Managing payroll is a crucial aspect of any business, especially for the HR team, but it’s a task that can be both time-consuming and error-prone when done manually. Right from entering the wages of employees into the system to applying the deduction in the final reconciliation, there are a lot of tasks and processes that require human attention.
This is the reason automation is the most reliable approach when managing substantial volumes of payroll data. In this blog, we will explore the payroll process, its challenges, and how automation can simplify it.
What is the Payroll Process?
Before delving into the benefits of automation, let’s first understand what the payroll process entails:
This step involves gathering essential employee information such as hours worked, overtime, deductions, and other compensation-related data.
Once you have all the necessary data, you need to calculate gross wages and account for hourly rates, salaried pay, bonuses, and other elements.
This step includes withholding taxes, Social Security contributions, retirement fund deductions, and other benefits and deductions to which employees are entitled.
This is where you distribute employees’ net pay through various methods like direct deposit, checks, or other payment options.
Ensuring compliance with tax regulations and providing employees with pay stubs and tax documents are crucial parts of the process.
Performing these tasks manually is time-consuming, leading to errors like missed tax deductions and employee data. Also, with manual payroll management, the risk of data breaches also increased. With these challenges in the payroll process, it is time to put automation in the front to accelerate it.
Benefits of Using Payroll Automation for Business Process
Automated payroll processing involves using computerized systems to manage and execute the payroll process. Typically, it is seamlessly integrated with the company’s Enterprise Resource Planning (ERP) system.
This automated process in the HR automation not only handles recording employee wage information, computing deductions, and generating reports for tax authorities but also streamlines the management of employee benefits. It also contributes to improved customer relationship management and smoother accounting procedures within the organization. Some of the payroll automation benefits are-
Easier Wage Calculation
You no longer need to deal with piles of manual paperwork each month to kickstart the payroll process. Think about the hours dedicated to collecting data, crunching payment numbers, managing deductions, distributing checks, and possibly sharing data with third-party vendors.
With payroll automation, you not only save time but also reduce the effort needed to organize and execute the payroll cycle. The system takes care of most tasks, from calculations to automatic payment transfers. Your main role is to ensure that the entered payroll data is accurate.
Improved Time Management
Traditional payroll systems involve manual calculations of hourly wages and time clock data, which can be an uphill task. Automation simplifies the process by effortlessly integrating time clock data into the payroll system, ensuring timely and accurate payments. This automated method eliminates the possibility of errors associated with manual interventions.
Faster Tax Management
The process of tax calculation is crucial but often tedious and prone to errors. It entails computing a variety of taxes, such as state, federal, medicare, and social security, each governed by distinct formulas and inclusion rules.
With the use of an automated system, preconfigured tax rate codes take charge of gathering pertinent data and executing the calculations. This ensures precision and punctuality in employee payouts and guarantees accurate tax reporting to the authorities.
High volume manual effort is required to perform data extraction, input data into the system, and process it further for payroll. Using an automation system reduces the manual labor requirement, which reduces the operational cost of payroll management in HR automation.
Offer Robust Data Security
Manual payroll systems lack robust security features. Moreover, these systems often rely on unsecured email communications for sharing bank details and sensitive payroll data. Physical copies of payroll information also present security vulnerabilities.
In contrast to traditional filing cabinets, an automated payroll workflow employs cutting-edge security measures. This encompasses various security layers, such as one-time passwords (OTPs), two-factor authentication, and encryption, ensuring the confidentiality of your payroll information.
A modern payroll system transmits all data through secure, encrypted channels. Typically, payroll information is securely stored on networks with encryption, offering the utmost security and peace of mind.