Is cheap payroll software worth it? Pros & cons explained

Is cheap payroll software worth it? Pros & Cons explained in summary:

Looking to pay staff on the cheap? This post unpacks what “cheap payroll software” really means – the bare essentials vs. hidden dangers – and when that bargain might backfire. You’ll get:

• The upsides: lower upfront cost, basic automation, HMRC-submission support
• The pitfalls: poor scalability, feature gaps, weak support, and hefty fines from compliance slip-ups (UK firms have been hit with over £75 million in HMRC reporting fines since 2020).
• How to distinguish “cheap” from “affordable” (yes, there’s a difference)
• A simple checklist to decide whether cheap payroll is safe for your business

TLWR? If your headcount is small, simple payroll might work; but for anything more, “cheap” often means “expensive in disguise

---

When budgets are stretched and financial forecasts don’t inspire confidence, the words “cheap payroll software” sound like sweet music to a finance director’s ears.

After all, who doesn’t love the idea of saving a few quid while still paying staff on time? It’s good for the balance sheets, keeps things ticking along and, of course, gets everyone paid. But here’s the thing: when it comes to payroll – as our own research has discovered – cutting corners can sometimes cost you more in the long run.

In this article, we’ll weigh up the pros and cons of cheap payroll software, look at the potential hidden costs no one talks about, and help you figure out whether saving a few pounds today is worth the potential headaches tomorrow. But first…

What does “Cheap Payroll Software” really mean?

Cheap (or free) payroll software usually falls into the category of basic, budget-friendly tools that tick the most essential boxes: calculating wages, generating payslips, and sometimes even filing Real Time Information (RTI) submissions directly to HMRC. So, literally the absolute bare essentials to pay people.

For a start-up or a very small business with straightforward payroll needs, this kind of solution can be the perfect fit and do a pretty good job: low cost, quick setup, and just enough functionality to get you through payday without breaking into a cold sweat. Fabulous!

However, “cheap” doesn’t always equal “affordable.” There’s a massive difference! Affordable payroll software is still cost-effective, but it usually comes with real added benefits; like reliable customer support, compliance safeguards, and the ability to scale as your business grows.

Cheap payroll software, on the other hand, is often designed for the “here and now.” Sure, it might cover today’s needs, like processing wages for a handful of employees, issuing payslips, and doing the minimum to keep HMRC off your back. But will it still serve you well when your workforce doubles? Or, when you need to integrate with time-tracking or HR systems? Or what about when new compliance requirements pop up? That’s where cracks can start to show.

In other words, cheap payroll software – if bought purely to balance the books – can be a false economy. Yes, you’ll probably save in the short term, but you’ll risk paying more in the long run through lost time, payroll errors, or costly software migrations.

What are the pros of cheap payroll software

Now, we’re certainly not here to bash cheap or free payroll software – in fact, there’s plenty of good basic systems out there if you just need something to pay a couple of people every month. And to be fair, going for a cheap payroll option can have some great perks for smaller cost-conscious businesses, such as:

• Lower upfront costs – Ideal if you’re a start-up or microbusiness counting every penny.
• Automation of basic tasks – Saves time compared to spreadsheets or manual calculations, and especially good if the person managing payroll is having to wear many hats.
• Simple compliance tools – Some low-cost solutions will be HMRC-recognised and support HMRC submissions, which beats doing it all manually by hand.

If your business is tiny and your payroll straightforward, you might be able to get away with cheap software – at least for a while.

The hidden costs of going cheap

Now for downsides… Cheap payroll software often comes with strings attached, and those strings have a nasty habit of tripping you up when you least expect it. Here’s where the “bargain” label starts to lose its shine:

• Lack of scalability

  A payroll system that works fine when you’re paying a handful of employees can quickly become a nightmare once you start growing. Cheap software often isn’t designed to handle more complex payroll structures, multiple locations, or additional reporting requirements. Outgrowing your system usually means messy data migrations, staff retraining, and the joy of explaining to the board why payday is becoming a full-time project.

• Limited features

  At first glance, cheap payroll tools might cover the basics. But as soon as you need something more advanced – like pension auto-enrolment, time tracking integration, or detailed payroll reporting – you may find yourself hitting a brick wall. Workarounds usually mean adding extra manual admin or, worse, paying for bolt-ons that end up costing more than just investing in a more robust solution from the start.

• Shaky support

  Payroll is one area where you need fast, reliable help if something goes wrong. With many cheap systems, “support” translates to a generic help article library or an email inbox that promises a response “within 72 hours.” Or worse still, an added-cost extra… That’s not much use if payday is tomorrow and your employees are refreshing their bank accounts every five minutes.

• Compliance risks

  This is where things can really sting. Did you know that over £75 million in avoidable HMRC payroll reporting fines were issued to UK firms since 2020, with over £20 million of that coming between April 2022 and April 2023? Payroll errors, incorrect tax codes, or missed HMRC submissions don’t just frustrate employees: they can result in huge fines, penalties, and a red flag against your business. And, unlike staff, HMRC won’t accept “our payroll system was cheap” as a valid excuse.

Much like buying a cheap old luxury car off Facebook Marketplace, what looks like a bargain at first can quickly morph into an expensive headache. The initial savings might be wiped out by compliance penalties, overtime spent on manual fixes, or the cost of replacing the software entirely when you’ve simply outgrown it. If you’re dead set on going as cheap as possible, go in with an open mind.

Affordable vs. value-for-money payroll software: what’s the difference?

Here’s where we separate the wheat from the chaff. Not all low-cost payroll software is created equal, and there’s a big difference between cheap and affordable. Cheap payroll software is usually focused on getting you in the door with a rock-bottom price tag; but what you gain in savings, you often lose in functionality, support, and long-term reliability.

Good quality, affordable in-house payroll software, on the other hand, takes a more balanced approach. Yes, it’s still budget-friendly, but it’s built to deliver value as your business grows. Think of it as the difference between buying a flimsy umbrella from a discount shop versus one that actually holds up in a storm. One keeps you dry for a few minutes; the other keeps you covered for years.

When you’re choosing payroll software, the question isn’t just “How much does it cost right now?” but “Will it keep up with our needs, protect us from compliance slip-ups, and save us time in the long run?”

In summary:

• Cheap payroll software = rock-bottom cost, bare minimum features, limited support.
• Affordable payroll software = reasonably priced, but with the compliance tools, support, and scalability your business actually needs.

For business leaders, HR and finance teams, the smart move is investing in long-term value. So, software that can grow with you, integrate seamlessly with a wider HR system, and keep HMRC happy.

How to decide if cheap payroll software is right for you

Still unsure? Here are some simple questions to ask yourself before hitting that “buy now” button:

• How many employees do we need to pay – both now and in the future?
• Do we need payroll to integrate with HR, time tracking, or pensions?
• How important is compliance support for us (spoiler: very important)?
• What’s our growth plan, and can the software scale with us?

If your answers lean towards growth, compliance, and peace of mind, then a “cheap” option probably isn’t going to cut it.

FAQs about cheap payroll software

• Is cheap payroll software safe to use in the UK?
  Some are, but many don’t offer the robust compliance tools or support you’ll need to stay on the right side of HMRC. If you’re unsure, check out this list of HMRC-recognised payroll software.

• What’s the best payroll software for small businesses on a budget?
  Look for software that balances cost with reliability, HMRC compliance, and scalability. “Affordable” doesn’t have to mean “bare bones.”

• Can cheap payroll software handle auto-enrolment and HMRC submissions?
  Some can, but check the fine print. Missing out on these features could cause costly compliance issues later down the line.

• What are the risks of free payroll software?
  Free payroll software does exist if you really, really need it. But, limited features, lack of support, and a higher risk of mistakes that could lead to fines or disgruntled employees. If your requirements are incredibly small (perhaps just a couple of employees), HMRC offer basic PAYE tools if you want to do things yourself, whilst startups.co.uk has put together a good list of free software options.

So, should you save or spend on payroll software?

Payroll is one of those areas where you don’t want to roll the dice. Yes, free or cheap payroll software can look tempting – especially when budgets are tight. But the hidden costs, compliance risks, and lack of scalability often mean you’ll pay more in the long run.

The smarter approach? Choose payroll software that’s affordable but built for growth, compliance, and employee satisfaction. Would rather someone else deals with everything? Then you might want to consider a managed payroll provider instead. After all, saving money shouldn’t come at the expense of your sanity (or HMRC fines).