The Benefits of Payroll Automation for Small Businesses

September 22, 2023
The Benefits of Payroll Automation for Small Businesses

For a business to thrive, it needs thriving people—and paychecks play a big part. But few employees grasp how much time and energy goes into managing payroll.

Manual payroll can require an entire finance team to run. It's much more than seeing that people get properly paid on time. From calculating potential overtime wages to accounting for any paid time off taken and accrued to calculating payroll tax withholdings, manual data entry can take up time and energy. It can also leave room for human errors. There are possible 401(k) deductions and employee benefits to manage, not to mention required local, state and federal payroll tax filing requirements. Compliance is also a key concern for manual payroll processing, as the penalties for non-compliance can be costly.

Payroll automation can be a great way for a small business to save time and money. It streamlines paying employees, helps with payroll compliance and can free up personnel to handle other tasks. Basically, an automated payroll service can help simplify payroll processing for a business owner.

Payroll automation involves using software, usually through an online service platform, to help perform your businesses' payroll processing functions. Once you choose a payroll system, you input or transfer your company's payroll records—data on employees, wages, deductions, payroll tax information and so on. Then, for each pay period, payroll managers enter payroll related information. A comprehensive, automated payroll system will process from there. It can also provide the data that the business and its employees may need for tax season.

In this article, we’ll explain more about automated payroll processing systems and the benefits of payroll automation.

Benefits of Payroll Automation

Automating payroll with a payroll processing software can bring benefits to a company beyond the performance of a complicated and endlessly repetitive task. Let’s look at a few benefits an automated payroll processing system may provide.

Time and cost savings

Using a payroll processing service provider does carry an upfront cost. But businesses often find ’it to be more cost effective than hiring and paying staffers to do the same work. When businesses automate payroll processing, they may free up the HR team’s time so they can focus on other HR issues, train employees and, in general, focus on people instead of numbers.

Improved accuracy

Payroll calculations don't require advanced mathematics. But then you add in regular rate of pay requirements, paid time off, deductions such as for 401(k)s and federal income tax withholdings, and you have a lot of calculations. Payroll processing automation software can help organize, process and record all those calculations—with less worry of how to calculate them accurately, typos or transposed numbers.

Increased employee satisfaction

Most automated payroll processing systems have an employee self-service component. An employee can check to see the hours they worked, their pay rates for those hours and their deductions. Easy access, complete clarity and pay stubs may mean less disruption in employees' lives. And less upset calls to the finance office.

Payroll tax compliance

For small businesses, profit margins can be slim. The last thing you want is a penalty because of a mistake in tax filing. It's not easy to stay in compliance when tax rates and rules change from year to year. Payroll taxes should be carefully tracked and managed. Some automation payroll processing solutions can help manage tax forms, tax deductions, tax withholdings and related responsibilities. At the same time, they can generate payroll reports for employers to review related tax information and the businesses' own tax payments.

Data security and analysis

Automated payroll processing systems also provide a business with the means to store data securely and easily. This means no more file cabinets full of papers that take up a lot of space and can be misplaced or damaged by fire and water.

Payroll data is priceless for your institution. It can give administrators insight into key information like how many employees are working overtime. At a glance, you can see where business funds are being spent.

Best Practices for Successful Payroll Processing Automation

Though it’s becoming standard practice, it can still be daunting for a small business to switch to automated payroll processing. If a small business decides to switch to payroll processing automation, here are a few things to consider.

Selecting the right automation tools

If you’re only employing part-time staff, it may not be relevant to use automation software. The first step in outsourcing your payroll processes is always to look at what your company needs and how different services can meet them.

Developing a solid implementation plan

The move from manual to automated processing must be smooth, so paychecks don’t miss a beat. Make sure whoever is processing payroll takes their time training and learning the ins and outs of the new program. It’s sometimes good to ramp up services, starting with simple payroll calculations and then incorporating paycheck distribution.

Communication and training

One of the strengths of software like this is that employees and managers can have the information they need at their fingertips. But they need to know how to access it. Make sure the software or payroll processing platform you choose has a reputation for good training and maintaining communication with their clients. Payroll managers will require time to become experts on the new system and processes. Employees will need training on the new system and access to manuals and instructions.

Regular evaluation and improvement

Choose an automated system that updates its software regularly to keep up with changing wage and hour and tax laws and reviews those changes with you. It also helps if the provider keeps its platform up to date technologically and with changes in payroll process and practices.

In a similar vein, it's a sound practice to review the performance of your automated service regularly and compare it to the competition for pricing and service. More than likely, you expect your business to grow. It only makes sense to get assurances that your payroll processing automation system can scale up with your company.

The Future of Payroll Processing Automation

This idea of automating payroll processing isn’t new. Accounting software has been around since the 1980s, helping to speed up the payroll process. But what could the future of payroll processing services look like for employers and employees?

Artificial Intelligence may be able to help with payroll processing services by helping with analyzing data and providing insights.

The industry standard for payroll processing services now includes things like mobile timesheets, even for small businesses. What matters most is that all of these services can complement each other. HR and payroll processing services be collaborative to give administrative teams insight into their business.

TriNet offers an automated payroll processing solution and HR services to help businesses and their employees.

This communication is for informational purposes only, is not legal, tax or accounting advice, and is not an offer to sell, buy or procure insurance.

This article may contain hyperlinks to websites operated by parties other than TriNet. Such hyperlinks are provided for reference only. TriNet does not control such web sites and is not responsible for their content. Inclusion of such hyperlinks on TriNet.com does not necessarily imply any endorsement of the material on such websites or association with their operators.

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