In today’s fast-paced business world, SMEs are constantly trying to establish a brand for themselves and keep up with the fierce competition in many innovative ways. As businesses that are still in the early stages of growth, ensuring that every functional area remains compliant, efficient, and productive while sticking to limited resources, especially finances, can be extremely challenging.
One of the leading reasons many small and emerging businesses fail within the first five years of entering the market is the inability to find a healthy balance between these requirements and resources.
While all organizational functions require compliance with regulatory frameworks, payroll stands out as the key area where compliance is crucial and foundational to the overall success and integrity of the business. This is because payroll involves direct interactions with employees’ livelihoods, as well as sensitive dealings with tax authorities and various government regulations.
A traditional payroll system has many drawbacks, especially in terms of inefficiencies and error risk. It also requires a significant amount of manual effort and a dedicated team of professionals.
Thankfully, the development of technology has now made it possible to automate or digitalise almost all payroll tasks and utilize their many benefits.
This article will list five key reasons why SMEs need to switch to automated payroll systems, key features to look for, and best practices for implementation.
Accurate and Timely Payments
One of the major drawbacks of a manual payroll system is its time-consuming nature. It demands tedious processes, repetitive tasks, and precision in reporting, making it challenging to maintain efficiency.
Especially in the Middle East, where timely payment for employees is regulated by systems like WPS (Wage Protection System) in UAE and similar systems in other countries, delays or inefficiencies in payroll systems can lead to incompliance and employee dissatisfaction.
In worse cases, it can tarnish the image of the company, leading to bad publicity. Moreover, it can also result in major legal disputes and financial penalties.
An automated payroll system can ensure both accuracy and efficiency in a company’s payroll process.
Adhering to Tax Regulations
Payroll involves meticulous calculations and withholding of taxes, including corporate tax, social security, and other state or local taxes. Switching to an automated payroll system ensures that all payroll reporting in terms of tax regulations is accurate, compliant, and timely reported to relevant authorities.
It avoids the need to maintain a specialized legal payroll team and the related costs associated with sourcing expertise. An effective automated payroll system can also ensure your payroll is programmed to adapt to the changing regulatory frameworks through instant updates.
All these protect SMEs from non-compliance, which can lead to severe penalties from tax authorities, including fines and interest on unpaid taxes, which can be detrimental to the business’s financial health.
Data Security
Payroll management is a task that involves a lot of sensitive and personal data. Automation helps maintain the privacy and confidentiality of these data without the risk of breach.
The automated payroll system uses advanced encryption, which helps protect sensitive data such as social security numbers, bank details, and salary information.
It also helps audit every action taken within the system, like who accessed the system, what changes were made, and when certain actions or tasks were processed. This information is very important when identifying and responding to unauthorized access or suspicious activities.
In addition, during emergencies like fire or theft, many payroll automation features have disaster recovery plans. It allows companies and payroll departments to recover data quickly and efficiently in the event of data loss, hardware failure, natural disasters, or cyber-attacks.
Reporting And Analytics
Payroll data is used in many decision-making processes. Automating the payroll function facilitates comprehensive reporting and analytics capabilities, which can be used within this process.
It allows SMEs to spend less time manually analyzing reports or having the need for a special team to support this task. It makes decisions more accurate and effective as they are based on real-time accurate data.
In today’s competitive business landscape, making spontaneous and important decisions in a timely manner is key to ensuring market sustainability, especially for SMEs in their growth phases.
Time is money in business. An automated payroll system helps businesses save time and make efficient decisions, allowing them to utilize opportunities to their fullest potential while keeping payroll records compliant with the local regulatory system.
Transparency
As a small and medium company, maintaining a strong culture is important to prevent turnovers and the related costs that come with them. Payroll automation enhances transparency regarding compensation and wages, making employees feel appreciated, valued, and respected.
An automated payroll system allows employees to view their profiles and related data through authorisation or personal access and raise any questions if needed. It also helps record, maintain, and report different components related to payroll, like bonuses, rewards, overtime, allowances, etc.
All these ensure that employees are well-informed about how their payroll is processed and give them credibility that the company pays them in accordance with the contract terms.
Transforming Payroll Processes: The Path to Automation
Before switching to an automated payroll system, a small or medium enterprise should conduct an assessment of the company’s payroll needs, nature, and tasks performed within the function. This will simplify expectations regarding the time of automation necessary for the company.
Most importantly, this assessment should address regulatory compliances relevant to the country or place of operation.
Once the payroll department has a thorough idea of their expectations from this transformation to automation, the next step is to find a reliable payroll solution provider like BSH, who can personalize the most effective system that meets all the demands of your company’s payroll function.
Finally, before implementing or transforming a manual payroll process to digitization, it is necessary to have proper training for employees who will be handling the system. This ensures that automation reaps the maximum benefits expected.
One of the main reasons payroll automation fails in SMEs is that employees concerned with the transformation are not given prior training on how to use the system to deliver expected results.
