The latest research shows that one in three (31%) continue to process wages manually using spreadsheets or paper forms. Among the smallest firms (5 to 19 employees), this figure rises to 44%.

This reliance on manual processes is leaving businesses exposed to costly mistakes and wasted time. 84% of SMEs have experienced payroll errors, including incorrect wage calculations (48%) and late or missing payments (38%), while 40% of businesses have faced payroll fines, often due to underpayments, reporting failures or late wage runs - penalties that can cost thousands of pounds.

35% of SMEs cite cost as a reason for not switching to payroll software from manual processing, so to help ease the burden, Employment Hero has launched free payroll software for all UK SMEs, eliminating cost barriers and reducing compliance risks for the UK’s 5.5 million small businesses.

Kevin Fitzgerald, UK Managing Director, Employment Hero, said: “With the rising National Minimum Wage, increased National Insurance Contributions and tougher enforcement of employment law, there’s never been a more complicated time to be a small employer. Our research shows payroll has become a compliance minefield. SMEs are trying to do the right thing, but outdated systems and limited resources are costing them dearly.

“No small business should face fines just for lacking the right tools – and that’s why we’re making payroll free. It’s too fundamental to get wrong. If we want SMEs to power growth and employment, we need to level the playing field – starting with payroll.”

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