Payroll software: Save time and money for your business

Published Friday 12 September 2025

Table of contents

• Payroll is vital for your business
• What to consider for payroll
• The cost of compliance
• Single Touch Payroll and Australian compliance requirements
• Four key benefits of payroll software
• What is payroll software worth to your business?
• Integration with your accounting system
• Choose payroll accounting software wisely
• Make payroll work for your business, not against it
• FAQs on payroll software costs and benefits

Key takeaways

• Calculate your current payroll costs by tracking time spent on each payroll task per pay cycle and multiplying by hourly rates to determine if software investment will generate positive ROI.
• Prioritise payroll software with automated Single Touch Payroll compliance and tax calculation features to eliminate manual reporting errors and avoid ATO penalties.
• Implement employee self-service portals to reduce administrative burden by allowing staff to view payslips, submit timesheets, apply for leave, and update personal details independently.
• Choose cloud-based payroll software that integrates with your accounting system to ensure automatic data flow, real-time financial visibility, and anywhere access for maximum efficiency.

Payroll is vital for your business

Payroll software helps you save money by reducing the time you spend on calculations, cutting errors, and automating compliance tasks.

Manual payroll methods include

• Tracking and calculating in spreadsheets
• Outsourcing to accountants or bookkeepers
• Using dedicated payroll service companies
• Spreadsheet tracking and calculations
• Outsourcing to accountants or bookkeepers
• Using dedicated payroll service companies

Payroll software handles these operations in-house through automation. This guide examines whether the time and cost savings justify the software investment for your business.

What to consider for payroll

Payroll complexity extends far beyond basic employee payments. Small businesses must manage multiple interconnected requirements that affect both compliance and costs.

Core payment requirements:

• Employee payments: Regular salary and hourly rate processing
• Payment types: Salaries, bonuses, commissions, and overtime calculations

Compliance obligations:

• Taxation: ATO reporting and tax withholding management
• Government reporting: Meeting mandatory filing deadlines
• Superannuation: Tracking employer and employee contributions, for which the mandatory Superannuation Guarantee percentage is 11.5% for the 2024–25 financial year

Employee management:

• Leave entitlements: Annual leave tracking and carry-over calculations
• Sickness tracking: Sick day recording and entitlement monitoring
• Significant dates: Employment start and termination documentation

Additional considerations:

• Expense reimbursements: Documentation and processing
• Benefits and perks: Proper taxation and recording
• Maternity and paternity payments: Complex regulatory compliance

Each requirement takes time and expertise, so payroll management can cost your business more.

The cost of compliance

Compliance costs can add up quickly for small businesses. Some estimates say these costs are about 2 percent of GDP.

Time equals money in compliance management. Small business owners typically wear multiple hats:

• Director: Strategic decision-making
• Bookkeeper: Financial record management
• HR manager: Employee relations and policies
• Sales lead: Revenue generation and customer relationships

The compliance time trap: Most business owners underestimate compliance hours. Manual payroll compliance can consume 5-10 hours per pay cycle for businesses with 10-20 employees.

The cost-benefit question: Can payroll software save enough time to justify its cost? The answer depends on calculating your current compliance costs versus software investment returns.

Single Touch Payroll and Australian compliance requirements

In Australia, staying compliant means keeping up with Single Touch Payroll (STP), as all employers have been required to report using STP since 1 July 2019, unless granted an exemption.

Good payroll software automates this process. It sends your payroll information directly to the Australian Taxation Office, so you avoid mistakes and penalties. You spend less time on reporting and can be confident you are meeting your obligations.

Four key benefits of payroll software

Cloud-based payroll software runs online rather than on individual computers, offering significant advantages over traditional desktop solutions.

Key cloud advantages:

1. Anytime, anywhere access

With cloud-based online payroll systems, your data is always safe. You can log in from any device and keep working.

2. Multiple access

Invite your bookkeeper or accountant into your payroll system to help manage it remotely from wherever they are.

3. Data security

Cloud-based tools use strong encryption to keep your payroll data secure and accessible, so you do not have to worry about losing information or unauthorised access.

4. Work from anywhere

Need to check some figures at the weekend when the office is closed, or while away on a business trip? No problem – just log in remotely at any time and access what you need.

Online payroll software does everything traditional products do, with the added benefits of the cloud. You can work from anywhere, not just your desk or office.

What is payroll software worth to your business?

Payroll software ROI depends on whether time savings exceed software costs. Some accounting systems include payroll features, while standalone payroll software requires additional investment.

The ROI calculation: Will payroll software save more money than it costs? Use this four-question framework to evaluate your business case:

1. What will the software cost you?

Software cost analysis requires evaluating multiple pricing structures:

Pricing models:

• Monthly subscriptions: Typically $20-100+ per month based on features
• Per-employee pricing: Common for larger teams
• One-time licenses: Less common, may require update fees

Key cost variables:

• User limits: Some platforms charge per additional user
• Feature tiers: Basic vs advanced functionality pricing
• Integration costs: Connecting to accounting systems
• Support and training: Implementation and ongoing assistance

Money-saving features: Look for unlimited user access, which can significantly reduce per-employee costs as your business grows.

2. How much does payroll work cost you now?

Calculate your current payroll costs using this time-tracking method:

Step 1: Track payroll hours

• Document time spent on each payroll task per pay cycle
• Include all staff involved (owner, bookkeeper, HR personnel)
• Consider both regular and periodic tasks (year-end reporting, leave calculations)

Step 2: Apply hourly rates

• Owner time: Use your target hourly rate or opportunity cost
• Staff time: Use actual hourly wages plus overhead
• External help: Include accountant or bookkeeper fees

Step 3: Calculate annual cost

• Multiply hours per pay cycle × pay cycles per year × hourly rates
• Add periodic tasks (quarterly reporting, annual compliance)

Example calculation: 8 hours per fortnight × 26 pay cycles × $50/hour = $10,400 annually in payroll management time.

3. Will the software help your business stay compliant?

Integrated payroll and accounting software eliminates manual data entry errors and ensures compliance accuracy. Automated compliance means tax calculations, superannuation contributions, and government reporting happen correctly every time.

Error reduction benefits:

• Eliminated double-entry: Data flows automatically between payroll and accounting
• Accurate tax calculations: Built-in tax tables update automatically
• Compliance assurance: Automated reporting reduces ATO penalty risks

4. Why can't I manage payroll on a spreadsheet?

Excel payroll risks create significant business liabilities despite initial cost savings. While spreadsheets can handle complex calculations, most small businesses lack the expertise to use them safely for payroll.

Compliance risks:

• Calculation errors: Manual formulas prone to mistakes
• Outdated tax rates: No automatic updates for changing regulations
• ATO penalties: Incorrect reporting can trigger financial penalties
• Audit trail gaps: Difficult to track changes and approvals

Operational risks:

• Data loss: No automatic backups or version control
• Employee trust issues: Payroll errors damage workplace relationships
• Time waste: Troubleshooting spreadsheet problems consumes valuable hours
• Scalability limits: Becomes unmanageable as employee numbers grow

The hidden cost: Excel "savings" often cost more through errors, penalties, and time waste than proper payroll software.

Four key benefits of payroll software

Cloud-based payroll software runs online rather than on individual computers, offering significant advantages over traditional desktop solutions.

Key cloud advantages:

1. Anytime, anywhere access

With cloud-based online payroll systems, your data is always safe. You can log in from any device and keep working.

2. Multiple access

Invite your bookkeeper or accountant into your payroll system to help manage it remotely from wherever they are.

3. Data security

Cloud-based tools use strong encryption to keep your payroll data secure and accessible, so you do not have to worry about losing information or unauthorised access.

4. Work from anywhere

Need to check some figures at the weekend when the office is closed, or while away on a business trip? No problem – just log in remotely at any time and access what you need.

Online payroll software does everything traditional products do, with the added benefits of the cloud. You can work from anywhere, not just your desk or office.

What is payroll software worth to your business?

Payroll software ROI depends on whether time savings exceed software costs. Some accounting systems include payroll features, while standalone payroll software requires additional investment.

The ROI calculation: Will payroll software save more money than it costs? Use this four-question framework to evaluate your business case:

1. What will the software cost you?

Software cost analysis requires evaluating multiple pricing structures:

Pricing models:

• Monthly subscriptions: Typically $20-100+ per month based on features
• Per-employee pricing: Common for larger teams
• One-time licenses: Less common, may require update fees

Key cost variables:

• User limits: Some platforms charge per additional user
• Feature tiers: Basic vs advanced functionality pricing
• Integration costs: Connecting to accounting systems
• Support and training: Implementation and ongoing assistance

Money-saving features: Look for unlimited user access, which can significantly reduce per-employee costs as your business grows.

2. How much does payroll work cost you now?

Calculate your current payroll costs using this time-tracking method:

Step 1: Track payroll hours

• Document time spent on each payroll task per pay cycle
• Include all staff involved (owner, bookkeeper, HR personnel)
• Consider both regular and periodic tasks (year-end reporting, leave calculations)

Step 2: Apply hourly rates

• Owner time: Use your target hourly rate or opportunity cost
• Staff time: Use actual hourly wages plus overhead
• External help: Include accountant or bookkeeper fees

Step 3: Calculate annual cost

• Multiply hours per pay cycle × pay cycles per year × hourly rates
• Add periodic tasks (quarterly reporting, annual compliance)

Example calculation: 8 hours per fortnight × 26 pay cycles × $50/hour = $10,400 annually in payroll management time.

3. Will the software help your business stay compliant?

Integrated payroll and accounting software eliminates manual data entry errors and ensures compliance accuracy. Automated compliance means tax calculations, superannuation contributions, and government reporting happen correctly every time.

Error reduction benefits:

• Eliminated double-entry: Data flows automatically between payroll and accounting
• Accurate tax calculations: Built-in tax tables update automatically
• Compliance assurance: Automated reporting reduces ATO penalty risks

4. Why can't I manage payroll on a spreadsheet?

Excel payroll risks create significant business liabilities despite initial cost savings. While spreadsheets can handle complex calculations, most small businesses lack the expertise to use them safely for payroll.

Compliance risks:

• Calculation errors: Manual formulas prone to mistakes
• Outdated tax rates: No automatic updates for changing regulations
• ATO penalties: Incorrect reporting can trigger financial penalties
• Audit trail gaps: Difficult to track changes and approvals

Operational risks:

• Data loss: No automatic backups or version control
• Employee trust issues: Payroll errors damage workplace relationships
• Time waste: Troubleshooting spreadsheet problems consumes valuable hours
• Scalability limits: Becomes unmanageable as employee numbers grow

The hidden cost: Excel "savings" often cost more through errors, penalties, and time waste than proper payroll software.

Employee self-service: reducing your admin burden

Modern payroll software often includes an employee self-service portal. This allows your staff to manage their own information, which can save you a lot of administrative time. Employees can:

• View and download their payslips
• Submit timesheets for approval
• Apply for leave
• Update their personal details

When your employees manage their own information, you spend less time on admin and can focus on running your business.

Integration with your accounting system

Payroll software that integrates with your accounting platform saves you time. Your financial data updates automatically every pay cycle.

You do not need to enter wage expenses or liabilities manually. You get an accurate, real-time view of your cash flow and financial position, making reporting and decision-making easier.

Choose payroll accounting software wisely

Choosing payroll software requires evaluating features against your specific business needs. Focus on essential compliance features first, then consider efficiency improvements.

Essential compliance features:

• Tax calculations: Automatic updates for changing tax rates and thresholds
• Superannuation compliance: SuperStream integration for multiple fund payments
• Audit trails: Complete transaction tracking for ATO requirements

Efficiency features:

• Cloud access: Manage payroll from anywhere using any device
• User permissions: Control access levels for managers and employees
• Leave management: Automated application and approval workflows
• Scalability: Software that grows with your business needs

Evaluation process:

• User reviews: Check forums and business owner recommendations
• Trial periods: Test software with your actual payroll data
• Support quality: Evaluate training and ongoing assistance options

Prioritise ease of use and reliability over feature quantity – complex software that's difficult to use defeats the purpose of automation.

Make payroll work for your business, not against it

Payroll software can save you money by reducing admin time, cutting errors, and helping you stay compliant. Automating payroll lets you focus on running and growing your business.

Ready to see how much time you could save? Try Xero for free and explore Xero payroll features that simplify your workload.

FAQs on payroll software costs and benefits

Here are some common questions small business owners have about payroll software.

What is the best payroll software in Australia?

The best software depends on your business needs. Look for a solution that is Single Touch Payroll (STP) compliant, easy to use, and integrates with your accounting system. Features like automated superannuation payments and employee self-service are also valuable. Choose software that can grow with your business.

Can I do my own payroll in Australia?

Yes, you can manage your own payroll. Compliant payroll software makes the process simpler and helps you meet your tax and superannuation obligations.

How much does payroll software cost?

Most payroll software uses a monthly subscription. The price depends on your number of employees. Consider the time you save and the cost of errors or fines if you do payroll manually.