The 5 Best Free Payroll Software Solutions

Free payroll software is only a viable solution for micro-businesses since most have an employee limit of 10, if not lower.

All businesses, no matter how small, are required to send payroll reports to the HMRC, and if you’re processing payroll in-house, payroll software is the best way to do this. It can help avoid mistakes and late submissions that can result in HMRC fining you £100 to £400.

You should also only use free payroll software that has been approved by HMRC, which all the recommendations in this article have been.

As your business grows, you may want to outsource payroll to a specialist payroll service, but unfortunately, there’s no free option for payroll outsourcing.

The Best Free Payroll Software: Summary

1. IRIS Payroll Basics: Best all-round free payroll software

IRIS Payroll Basics is a free, cloud-based payroll software that businesses with less than 10 employees can use to manage their payroll. Any legislation or business software updates are also included with the platform, free of charge.

What you get with IRIS Payroll Basics

The main advantage of using IRIS Payroll Basics is that it’s incredibly easy to upgrade to its paid payroll software as your business grows. This also opens the door to integrations with IRIS HR tools, such as the IRIS Staffology, which starts at £6.50 per month plus 65p per employee.

Here are its key features:

• Integration with HMRC for automatic form submissions
• RTI and Automatic Enrolment-compliance
• PAYE, NI, and statutory payments calculations
• Mandatory employee forms, payslips, and basic reports generation
• The ability to scale up as your business grows

What you don’t get

Like all free payroll software systems, IRIS Payroll has a pretty basic offering.

It can’t be used to process payroll for businesses with over 10 employees, at which point you’ll have to switch to a different provider, or one of IRIS’s paid software plans, which start at £35 per month.

It’s also not suitable for handling complex payment requirements like pension schemes, or international payrolls, since the software can only process one type of payment and deduction, typically salary minus taxes.

Finally, the system doesn’t accommodate third-party software integrations, such as accounting or HR software.

Who’s IRIS Payroll Basics for?

We’d recommend IRIS Payroll Basics to micro businesses who are looking to scale, since IRIS makes it easy to upgrade to a more advanced software system that can handle more employees and complex tasks.

If it’s your first time dealing with payroll, IRIS has a good customer support network in place. You can contact the customer service team by phone, email, or live chat, and the IRIS website has a knowledge base and plenty of handy guides that answer a range of payroll-related questions.

2. Shape Payroll Lite: Best for ease of use

Shape Payroll’s Lite plan includes all of Shape Payroll’s core features, such as generating payroll documents and payslips. You can easily set up and edit employee records and ensure that they’re on the correct tax code in the platform, and it’s HMRC compliant, allowing you to automate your payroll. However, it can only be used to process payroll for three employees.

What you get with Shape Payroll Lite

One thing that sets Shape Payroll Lite plan apart from other free payroll solutions is that it can calculate pension contributions (IRIS and HMRC’s Basic PAYE Tools don’t), although you’ll have to upgrade to a paid Shape Payroll plan to integrate your payroll with a pension scheme provider.

Part of what makes it easy to use is the simple design of the platform, and the “stater wizard” you get access to, which guides you through the set up with a checklist.

Here are its key features:

• Integrates with HMRC
• RTI and Automatic Enrolment-compliant
• Calculates PAYE and NICs
• Pension contributions calculator
• Generates payslips, P60s and P45s
• Can be scaled up as your business grows

What you don’t get

Shape Payroll’s Lite plan is designed for truly tiny businesses, only capable of processing payroll for three employees, most other free payrolls can handle up to 10.

Customer support is also limited to the community support forum on the paid plan, so you’re a little stuck if you run into real trouble. If you need help with onboarding, this will cost you £75.

Who’s Shape Payroll Lite for?

Shape Payroll Lite is best for micro-businesses, such as fresh-off-the-ground startups or small artisans, since it has a three-employee limit.

It can be easily scaled up, should you envision your team growing, since Shape Payroll has a plan for businesses with 50 employees, and a bespoke plan and managed payroll plan for larger businesses.

The free plan isn’t big on customer support, however, so if you’re feeling nervous about managing payroll, you should go with IRIS, which offers much more guidance.

3. Primo Payroll Essentials Free Plus: Best for auto-enrolment

Primo Payroll’s Essentials Free Plus plan’s highlight is its auto-enrolment capability. It automatically calculates pension contributions and eligibility, but unlike the other free solutions on this list, Primo’s free system can also communicate this directly with your pension provider.

What you get with Primo Payroll Essentials

Primo’s free software comes with the basic features you’d expect, such as tax calculation, and payslip generation. Although unlike competitor Shape, Primo lets you email payslip to employees on its free plan. With Shape you have to upgrade to a paid plan to do this.

Like IRIS, Primo also makes it easy to upgrade, with its Essentials 25 plan costing £24.99 per month. However, all Primo Essentials plans have a 10 employee limit, so you’ll get better value for money with IRIS’s paid plans.

Here are its key features:

• Integrates with HMRC
• RTI and Automatic Enrolment-compliant
• Calculates tax and NICs
• Email payslips to employees
• Can be scaled up as your business grows

What you don’t get

Primo’s Essentials Free Plus does have some drawbacks. There’s a 10-employee limit that includes leavers. This means that if anyone leaves your company, you won’t be able to add their replacement to the payroll system if you’re already at the 10-person limit.

Support-wise, you’ll be limited to emails, which will be classified as low priority, so don’t expect swift replies.

Who’s Primo Payroll Essentials Free Plus for?

We’d recommend Primo Payroll’s free payroll software for businesses with 2 to 5 employees. Even though the employee limit is 10, since this includes leavers, starting out with fewer employees will give you more time before you have to upgrade to a paid plan.

Paid plans imply scalability, and rest assured, Primo has payroll solutions for businesses of all sizes, so you can stick with them once you outgrow the free version.

It’s an especially good option for automating the pension process, so if that’s a priority for you, this is the software for you.

4. EnrolPay Self Service: Best bare-bones solution

EnrolPay Self Service can be used to process payroll for up to nine users and has the advantage of being accessible on both desktop and its Android and iOS apps. It’s one of the most basic software solutions on this list, but this also makes it very simple to use.

What you get with EnrolPay Self Service

Given its name, it’s pretty evident that EnrolPay’s free Self Service payroll software is a low-touch solution. You’ll be able to generate printable employee payslips, P45s, and P60s, and create employer records (SSP, SMP, SAP etc.).

You can also scale up for the low cost of £6 for one to four employees, which gives you access to features such as automatic RTI submissions and more customer support.

Here are its key features:

• Integrates with HMRC
• Manual RTI submission
• Calculates PAYE and NICs
• Printable payslips, P45s, and P60s
• Can be scaled up as your business grows

What you don’t get

EnrolPay’s free payroll software won’t automatically submit RTIs to HMRC, you’ll have to do this manually from the platform each month – IRIS automates this process. There’s also a nine-employee limit, one person short of almost every other supplier on this list.

You also won’t get auto-enrolment on EnrolPay’s free version, it’s actually an add-on for all of EnrolPay’s “Self Service” payroll systems.

Lastly, customer support is extremely limited, and you’ll only get access to EnrolPay’s FAQ library if you need help.

Who’s EnrolPay Self Service for?

The self-service aspect of EnrolPay might not be everyone’s cup of tea, but if you want to save your coins and don’t mind the manual tasks, this could be the right platform for you. You also don’t need to be a tech expert to use the platform, as it’s very simple.

Customer support, however, is limited to the FAQ Library (no phone or email), so we’d recommend IRIS if you’re worried about being stuck in a bind.

5. HMRC Basic PAYE Tools: Best for checking employees’ NI numbers

HMRC actually provides its own free payroll software to businesses, called Basic PAYE Tools. Since it is government-owned, this software allows you to check a new employee’s NI number, send an Employment Payment Summary, and send an Earlier Year Update directly to HMRC from the platform.

What you get with HMRC Basic PAYE Tools

Like IRIS Basic Payroll, HMRC Basic PAYE Tools is limited to businesses with fewer than 10 employees, and can only complete basic payroll functions such as calculating PAYE and NI contributions.

It also has an apprenticeship Levy calculator, although since this is a tax only paid by large companies with a pay bill of over £3 million, it’s essentially a useless feature for software that only manages payroll for businesses of 10 employees or less.

Here are its key features:

• Employee NI number lookup
• Calculates PAYE and NICs
• Apprenticeship Levy calculator 
• Sends data directly to HMRC

What you don’t get

HMRC Basic PAYE Tools does not allow for auto-enrolment, it can’t produce payslips, or calculate pension contributions.

Most importantly, it can’t be scaled up if your number of employees increases past 10 since HMRC does not offer any other type of payroll software system.

Who’s HMRC Basic PAYE Tools for?

HMRC Basic PAYE Tools is a good option for businesses who feel safer using government made payroll tools over privately made ones, and aren’t planning on increasing their number of employees.

It’s not a good option for businesses looking to grow, as HMRC doesn’t have an alternative software for larger companies.

We also wouldn’t recommend BPT to employers who are unfamiliar with how payroll works, since even though this is a government-made payroll tool, there’s very little hand holding involved in it. HMRC does have a user guide, which it updates regularly, but it’s not easily digestible for total beginners.

Is Free Payroll Software Worth it?

Free software gives small businesses the ability to run payroll without any overhead fees. This is extremely helpful at the beginning stages of a business, when you might not have the funds to invest in advanced software, but still need to submit reports to HMRC.

However, there are limitations with free software, the biggest being the typical 10-employee limit. Free payroll software is also limited when it comes to its features, typically only offering HMRC form submission, tax calculation, and payslip generation.

That’s why we recommend that you choose a free payroll provider that allows you to scale up from its free plan to a paid plan. As your business grows, you’ll find that it’s no longer sustainable to manually carry out payroll tasks and that you have too many employees to qualify for free software.

What do you get with paid payroll software?

Paid payroll software allows you to manage payroll for a larger number of employees than free software. It also generally comes with more advanced features, that make processing payroll easier and less time-consuming.

These include:

• Automations, such as tax and pensions deductions, and RTI submissions
• The ability to run different payroll runs for different types of employees
• Comprehensive reporting tools
• Employee portals for viewing payslips and requesting holiday
• Access to multiple support channels, such as phone, email, and live chat
• Integration with other business software, such as HR and accounting tools

Read more on payroll compliance in our guide.

Why Do Companies Offer Free Payroll Software?

Most private companies that offer free payroll software do so in the hopes that your business will outgrow the free plan and upgrade to one of their paid options. That’s why the number of employees you can manage with free payroll software is typically very limited.

Some companies offer other services besides payroll software, such as accounting software, and so make a profit through other means.

The exception to this is HMRC’s Basic PAYE Tools software. Since it’s a government-made software, it’s free to use, and subsidized by taxes (so technically, we’re all paying for it).

How Much Does Payroll Software Typically Cost?

Paid payroll software typically costs around £10-£30 per month for basic services suitable for a small business with around 15 employees. That’s around £1.30 per month, per employee, or £240 per financial year. A business with up to 50 employees can expect to pay around £50-£80 per month, while anything above that costs £100-£200 per month.

You also have the option of outsourcing payroll to a payroll service provider, a separate company that can manage your payroll for you.

Paid payroll services costs vary depending on if you choose a fully managed or part-managed solution. A fully managed service tends to cost around £4–£25 per employee, per month, and pension plan auto-enrolment costs around £1.50–£2 per employee, per month. If you want HR tools, this will cost you £10–£25 per employee, per month.

Part-managed payroll services are harder to price, as this cost depends on which services you want to outsource. You can expect to pay around £2–£3 per employee, per month.

If you want help deciding whether outsourcing is a good option for your business, check out our article on the benefits of outsourcing payroll.