlled implementation sequence

Keep old system authoritative until acceptance
Clean and validate source data
Agree opening figures and restrict access
Configure tax year, references and roles
Run synthetic tests before customer data
Run parallel payrolls and reconcile every difference
Test submissions, exports and rollback

HMRC's software guidance warns that changing an employee's payroll ID without handling the change indicator correctly can create duplicates or affect the PAYE bill. Follow current guidance for the actual migration and obtain appropriate payroll expertise.

Configure the tax year, employer references, calendars, statutory settings, pensions, roles and integrations. Use synthetic tests before controlled customer data.

Run parallel payrolls containing ordinary employees, variable pay, starters, leavers and corrections. Reconcile gross pay, deductions, employer liabilities, net pay, pensions and report outputs. Investigate every difference and record approval.

Test submission acknowledgements, failed responses, pension rejection, accounting journals, employee documents, backup restoration and a full export. Prepare rollback and support escalation before the first live run.

Plan for change and exit

Payroll products change through tax-year releases, integrations, supplier strategy and technology support. Assign owners to monitor HMRC recognition, release notes, pension connections, service incidents and contract notices.

Exit and continuity checks

Export employee records and payroll history
Export reports, pension information and audit logs
Clarify post-termination access and retention
Confirm deletion terms and transition support
Assign owners to monitor recognition and releases

The contract should define supported scope, customer responsibilities, service, changes, payment, liability, renewal, termination and transition. Ensure the order form records the precise plan and employer assumptions.

Before purchase, test how to export employee records, payroll history, reports, pension information, audit logs and documents required for continuity. Clarify post-termination access, retention and deletion. A supplier is easier to trust when leaving is technically and contractually understood.

Document the selection decision

Record the decision in one place before you buy. Note who ran the comparison, how products were included, the reference scenario, the evidence date, any commercial relationships and the tests not performed. Name the exact product, edition and plan on the order form, with the employer assumptions it was chosen against.

If the employer's workflow changes, rerun the assessment rather than carrying forward the old winner. The appropriate 2027 choice is the product whose current, tested scope fits the employer with acceptable risk, support and full cost. It is not a permanent title held by one brand.

Before you act

Define employer facts and essential requirements before listing suppliers.
Check the exact product on HMRC's recognised software directory.
Confirm the named pension provider connection works.
Test migration with a parallel reconciliation.
Record the evidence table and name the decision owner before purchase.

Common questions

Why is HMRC's recognised software list not a ranking?

HMRC states it cannot recommend one product over another and is not responsible for problems with purchased software. A listing does not prove suitability for your pay pattern, pension support, accessible operation, secure configuration, reliable support, fair terms, successful migration or acceptable total cost.

How should an employer compare shortlisted payroll suppliers fairly?

Create one reference scenario and send it to every shortlisted supplier. Use a structured evidence table covering the HMRC listing, pay frequencies, pension exchange, migration, permissions, support and exit. Score requirements before testing, because weighting after seeing results invites the team to favour a familiar or commercially attractive supplier.

What should be tested for automatic enrolment in payroll software?

Apply the Pensions Regulator's checklist to the named pension scheme. Test assessment at relevant ages and earnings, new starters and changing eligibility, contribution bases and rounding, plus provider information, communications, worker requests and record retention. Confirm the correct tax-relief method is used throughout.