Everything You Need To Know About Payroll Automation

Everything You Need To Know About Payroll Automation

Introduction To Payroll Automation 

This age of automation has brought and established many differences in the business world. Some industries are already impacted by the growing trend of automation within business operations. In fact, it is speculated that automation can eliminate some jobs and even fields in the coming years and increase the need for human resources with critical thinking and problem-solving skills. The percentage of businesses that have fully automated at least one of their business functions has grown from 29% in 2018 to 31% in 2020. 

Payroll is one crucial function within an organization, in short- payroll refers to the following,

  1. The employees a business is legally entitled to pay along with their information
  2. The amount a business pays for its employees during each pay period.
  3. The process of actually calculating and distributing wages and taxes, per the statutory requirements of a given country and reporting to relevant state authorities. 

Manually processing payroll takes a great deal of time, leaves a lot of room for errors, and requires a lengthy learning curve with regards to payroll and tax-related laws – which if overlooked can result in serious fines and other legal issues. 

Payroll automation in simple terms is running the payroll process of an organization with the help of a computerized or automated system. Usually, as a general practice, payroll automation is integrated with a company’s ERP system (Enterprise Resource Planning system).

The Importance Of Payroll Automation For An Organization 

While payroll experts have been favoring payroll automation consistently over the past few years, for both organizational productivity and cost-effectiveness- deviating from the notion manual payroll works the same as automated, is quite challenging for some businesses till now. This could very well be a result of a lack of comprehension of how payroll automation works.

Here is a list of reasons why payroll automation is important for any organization, especially as they grow and expand. 

Reduce Errors

Experts believe that at least 40% of employees will leave a job after experiencing at least two errors or problems with their paychecks. This would not just result in an increasing employee turnover rate but also affect a company’s financial statements and even confuse stakeholders. In worse cases, as payroll is strictly compiled by-laws, paycheck errors can lead to legal issues that can subject businesses to penalties. 

A payroll naturally includes calculations that precisely add and deduct several components that will affect an employee’s pay- which in truth is a complex task with many things easily going wrong. So just like how calculators can be error-free and better at math than human brains, payroll automation can process calculations error-free. It also avoids the risk of mistyping or miscopying numbers, data and related errors – which is often associated with manual payroll processing. 

Saves Time

A payroll process involves several tasks associated with paperwork. From filling forms to updating and maintaining them duly, the manual payroll process is tedious solely because of paperwork. The need to be precise and cautious because of the related legal requirements a payroll process is bound to, consumes even more time. 

On the other hand, the time taken to manually process payroll depends on the relevant payroll professional’s efficiency, skills, and overall capability. Automated payroll produces consistent results with uniform efficiency. 

And so, payroll automation can save a significant amount of time related to these monotonous payroll processes, which can be effectively directed towards other HR or accounting functions.

Increases Security

Payroll data includes confidential employee information. Paper works and spreadsheets are not reliable places to keep payroll data. With payroll automation such as cloud payroll solutions, organizations can keep confidential data encrypted and password-protected. This way, no one besides approved employees or teams can access it, ensuring improved security for all sensitive data associated with payroll. 

Saves Money 

Many businesses refrain from the idea of payroll automation considering the price tag it brings along. Surprisingly, the American Payroll Association has estimated that payroll automation can save up to 80% on payroll processing costs. 

On the other hand, payroll processing helps in eliminating expensive errors that are to do with legal compensations. This can effectively save money for a business in the long run. 

Most importantly, payroll automation saves time that can be effectively used in other business operations – and as some say “time is money” —which is especially true for businesses. 

Easy Record-Keeping 

Record keeping, unlike in other business functions, is mandatory when it comes to payroll. This is because the employment/labor laws of any given country require registered businesses to maintain at least three years’ worth of pay records. This includes records of employee information such as hours worked, payroll dates, payment rates, and other information depending on the laws of a country. 

Doing this in a manual payroll process is complex and risky altogether, especially in situations like fire, theft, or any other unforeseen circumstances. Payroll automation with the use of cloud-based systems can make record-keepings more organized, safe and secure. 

Cloud-based means the ability to store data on an automated remote system that can be accessed from anywhere with an internet connection. This way businesses can stay compliant and be prepared for a possible audit- anytime and anywhere. 

Top Features And Benefits Of An Automated Payroll System

Employee Self Service

The ESS portal within an automated payroll system allows employees to view their paychecks and update any necessary personal information by themselves. This will keep extra tasks off the payroll process and also limit errors from the person handling the payroll. 

Many automated payroll systems with the ESS feature allows employees to do the following, 

  • Edit their own personal information
  • Access, view, and print relevant information or forms
  • Update their direct deposit
  • View benefits and deduction statements

Like so, as employees can instantly update themselves with the necessary information or edit whatever is necessary, the two-way confirmation through emails, requesting for information access, or misinformation handling between employees and payroll professionals can also be reduced greatly. This avoids employees taking time away from the HR department to handle their payroll information as well. 

Easy Payroll Reconciliation Process 

With an automated payroll system, data is verified at every step- this is verifying against the employee data entered and as well as the company standards. This goes a long way in making payroll reconciliation a smooth process. 

In an automated payroll system, it’s also possible to compare current records with previous ones, which helps in easily detecting anomalies and related reconciliation needed. 

Moreover, since an automated payroll performs calculations based on preset algorithms and formulae, the resulting data or calculations are more accurate and reliable – which results in lesser variance during a reconciliation process. 

 Different Reporting Options 

Payroll reports play a great role in employee and management decision-making. Especially, in a large organization, different specific and detailed reports will be necessary for decision-making, and to keep data better structured for future business purposes. 

Some advanced automated payroll systems have features that can generate different types of reports such as, 

  • MIS reports
  • Payroll reconciliation reports
  • PT data reports
  • Customized salary register reports 
  • Reports according to the different statutory acts and amendments 
  • Ad-hoc reports

It’s also possible to schedule and access these reports or use them whenever needed. 

Accurate Time And Attendance Data 

Time and attendance data is one leading cause of payroll anomalies in organizations. A good payroll automation system can be integrated with the time and attendance management system of a company. This will allow the transfer of accurate time, leave, and attendance data seamlessly into the payroll system without the need for employees or payroll specialists to take any manual intervention for processing these data. 

While it saves time without the need for any manual interventions, it also enhances the accuracy of data allowing the payroll process to reconcile more effectively. 

Effective Tax Management

Properly filing taxes in a way it complies with the accepted laws is a big task to do manually – as even the smallest errors can lead to legal fines. This is why most automated payroll systems feature a dedicated tax filing process with automated tax parameters that keeps tax calculations accurate, reliable and free from sensitive errors. 

Maintaining and sending relevant tax data and documentation to state agencies is another important task associated with payroll. With an automated payroll system, the entire tax process from filing documents to sending them where necessary is all done with minimal oversight and manual intervention. 

Customization And Flexible Tools 

Automated payroll systems come with customizable templates and other parameters. This allows payroll elements like professional tax, EPF/ETF contributions, and basic salary details customizable at any point. 

Businesses can also benefit from customizable reports, payslips, and other design templates from an automated payroll system to suit any agile payroll requirements. 

Some automated payroll systems also feature flexible tools that support the scalability of a business. Meaning, as a business is growing or downsizing, the payroll process can be scaled accordingly, through an automated payroll system- without the hustle to change the overall manual payroll process. 

Compliance Management

An automated payroll system will feature a more accurate and law-obedient payroll process. The employment and payroll laws are often subject to changes every now and then, which makes compliance management tricky within a payroll process. 

It can also be exhausting and time-consuming to learn and update a manual payroll system according to frequent law changes. And if a business operates in multiple states or countries, which have different statutory requirements for payroll processing, then compliance management is not easy. 

A trustworthy and reliable automated payroll system will regularly update the system according to active payroll laws and equally keep businesses updated on tax allocation rules, latest tax law changes, and government tax guidelines. 

This way businesses can be confident that their tax compliances are in line with the most recent updates. 

Effective financial planning for employees and hr professionals 

The timely and accurate payouts resulting from an automated payroll system will help both the employee and employer/payroll professional in maintaining good working relationships with no misunderstandings. 

Apart from this, the timely payout allows employees to plan their finances well in advance and employers to plan future budgets and related payroll decisions effectively. 

This also helps HR managers get better insights into the monthly payout cycle promptly, which in turn can support effective decision-making about training and development, recruitment, employee benefits, and so on. 

Direct Deposit 

Direct deposit is one of the best features and benefits of an automated payroll system. Meaning the payroll is deposited directly from the company account to the employee’s account. While this saves a lot of money for businesses on annual supply and processing, it can also avoid any fraudulent activities related to the employee’s salary, eliminates the risk of losing a check in the mail or even facing costly check-tampering fraud. 

In addition, direct deposit makes funds available to employees faster –improving employee satisfaction. This also allows businesses to easily keep a digital record of every transaction for bookkeeping purposes. 

While these are some features and benefits businesses can expect from an automated payroll system – the demand is growing and automated payroll systems are consistently developed to provide global payroll solutions for businesses across different industries. 

The recent pandemic outbreak has put huge stress on businesses of all scales to go remote and focus more on automation and digitalization. Organizations are now gaining a better comprehension of the inevitable impact automation has on business operations and its equal benefits that can enhance the productivity of business operations. 

Businesses looking to shift to an automated payroll system should make sure all the features incorporated within an automated payroll system fits all relevant payroll requirements of their organization and standards, along with reliable legal compliance. A system that fails to meet this will be a mere waste of time and money. 

BSH has secured a leading role in the fast-growing global payroll business. They provide a multi-country, robust and end-to-end automated payroll platform along with a streamlined one-click payroll generation process, which eliminates human errors and delivers a timely, accurate and secure payroll for businesses to meet all their precise payroll requirements.