What is payroll automation?

No matter how big or small the organization, there’s no way around payroll. Calculating wages and salaries and paying employees for their work is a process every business needs to undertake. But since payroll is so complex and time-consuming, it’s definitely not everyone’s favorite task.

While there’s no way to avoid payroll, businesses can significantly reduce the complexity and workload behind it by automating their processes. Let’s take a look at what payroll automation is, how it works, and how businesses can benefit from putting their payroll operations on autopilot.

Payroll automation is the process of eliminating manual tasks from the payroll process. This is achieved through the use of payroll automation software and modern technology which reduce the need for human intervention in payroll to a minimum.

An automated payroll system can carry out processes like calculating gross and net pay, determining the amount of payroll taxes to be withheld, gathering the data needed for payroll, issuing payments to employees, creating payroll records, and more.

The fact alone that payroll automation software takes over mind-numbing manual tasks like entering employee hours and overtime is a great selling point to switch to automated payroll processes.

But there are even more advantages that make investing into an automated payroll software a no-brainer. They include efficiency gains, increased productivity, and enhanced profitability. 

Payroll automation reduces errors

Automating payroll is a great way to eliminate payroll errors. Especially when working with spreadsheets and important information that is distributed across many different files and systems, a small mistake can result in many hours of extra work—not to mention the stress and headache it causes.

Automated payroll systems prevent mistakes from happening and allow businesses to change and update their data in one centralized database. Depending on the software, employees will even be able to update their personal information themselves via self-service functions.

Payroll automation enhances compliance

Apart from preventing operational errors which often result in countless hours being wasted on correcting said errors, automating payroll also helps businesses enhance their payroll compliance. That’s because payroll errors not only take a lot of time to correct, but they also pose significant compliance risks.

If payroll calculations are incorrect, this means that the amount of payroll taxes withheld from employee earnings is not correct. As a result, the business’s statutory payroll reporting will not be accurate, which can lead to compliance fines imposed by the competent statutory authorities.

Payroll automation saves time (and money)

The use of software makes payroll calculations and processes faster than ever before. What’s more, automated payroll systems free up time for HR and payroll managers to focus on more important tasks such as employee happiness, talent recruitment, onboarding, and creating a welcoming and positive workplace experience.

This increased process efficiency and productivity reduces operating costs. Plus, it can free up as much as three to five extra hours of work to be spent on different tasks.

Payroll automation increases security

Employee payroll data is confidential information that should be kept safe and protected from unauthorized access. Printed spreadsheets and physical copies of payment details and other sensitive information pose a security risk that can easily be avoided by digitized, automated payroll processes.

Payroll software typically uses encryption to ensure confidential data is protected at all times. It also helps track important payroll processes and store tax-relevant details in a compliant way so that the organization is well-prepared for potential audits at any given moment.

Payroll automation makes payroll easier to handle

Managing payroll is incredibly complex, and there are numerous payroll functions that need to be taken care of. Automating large parts of the payroll process reduces the amount of tasks that have to be handled individually, which makes managing payroll a lot easier on an overall level.

Thanks to payroll automation, organizations can calculate payroll taxes, export data, and generate reports on workforce costs, employee productivity, and more in an efficient way. Automation also makes data management in payroll a lot easier since it enhances the transparency and accessibility of the data.

Payroll automation enables businesses to scale

Automating payroll processes is a key prerequisite for scaling a business’s payroll operations. Manual processes are not suitable for sustaining business growth in the long term.

As a business grows, the payroll process needs to be adjusted to accommodate for increasing volumes of payroll data and growing headcount. Automating payroll processes is the only way for businesses to build a payroll system that is designed to support business growth.

Payroll automation helps businesses prepare for the future

Payroll automation is an important component of digital transformation which, in turn, is crucial for businesses to prepare for the future of payroll. An automated payroll is more resilient and efficient than manual processes, which is a key requirement in the digital era.

In a fast-paced business environment that is characterized by increasingly high expectations surrounding efficiency, productivity, and profitability, payroll transformation is what it takes to future-proof operations and respond to ever-increasing demands.

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Payroll automation holds a range of benefits. Businesses of any size can harness the benefits of automating payroll with the right payroll software. HR and payroll automation software is a key component of automating payroll operations. That’s why choosing the right payroll software is the first step towards putting payroll on autopilot.

There are many different aspects to consider when selecting a software solution for payroll (e.g. user-friendliness, scalability, security, and more), but in order to achieve the highest level of automation, there are two aspects which are absolutely crucial.

• Payroll software integrations: The more workforce management tools can be integrated with the payroll software, the more processes linked to payroll can be streamlined and automated.

• Software capabilities and features: If the objective is to automate as many payroll processes as possible, the chosen software should come with many different capabilities and features.

After deciding on a software solution, the organization can proceed to feed their data into the system, train employees on how to use the new system, and implement its new automated payroll processes.

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An automated payroll system can significantly increase efficiency, productivity, and revenue, which is why businesses should aim for automating as many parts of payroll processing as possible. Payroll processing tasks which can be automated include:

• Data input collection,

• Payroll calculations,

• Payroll results validation,

• Payroll data transfers,

• Payslip creation,

• Payment processing, and

• Payroll reporting.

This means that a payroll automation system should at least include:

• Automated time tracking,

• Payroll data automation capabilities,

• Synchronized PTO tracking,

• Automated payment capabilities,

• Payroll integrations,

• Employee self-service payroll,

• Tax filing capabilities, and

• Automated error-detection for payroll.

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Although there are many tasks in payroll that can be automated, an automated payroll system is not entirely self-sufficient. In other words, there is always a certain degree of human intervention needed for keeping an eye on processes and systems.

In fact, there are four key areas of payroll where technology cannot replace the role of a payroll manager. These include:

• Handling exceptions in payroll,

• Carrying out the final checks in payroll,

• Providing advice surrounding payroll-related topics, and

• Leveraging the strategic potential of payroll.

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