Payroll software, RTI and your ERP: a UK guide

Payroll is the part of a UK finance function where mistakes are noticed fastest: by employees, by HMRC and by the pension provider. If you are looking for payroll software with RTI, the first thing to settle is whether payroll belongs inside your ERP, beside it, or with an outside provider. This guide sets out what the law asks of the employer, what the ERP should do, and what is better handled by a dedicated module or a specialist.

What RTI means for an employer

Real Time Information, usually shortened to RTI, is the way UK employers report payroll to HMRC. Rather than a single annual return, you report each time you pay people. Searching for RTI HMRC guidance can be confusing, so here are the three submissions that matter in practice.

Full Payment Submission (FPS)

The employer reports pay, benefits that are processed through payroll and deductions in a Full Payment Submission. It is due to HMRC on or before the employee's payday, with limited exceptions. For an ERP project this has a direct consequence: the pay run is not finished when the net pay is calculated, but when the submission has been accepted.

A late FPS can be sent with an exception code in specific cases. Code F covers an employee paid less than £96 a week or who has worked fewer than seven days, with the report due within seven days. Code G covers a reasonable excuse, with the report due within a month. Your software should let a payroll officer select a code deliberately, rather than hiding the option in a settings screen.

Employer Payment Summary (EPS)

The Employer Payment Summary has two jobs. It must be sent before the 19th of the following tax month if you want HMRC to apply a reduction, such as statutory payments you have recovered, to what you owe. It also replaces the FPS in any tax month in which no employee was paid. Businesses with seasonal staff, or a director-only company in a quiet month, often forget this second use.

What you pay and when

The payroll software records pay, calculates the income tax and National Insurance deducted, works out employer contributions on earnings above £242 a week and produces payslips. If it cannot produce payslips, they can be produced in other software. HMRC's statement of what you owe is available from the 10th of the following tax month, and payment is due on the 22nd, or the 19th if you pay by post.

That timetable is the one your accounts team will work to. It is worth checking that the ERP can raise the liability in the ledger on the day of the pay run and clear it when the payment leaves the bank.

Auto-enrolment: the second compliance thread

Alongside RTI sits auto enrolment payroll processing. The employer must automatically enrol into a workplace pension any worker aged from 22 up to State Pension age who earns at least £10,000 a year and usually works in the UK.

For 2026-2027 the earnings trigger is £10,000 a year, or £768 for a four-week period. The lower limit of qualifying earnings is £6,240 and the upper limit is £50,270. These figures are unchanged from 2025-2026, and the Department for Work and Pensions reviews them each year with effect from 6 April, so your software must let you update them without a code change.

A few rules shape the configuration:

• An employer need not contribute for someone earning £520 a month or less, £120 a week or less, or £480 or less in a four-week period, although that person may still choose to join.
• Enrolment can be postponed for up to three months, and longer for some types of scheme.
• You must write to the employee on enrolment, and you may not encourage or force them to opt out.

The pension logic belongs with payroll, not with the general ledger. What the ERP must handle is the consequence: the employee deduction and the employer cost, posted to the right accounts, and the payment to the pension provider tracked as a liability until it is paid.

Where payroll and the ERP meet

An ERP payroll UK project is really three questions. Who calculates pay? Who reports to HMRC? How do the numbers reach finance? The table shows the common arrangements.

None of these is right in every case. Your accountant may have a strong view because they file your accounts and may already run a bureau service for you. Take that advice into the selection, but keep it separate from the technical question of what the ERP can do.

What the ERP should do in every arrangement

Whatever you choose, the finance side has some fixed tasks:

1. Post payroll journals by cost centre or department, with gross pay, employee deductions and employer costs separated.
2. Hold liabilities to HMRC and to pension providers until the payments are made.
3. Reconcile the bank payment against the liability, so nothing lingers on the balance sheet.
4. Keep an audit trail linking each journal to the pay run that created it.

If your payroll is outside the ERP, the quality of that journal import is the real test, not the demonstration of the payroll screens.

How the five ERPs the site covers approach payroll

We do not claim any product handles UK payroll in a particular way; the answer depends on version, edition and the add-ons your integrator proposes. The useful approach is to ask the same questions of each platform.

• Odoo: ask whether UK payroll, RTI submissions and pension handling are available natively, through a community module or through a connector to a specialist product. Check who maintains it when HMRC changes the rules.
• Microsoft Dynamics 365 Business Central: ask which payroll route the integrator has used in UK projects, and whether the journals and employee dimensions are mapped to your chart of accounts.
• Sage: ask how payroll sits relative to the finance product you are considering, and whether the same employee data is shared or re-keyed.
• Oracle NetSuite: ask whether payroll is part of the proposal or a separate connected service, and how HR, expense and payroll data flow between them.
• SAP Business One: ask how UK payroll is provided in practice, and which party supports RTI and auto-enrolment after go-live.

The honest answer for many mid-sized UK firms is that payroll will be a connected, specialist service, and the ERP project is about the interface.

Points to test with your integrator

A demonstration will show a clean pay run. Real life is less tidy, so ask for these scenarios to be shown with your own data.

Calculation and reporting

• A new starter mid-month, a leaver with a final pay run and a correction to a previous period.
• A pay run in which nobody is paid, to see whether the EPS is prompted.
• A late submission with the correct exception code, and a clear record of why.
• Statutory payments recovered through the EPS and reflected in the amount due to HMRC.

Pensions

• A worker who crosses the earnings threshold part-way through the year and is enrolled automatically.
• A worker under the lower earnings level who opts in voluntarily.
• A postponed enrolment, with the letter generated at the right moment.
• Annual updates to the thresholds in April, applied by configuration rather than by a developer.

Finance integration

• Journals that land in the right period, even when the pay date falls across a month end.
• Liabilities that clear when the HMRC and pension payments leave the bank.
• Reports that show payroll cost against budget by team, project or site.

Making Tax Digital

Payroll sits next to your wider digital tax obligations. If your ERP also produces VAT returns, our guide to Making Tax Digital and your ERP explains the software requirements for that side. The two are separate regimes with separate submissions, so do not assume that one connection to HMRC covers both.

Data protection and payroll

Payroll files contain salaries, bank details, tax codes and sometimes health-related absence data. Under UK GDPR the usual principles apply: a determined and documented lawful basis, data minimisation, accuracy, limited retention and security. In an ERP, that translates into role-based access, field-level restrictions on salary data, and logging of who has viewed or exported it.

A personal data breach that risks people's rights and freedoms has to be reported to the ICO as soon as possible and, where feasible, within 72 hours. Ask your integrator how a suspected breach would be detected, and who would be able to establish what was accessed. If your payroll is run by a bureau or product vendor, the contract should say who notifies whom and how quickly. Our overview of legal requirements for ERP in the UK puts these obligations in context.

Making the project run smoothly

A payroll change is among the riskiest items in any ERP programme, because the deadlines are fixed by the pay calendar rather than by the project plan. Three habits help:

1. Do not switch payroll at the same time as the finance cut-over unless you have a strong reason. Moving the ledger and the pay engine in the same month doubles the points of failure.
2. Pick a clean boundary. A start of the tax year is tidy for reporting, but it is also a busy time for threshold updates, so plan the resourcing.
3. Run in parallel. Compare at least one full cycle against the old system before relying on the new one.

For the wider programme, see our guide to ERP implementation, and for how to judge a supplier's experience, read choosing an ERP integrator.

How we can help

ERP Integrator is a free service that puts you in touch with an ERP integrator suited to your project. We do not run projects ourselves and we are not affiliated with any software vendor. When you describe your payroll set-up, headcount patterns and the systems you use today, we match you with an integrator that has relevant UK experience. How it works explains the steps, and there is no obligation to go further once you have spoken to them.

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