Payroll preparation: A step-by-step guide for UK HR teams

Effective pre-payroll workflows lead to fewer mistakes and higher levels of employee trust, as employees know that they’ll be paid the right amount at the right time. 

Employees expect to be paid correctly and on time. When payroll data is incomplete or inaccurate, mistakes can happen–like incorrect overtime payments or missing deductions.

Preliminary payroll gives you a chance to review the information that feeds your pay run before processing happens, so you can spot mistakes and correct them before they hit your employees’ bank accounts.

UK employers are responsible for reporting payroll information to HMRC through Real Time Information (RTI). Missing or inaccurate payroll data can create problems when submitting a Full Payment Submission (FPS), resulting in extra work to correct records.

Validating employee information, tax details and pay data before each payroll run reduces the risk of reporting headaches, keeps your payroll running smoothly and allows you to make accurate submissions to HMRC every time.

Many payroll problems start long before payday. Missing starter information, unrecorded absences or incorrect pay changes create last-minute delays and corrections–especially if you rely on traditional systems without preliminary payroll.

A consistent pre-payroll process enables HR and payroll teams to spot issues earlier, and the right software can automate as much of the prep process as possible–giving HR teams valuable time back to focus on the work that matters most.

Preparing for payroll is easier when you have a simple, repeatable process to follow every time. Here’s how to prepare to pay your employees–including what to do the very first time.

Before you can run payroll, you'll need to register as an employer with HMRC and set up PAYE. Once you’re signed up, you’ll have access to the references and reporting framework needed to submit payroll information through Real Time Information (RTI).

If you’re already running payroll you can skip this step.

For any new starters, collect the information you’ll need for PAYE reporting and tax calculations. In most cases, this will come from a P45, but if they don't have one, have them complete and return a starter checklist.

What you'll need:

• P45 or completed starter checklist

• Employee bank details

• National Insurance number

• Start date

• Salary or hourly pay details

Next, gather all the information that could affect employee pay during the period–including hours worked, overtime, bonuses, commission payments, holiday taken, sickness absence and statutory leave. 

If your organisation uses separate systems for time tracking, absence management or expenses, this is the stage where you’ll need to consolidate information. The accuracy of your payroll preparation depends heavily on the quality of the data collected here.

What you'll need:

• Hours worked and overtime

• Holiday and absence records

• Statutory pay information

• Bonuses and commission payments

• Expense claims, where applicable

Before you process payroll, check that all workers are classified correctly. Most organisations will be dealing primarily with employees, but if you engage contractors you'll need to consider whether the IR35 rules apply. Misclassifying workers can create tax and reporting issues further down the line.

Once you've gathered your payroll data, you can calculate each employee's gross pay before deductions are applied. Gross pay includes salary or wages, overtime payments, bonuses, commission and any statutory payments due during the period. 

After calculating gross pay, apply any relevant deductions for each employee.

These may include:

• Income Tax through PAYE

• National Insurance contributions (NICs)

• Pension auto-enrolment contributions

• Student loan repayments

• Attachment of earnings orders

• Other voluntary deductions

Before you finalise payroll, review all figures and check for any missing data or discrepancies. This includes validating pay changes, checking unusual variances, confirming deductions have been applied correctly and ensuring starter and leaver information has been processed accurately. A final review helps reduce the risk of errors reaching employees or HMRC.

After you’re happy that your pre-payroll data is correct, generate payslips and prepare supporting documentation. Most HR teams use dedicated payroll software or combined HR and payroll software to handle this step.

Employers should also maintain payroll records appropriately and store relevant documentation securely. Depending on the circumstances, this may include records relating to P45s, P60s and P11Ds. Keeping accurate records makes future payroll runs easier and helps support reporting and audit requirements.

Finally, check that your data is ready for Full Payment Submission (FPS) and Employer Payment Summary (EPS) submission. 

Even with a well-defined payroll preparation process, missing information can create delays and errors. Before each payroll run, check that you have all the documents and data you need to calculate pay, apply deductions and prepare payroll for reporting.

• Employee name and contact details

• National Insurance number

• Bank account details

• Tax code

• Employment start date

• P45 (where available)

• Starter checklist (if no P45 is available)

• Leaver information and final payment details

• Hours worked

• Overtime records

• Time and attendance data

• Holiday and annual leave records

• Sickness absence records

• Statutory leave information

• Bonus payments

• Commission payments

• Expense claims awaiting reimbursement

• Any one-off payments or adjustments

• Pension scheme details and auto-enrolment contributions

• Student loan repayment plan information

• Attachment of earnings or court orders

• Other voluntary deductions

• Relevant P11D information, where applicable

• Previous payroll records

• Payroll approval documentation

• Any employee pay changes for the current period

There are several ways to manage payroll preparation and payroll processing in the UK. The right approach depends on your organisation's size, complexity and available resources.

A lot of growing businesses choose dedicated payroll software because it brings employee data, payroll preparation and reporting processes together in a more efficient and scalable way.

Start simplifying your payroll management

Learn how to streamline your payroll process to save time and ensure accuracy.

Read our guide

The right HR software makes payroll preparation significantly easier. Here’s what to look for when evaluating HR and payroll software:

• A single source of employee data

• Automated time, attendance and absence tracking

• Secure document management

• Workflow automation

• UK payroll support

• Integrations with your payroll provider

• Preliminary payroll functionality

• Reporting and audit capabilities

Depending on the size of your organization and your needs, the right system could be standalone payroll software, a combined HR and payroll tool or a HR platform that supports pre-payroll and integrations. 

Simplify your payroll tasks

Prepare your payroll more efficiently for accounts. Enable employees to change personal data themselves that HR approves. Working hours and bonus details are automatically transferred to your payroll system.

Streamline how you pay employees

Personio is the Intelligent HR Platform built to help growing businesses manage people processes with greater accuracy, efficiency and confidence – including preliminary payroll.

HR teams can use Personio to: 

• Create a single source of truth for employee data

• Capture time, attendance and absence data automatically

• Keep starters, leavers and approvals on track

• Manage payroll documents securely

• Bridge the gap between employee data and payroll

• Support compliance and data security

• Work with your existing payroll setup

• Integrations with popular UK payroll tools, including Sage 50 and Xero

Personio gives UK HR teams a single, accurate foundation for payroll preparation, so the pay run starts with the right data, every time.

To prepare payroll, you'll need to gather employee and pay-period data, calculate gross pay, apply deductions, review payroll records and prepare information for HMRC reporting. A structured payroll preparation process helps reduce errors and ensures employees are paid accurately and on time.

HMRC offers free basic PAYE tools which allow you to perform most payroll tasks, including submitting information to HMRC – but it’s limited to businesses with fewer than 10 employees. For most organisations, a dedicated HR and payroll platform or standalone payroll software is the right choice. 

You can run payroll from a spreadsheet, but it’s not the recommended option – especially if you have more than a handful of employees. Growing businesses need payroll software that securely and accurately stores, calculates, and prepares data for payroll submission. 

The best payroll software is the one that your finance team feels most comfortable using, but many businesses make decisions based on features, budget, and compatibility with other tools in their HR tech stack. Examples of popular payroll software in the UK include Xero and Sage 50, both of which integrate with Personio. 

It typically takes between 1-3 days to prepare and process payroll, but it depends on the software and processes you use. If you prepare data manually and have to update payroll software without automations, it can take much longer and be prone to user error – leading to more time spent fixing payroll data.