10 Benefits of payroll automation for your business
Alex Margolin| Nov 21, 2017
- Taking shortcuts on international payroll compliance increases chances of data errors, expensive fines, legal repercussions, and reputational damage
- Payroll automation (automating employee payments) helps businesses manage, process, and carry out employee payments while reducing human error
- Automating payroll can increase efficiency, deliver accurate pay, keep all records and actions on one accessible platform, protect data, and more
- With the right partner, automating payroll is a seamless process that ensures compliance
A recent study by the American Payroll Association (APA) found that 66% of payroll professionals and 51% of HR practitioners say their organization occasionally cuts corners when it comes to payroll solutions. These short cuts may jeopardize compliance, especially as companies expand into new international markets.
International payroll compliance requires a huge amount of manual effort and increases risks such as data errors, expensive fines, legal repercussions as well as damage to your company’s reputation. With so much at stake, payroll automation—and all the benefits it brings—should be at the top of any international HR to-do list.
What is payroll automation and why should payroll be automated?
Payroll automation is automating employee payments. In automating payroll, companies combine all payroll processes (including management, processing, and employee payments) onto one system that handles payroll activities without human interference.
Many businesses use a payroll software carry out repetitive, time consuming tasks that are prone to human error. This includes: running payroll, calculating pay and benefits, organizing spreadsheets and payroll records into one secure place, issuing payments to employees, and more.
Your payroll team will likely oversee some aspects of payroll, but automating certain activities will save the company time, resources, and decrease errors.
An automated payroll system calculates and distributes employee wages, deductions, and taxes using a software, and reducing manual errors.
Which parts of the payroll process should be automated?
As the goal of payroll automation is to streamline payments and boost efficiency, there are a few tasks employees can release to payroll software:
- Tracking and updating payroll data
- Running payroll
- Garnishment order processing
- Time tracking
- Filing taxes and records
- Calculating overtime, bonuses, raises, tax reduction and so on
An automated payroll system handles all of the above and more.
What are the benefits of payroll automation?
There are several reasons why companies across the globe have switched from manual payroll processes to payroll automation. By automating payroll, companies can:
When it comes to payroll, efficiency is a top priority for many organizations. Using an automated global payroll software drastically reduces the time and resources allocated to processing employee information, while minimizing errors.
And without errors, you eliminate costly over-payments and damaging underpayments. From a global compliance perspective, this efficiency will result in a reduction of legal risks and actions, including judgments, penalties, and potential employee litigation.
An automated payroll system can also be integrated into an organization’s other manual payroll systems. These include HR management tools, ERP systems, and expenses software. This faster and more accurate system ensures your company’s management has access to real-time accurate information, including job and leave absences as well as labor allocations and expenditures.
Deliver accurate pay
Accuracy is important on so many levels and to so many parties. Employees want accurate pay; employers want accurate pay and governments want accurate payroll taxes paid. Automated payroll solution ensures accuracy and keeps all parties happy.
Automating your payroll process means less human interference which equals higher levels of accuracy. Anyone that has managed payroll knows that computing income taxes, deductions and other withholdings can be time-consuming.
Once you consider the fluctuations in tax rates, and new laws being passed at a local, state, and federal level, it’s difficult to ensure the accuracy of your payroll. An automated payroll solution ensures a high level of accuracy, compliance and adherence to government laws through technology such as Robotic Process Automation (RPA).
RPA is a system that mimics human action, in this case, your HR personnel, and is ideal for payroll tasks because they tend to be repetitive, rule-based, and high in volume.
Access cloud-based technology
Cloud-based technology means you’ll always have access to payroll data whenever your HR team needs it. Rather than manually updating and saving excel spreadsheets, an automated system saves your every move on its global payroll cloud interface.
Pouring over spreadsheets, making calculations and filling out government forms every payroll cycle is tough sledding. If that weren’t tedious enough, there are potential legal ramifications if your payroll is delayed or if your calculations are wrong.
Another advantage of cloud-based technology is automated data verification. This process ensures that your payroll data is accurate and in full compliance with the local tax and employment laws.
Based around built-in cost structures for each employee including their salary terms, benefits, tax contributions and more, automated verification will check all data during the payroll cycle. If any data is incomplete, inaccurate or inconsistent, automated verification will flag the discrepancy and investigate it. With this in mind, it’s no surprise that many payroll managers choose cloud-based technology to gather and aggregate payroll data.
Protect their data
Unlike an old-fashioned filing cabinet, an automated payroll workflow offers the latest in advanced security. That’s everything from one-time passwords (OTPs) to two-factor authentication, to encryption, to keep your payroll information, confidential.
Encryption is one of the fundamental features you need to secure your payroll data. This includes when the data is at rest, backups, and even when it is being transmitted between systems.
With a smart payroll system, all data is transferred through secure, encrypted communication channels. Payroll data is typically stored on encrypted networks like Amazon’s S3 storage for ultimate security and peace of mind.
Manual payroll systems have little to no security features. Even worse, systems like these often rely on unsecured email chains for the transfer of bank details and confidential payroll data. Hard copies of your payroll information aren’t secure either and erasing or hiding printed information in a data breach is more difficult than changing passwords on your payroll automation software.
Easily report taxes
While businesses have to keep accurate records to ensure correct payroll cycles, they also need to fulfil obligations to the IRS. For example, employers need to report all federal income tax, Social Security, Medicare tax liabilities and unemployment tax to the IRS every year or quarter.
And at the state level, businesses also have to report state income tax withholding and state unemployment tax according to their state’s policy. With so many filings to make, payroll automation systems handle the essential aspects of the payroll workflow, while keeping you compliant with federal and state laws.
Grow the business
Global expansion and the move into new markets offer a variety of complex challenges. One of the ways for your company to grow, is outsourcing your global payroll. Doing that will help you to automate the payroll process. Without one, your company could be at risk of costly and timely errors, whilst enduring an unnecessary drain on resources. Errors when it comes to payroll often lead to expensive and harmful legal and regulatory risks.
A global automated payroll system will free up your time and resources so that you can focus on achieving your business goals, including global expansion.
We’ve touched on compliance above and its importance, but staying up to date on each new rule or regulation isn’t easy. Then, businesses must navigate taxes, which has its own challenges, one of which is complying to IRS regulations and tax laws. Payroll automation handles complicated processes such as withholding federal income from an employee’s wages, so employers have peace of mind that the result is accurate.
Operate with a smaller payroll team
With an automated payroll process, you won’t need as many employees to handle ongoing, repetitive tasks. Not only will the business save money, but the finance department may run more smoothly as well. A smaller team means employees will have an easier time communicating with each other. Additionally, with operations kept in-house, team members can easily track process and avoid delays from other service providers.
Finesse their financial planning
An automated payroll system means that funds are automatically transferred into the payroll account and employees receive notifications as soon as their paycheck lands in their bank account. When money is deposited in the right amount each cycle, both employers and employees have an easier time with financial planning.
Keep a virtual wallet
The most robust payroll automation solutions come with virtual wallets for various currencies. As a business grows and expands their operations, payroll may need to pay employees in several countries. Instead of manually needing carryout payroll for each currency, payroll automation lets companies make payments to their entire global workforce in a single click.
Payroll automation handles tasks quickly and accurately. Although manual payroll processes may work with a small company at the beginning, growing the business also means adopting solutions that ease operational challenges.
Here is a comparison between automated and manual payroll:
Effort Accuracy Scaling Speed Security Payroll automation Requires little human effort Companies can generate up-to-date reports, few chances of inaccuracy Can grow with the company from day one Much faster than manual approaches Data is encrypted and password-protected Manual Individuals must run payroll by hand More prone human error Can work well for a small company Process takes more time Less secure, cannot be encrypted, leave a papertrail
Now that we’ve outlined the benefits of payroll automation, there’s a caveat; not all payroll automation solutions are the same. Each company may have unique needs, but there are general questions employers can ask to find their perfect fit.
What to look for in an automated payroll solution
Once you have your CFO and HR experts in the same room, you’ll need to start brainstorming about what you want from your payroll system. First on the board will be questions like:
“Does this new system work with our current HR software?”
“Can this software adapt with our company’s expansion?”
“Does this system include all the features we need?”
Speaking of features, your list of wants should include:
- PTO tracking
Customize your paid and unpaid time-off policies. Prevent miscommunication, missed shifts, and costly payroll errors with a PTO tracker.
- Time and attendance tracking
Track and manage employee time for payroll, invoicing, and scheduling. Benefit from accurate timesheets and project tracking.
Get easy income statements to balance sheets submission tools. Track what’s coming in and what’s going out with a finance statements and tailored reports to keep your accountants and CFO in the loop.
- Federal, state, and local tax filing
Make sure your new payroll system can keep up and file any federal, state, or local laws and taxes that may apply to how your employees are paid.
- 24/7 support
No matter the time or place, make sure you have a helping hand if you need one.
How to automate your global payroll
So, you’ve made the decision to move from a manual payroll system to an automated one. Here you can find a step-by-step guide to get your company on the path to automating its payroll.
Step 1: Find the right payroll provider for you
Researching different payroll providers should be your first port of call. There are various automated payroll systems out there but not all software will work for your business. Depending on the size, nature (does it operate and hire internationally?) and features you need, some systems will outweigh others. For instance, do you need federal, state, and local tax filing capabilities, tax penalty protection, around-the-clock customer service or all three?
Step 2: Input your system information
It goes without saying that for your new payroll automation to work effectively, it needs to be fed the correct data. Although tedious, this stage of the payroll process is perhaps the most important. Get it right and you’ll help prevent mistakes when your next payroll cycle is run.
Step 3: Gather the relevant documentation
You’ll need important documentation before you can get started, such as W-4 forms. You should also take the time to notify your employees of the change.
Step 4: Provide training for your employees
Most automated payroll systems these days will be easy for your HR team to pick up. But depending on the software, you may have to provide additional training or resources for your employees. Either way, employees should be given time to familiarize themselves with the new payroll automation software.
Step 5: Automate your payroll
Once you’re ready to push “Go” on your new payroll automation, make sure to integrate your existing payroll and HR tools into your new system.
The Papaya Global Advantage
Multinational companies have to comply with ever-changing payroll regulations, making managing a global workforce extremely challenging. Failure to adhere to these regulations can result in sizeable consequences.
Using a global automated payroll system ensures those risks are negated, allowing your company to focus on achieving your global expansion goals, free from timely and costly errors. Even better, the implementation of such a system also offers your company a wealth of benefits that can aid in your company’s global expansion. Schedule a demo with Papaya Global today and take your first steps towards automation heaven.
Why should I switch to automated payroll?
Automating payroll helps you run your business more efficiently due to its speed and accuracy. Payroll automation also removes the risks for errors, and ensures your employees are paid correctly and your business follows the necessary legal obligations.
How long does it take to switch from a manual payroll system to an automated system?
It depends on the size of your company. That’s because the transition from manual to an automated process involves manually collecting and inputting data into your new software. Therefore, the more employees you have, the more raw data you’ll need to input. Although initially time-consuming, the benefit of switching to an automated system will be felt in the long run.
Once the data has been fed into the new system, someone from your payroll team will need to go over it to check for errors. Finally, when your payroll software is up and running, encourage your employees to interact with it. You could even arrange tutorials or training for your employees on how to navigate the software and use its features.
Does an automated payroll system handle contractor’s invoices?
It depends. Some automated payroll software enables you to pay independent contractors by generating contractor invoices. Other platforms allow contractors to upload their invoices to the system too.
Can a payroll automation system work with a global workforce?
Yes. In fact, payroll automation is best suited to large multinational companies. Payroll automation makes staying legally compliant and following international employment laws easier.
What size organizations use payroll automation systems?
Businesses of all sizes can benefit from payroll automation. Even in small to medium-sized enterprises, payroll cycles can be time-consuming and a burden on company resources. Automating the process saves all businesses time and money.
How does GDPR in Europe affect data protection processes for businesses?
Among the rules that GDPR put into place for businesses to follow were the rights and freedoms granted to the data subject. These include the subject’s right to consent to data collection, the right of a user to request deletion of their data and the right of a user to access their data. Fulfilling these rights meant that many companies had to put in place new systems for data collection in order to come into compliance.
How much time can I save switching to payroll automation?
That depends on the size of your company. In terms of finances, the APA estimates that automation reduces payroll processing costs by as much as 80%. Whatever the size of your company, what rings true is that switching from manual payroll to an automated system will save you time and money, while also eliminating the risk of expensive errors.
Can I automate state and federal tax filing?
Yes. As well as federal and state tax filing, you can also automate local tax filings for your company.
Can I also automate my HR processes?
Yes. One of the most important features you should look for in a payroll automation system is that it communicates with your Human Resources Information System (HRIS). That way, employee information like wages, hours, account numbers, and withholdings can all be stored in one place.