Charities have the same payroll obligations as any other employer. PAYE, National Insurance, RTI submissions, auto-enrolment — none of these disappear because an organisation’s purpose is charitable rather than commercial. HMRC and The Pensions Regulator treat a missed auto-enrolment deadline from a hospice the same as they’d treat one from a restaurant chain.
What’s different is the context: tighter budgets, a mix of paid staff and volunteers, sometimes part-time or trustee-led finance functions, and occasional funding restrictions on how costs are allocated. The software choices are the same as for any small employer, but the priorities shift.
Compliance issues that catch charities out
Volunteers and the employment boundary. Volunteers aren’t employees and don’t appear in payroll. But the line between volunteering and employment is something HMRC pays attention to — paying volunteers above genuine out-of-pocket expenses creates a risk that they’ll be treated as workers, with PAYE and NI implications. Payroll software can’t draw this line for you; that’s a judgment call, ideally made with an accountant. But it’s worth making deliberately rather than letting it drift.
Auto-enrolment. Any employee earning over £10,000 a year aged between 22 and state pension age must be enrolled in a workplace pension. Charitable status doesn’t change this obligation. For small charities that grew from all-volunteer operations and have only recently taken on paid staff, auto-enrolment is sometimes treated as a future problem rather than a current one — sometimes incorrectly. Check your duties with The Pensions Regulator if you’re unsure.
Cost allocation across funding streams. Some charities need to split payroll costs across different funders — one grant covers certain staff time, another covers different work. Payroll software doesn’t do this allocation natively. You export payroll data into your accounting system and handle the split there. It’s worth knowing before you expect the payroll tool to solve it.
Employment Hero Payroll – free tier
For small charities with straightforward payroll, Employment Hero’s free tier covers a lot of ground. Unlimited employees, RTI, auto-enrolment, payslips, automatic rate updates in April — all at no cost. For a charity with fewer than fifteen paid staff on standard contracts and no dedicated payroll function, the free tier may cover everything indefinitely.
The interface isn’t as intuitive as some newer tools, but once set up it runs reliably. It’s cloud-based, which matters when the person who runs payroll works from home or shares the responsibility with a colleague.
HMRC Basic PAYE Tools – free
Sufficient for very small charities with simple payroll and someone who’s comfortable with the basics. It handles RTI submissions and PAYE/NI calculations, but doesn’t generate payslips or manage auto-enrolment — you’ll handle those separately. For a charity with two or three part-time paid staff and a confident bookkeeper, it works. For anything more complicated, the gaps cost time.
Sage Payroll – with charitable discounts
Sage is widely used in the third sector, partly because many charity-specialist accountants work with Sage products. Sage offers discounted pricing for registered charities through the Sage Foundation programme and some reseller arrangements — worth asking about directly if you’re considering it, since the discounts aren’t always prominently advertised.
For charities working with an accountant who uses Sage, the integration makes access straightforward and reduces the back-and-forth of sharing payroll records.
3. Xero Payroll – with charitable discounts
Xero also offers charitable pricing for registered charities. The payroll module handles RTI, PAYE, NI, auto-enrolment, and payslips, and sits within Xero’s broader accounting platform. For charities already using Xero for accounts, adding payroll in the same system is the most sensible path — it keeps everything in one place and simplifies trustee reporting.
As with Sage, charitable pricing requires direct enquiry and your charity number.
Moneysoft Payroll Manager — from £72/year
For charities that don’t qualify for meaningful discounts on Sage or Xero, Moneysoft is hard to beat on value. Around £72 a year for unlimited employees, full compliance features, auto-enrolment included. The trade-offs are real — it’s a Windows desktop application, not particularly intuitive, support is by phone and email — but for a charity where the payroll function is part-time or trustee-run, the price makes those trade-offs tolerable for a lot of organisations.
On charitable discounts
When looking at any commercial payroll software, ask directly about charitable pricing. Sage, Xero, QuickBooks, and others have arrangements that aren’t always visible on their standard pricing pages. You’ll typically need a registered charity number. The discounts vary considerably — some are modest, some are significant enough to change the comparison materially.
How to choose
For a small charity with five to fifteen paid staff and no dedicated payroll professional: Employment Hero free tier or Moneysoft are the realistic first choices. Employment Hero because it’s free and cloud-based; Moneysoft because it’s very cheap, covers everything, and has been used reliably by small third-sector organisations for years.
For charities already on Sage or Xero, add payroll within that platform, ask about charitable pricing, and don’t overcomplicate it.
The best payroll software guide covers the full market comparison. If the budget is genuinely tight, the free payroll software guide covers every no-cost option in detail.
