How to go paperless in payroll and HR

Many businesses are literally swimming in paperwork. And even those who aren’t will find that there are some departments and business functions that are traditionally very paper-heavy. Those include payroll, HR, and accounting.

Especially in payroll and HR, there are a myriad of documents, reports, and records that need to be kept, and businesses can gain considerable advantage from digitizing their HR and payroll departments.

But what does going paperless in payroll and HR actually entail? What are the benefits of paperless HR software and electronic payroll systems? And how do teams make HR and payroll processes paperless?

When businesses go paperless, they replace their paper-based processes with digital ones and digitize their documents to store them either on the computer or in the cloud. Making HR and payroll paperless hence includes: 

• Digitizing payroll and employee information and records,

• Moving to digital payment methods, such as direct deposit or digital wallets,

• Replacing paper time sheets with online time-tracking tools,

• Distributing electronic payslips,

• Making information and records accessible online,

• Implementing employee self-service functions for updating information and forwarding queries to the HR and payroll department, and

• Using an online PTO management system.

There are two options for businesses to make their HR and payroll processes paperless. They can either use payroll software or outsource payroll to an external service provider who works with an electronic payroll system.

Businesses often wonder if moving to an electronic payroll and HR system is worth all the time and effort. The answer to this question is a definite “yes”, since businesses that go paperless can leverage many advantages, including: 

• Improved document organization: When stored digitally, payroll and HR files are easily accessible and always in the place where they belong. Also, digital file and record keeping ensures whoever accesses the document gets the most up-to-date version.

• Greater operational efficiency: Having all things payroll and HR digitized increases operational efficiency. For instance, issuing payments to employees is a lot faster when bank details and other payment information is saved in the payroll system—instead of having to go through paper records manually to enter the employee’s payment details.

• Reduced risk of losing documents: Storing payroll records and HR documents digitally is safer than keeping paper records on site. Paper records can go missing—for instance, when people don’t return files after consulting them. Regular back-ups prevent document loss due to a system crash or any other incident that may result in files being deleted.

• Enhanced payroll data security: Paper records containing sensitive employee information might fall into the wrong hands. Storing all HR and payroll data in the cloud prevents unauthorized access. Plus, digital payroll systems can track who has accessed a certain file and when.

• Shortened processing times: How long it takes to process payroll largely depends on how much of the process is digital and/or automated. Making payroll paperless also means digitizing employee payments, which significantly reduces processing times.

• Cost savings: Going paperless means saving money by cutting down paper and printing costs.

• Minimized risk of errors: Paper-based processes are prone to error. Since payroll errors can cost businesses a lot of money, moving to a paperless payroll system is a good way to reduce the error frequency in payroll and maximize compliance.

• Enhanced compliance: Reporting and paying payroll taxes accurately and on time is an important part of payroll compliance. When information on payroll taxes and deductions is stored in a digital payroll system, the risk of reporting errors is significantly lower compared to when tax information needs to be collected by going through various paper sheets.

• Greater employee satisfaction: Fewer errors and faster processes ultimately lead to a greater level of employee satisfaction, which can have a positive impact on employee morale and productivity. Being able to access payroll information online at any given moment is highly convenient.

• Remote accessibility: In the era of remote work, going paperless is a must for businesses. This includes payroll and HR and all other business functions. Managing a remote payroll is impossible when processes are based on paper files.

• Good for the environment: Last but not least, going paperless in payroll and HR means doing something good for the environment, since it saves paper and printing resources and helps reduce the business’s carbon footprint.

Moving away from paper records and processes requires careful planning and preparation. Here is how to get there step by step:

• Analyzing the current status quo: Putting an end to paper culture requires businesses to first analyze where and to what extent they rely on paper-based processes only then can they start replacing the existing systems with paperless payroll processes.

• Defining a project scope: Depending on the current status quo, internal capacities and the overall willingness for change, it might not be feasible to take all of payroll and HR paperless. In this case, a necessary intermediary step would be to decide which elements should be digitized first.

• Choosing the right software (or payroll provider): Moving to paperless payroll and HR requires the use of the right software and tools—or contracting a service provider who has the necessary digital set-up. HR and payroll software is designed to automate and digitize processes so that paper trails aren’t needed anymore.

• Creating a timeline for the transition: Digitizing payroll and HR is a huge step and, similar to other major changes in an organization, needs to be managed carefully. Since these changes don’t happen overnight, it’s important to set a timeline for the implementation of the new processes.

• Training employees: Imposing changes on employees without properly communicating their advantages will likely result in employees rejecting the move towards a paperless payroll and HR system. Therefore, it’s important to devise a plan for providing upfront information and proper training.

• Implementing and adjusting the paperless processes: The final step is the implementation and adjustment phase. This phase is where the business makes the switch to paperless payroll and HR. Once things are up and running, processes and systems should be monitored closely to check if any adjustments are needed.

Mapping out a clear process for implementing an electronic payroll and HR system is the first step on the way to a paperless office. Businesses should keep in mind the following tips and recommendations:

• Cloud-based is more secure: Instead of storing files locally on computers or company servers, companies should move all processes and records in HR and payroll to the cloud.

• Due diligence when choosing HR and payroll software: Businesses that want to make their HR and payroll paperless need a reliable software that comes with all the necessary capabilities and functionalities. Organizations should do their due diligence when choosing a payroll software and really find the product that best matches their needs in terms of compliance support, automation, and more.

• Upfront compliance checks: Many business leaders wonder if there are any legal restrictions regarding paperless payroll and HR. Since payroll regulations for keeping personnel records vary from one country to the next, it’s best to double-check local regulations before making any changes. For instance, it could be necessary to provide paper payslips as an alternative or get the employees’ written consent for sending out electronic payslips.

• Gradual transition: Slow, gradual change processes generally have better chances of success than rushed ones. Having the old paper-based system run in tandem with the new electronic one in the beginning allows for a smooth transition and leaves time for necessary adjustments.