Historically, payroll management has been a manual process. Many organizations still use paper-based manual payroll systems, which come with a host of challenges: sensitive information, like employees' addresses and Social Security numbers, isn't secure. Manual payroll processing is rife with errors, and puts a strain on HR and finance teams that is only compounded by paychecks needing to be disbursed in a timely manner.
Payroll Automation Technology
Payroll automation technology is a game-changer that vastly mitigates these risks and and streamlines the payroll process. Here's how payroll software solutions work, and why they're more efficient than manual payroll processing.
The Need for Automation in Payroll
Manual payroll processing used to be the only option for payroll management within organizations of all sizes. Now that payroll automation technology is more accessible, many of the risks and problems that come with legacy payroll systems can be mitigated or eliminated entirely.
Manual payroll systems are incredibly inefficient. Since multiple procedures are involved, numerous employees must handle different aspects of the payroll process. Payroll management can be incredibly time-consuming, particularly for larger organizations. Fast-growing companies are also especially prone to problems with consistency in payroll reporting and administration since calculations and procedures will change over time.
Addressing Compliance and Efficiency
Payroll legislation is becoming more complex in the 2020s. Remote jobs and freelancing are more common today. While this is great for a wider talent pool, it can also open up payroll compliance risks depending on the locations of the employee and employer. Legacy systems that assume employees live in the same state where they work cannot keep up with this.
As federal agencies like the Department of Labor crackdown on worker misclassification and the IRS issues guidelines for wage and hour requirements to qualify for tax credits, manual payroll systems cannot keep up with these changes.
Payroll technologies that are regularly updated to keep up with federal, state, and local payroll laws help mitigate compliance risks and ensure that payroll deductions and employer contributions are accurate. Automation also tracks wages, hours, activities, and other criteria that ensure organizations are eligible for lucrative tax credits, freeing up human staff to fact-check the software's findings rather than manually managing each activity log and payroll cycle.
Benefits of Automating Payroll Deductions
Payroll automation technology is more accurate than manual systems in calculating payroll deductions. In manual systems, employee paperwork such as W-4 forms and state tax department equivalents may be lost or incorrectly processed, which could lead to errors. These documents also contain sensitive identity information that can be easily breached and stolen. Handling thousands of such documents for a large staff is time-consuming and prone to errors.
With the right payroll software solution, employees can upload and change their documents at their own convenience, which greatly reduces the likelihood of processing errors. Today's payroll technologies offer self-service options for employees, making it easier to report changes such as a new address or name changes brought on by marriage or other events that could affect their payroll deductions. This frees up HR and finance departments from manually processing these changes in time for the next paycheck.
How Payroll Automation Technology Works
Online payroll technologies integrate numerous functions together. They include timekeeping systems, accounting, and benefits administration. Depending on the solution and level of service selected, they can also include employee onboarding, handbooks, self-study employee training, and other materials that employees need to do their jobs.
Automated payroll deductions utilize cloud technology that is synced to the latest withholding tables provided by the IRS and state tax departments in order to calculate tax payments for each employee's paycheck.
Based on the type of job, pay rate, pay frequency, benefits, and other criteria, the automated payroll system makes the appropriate deductions unless overridden by the HR department or changes the employee is allowed to make (such as filing a new W-4 for federal income tax withholding, or selecting new benefits they are eligible for).
Choosing the Right Payroll Solution
When choosing payroll software, consider scalability, integration with other solutions, and level of support. Starting with a small business payroll platform can cause disruptions if a switch is required for scalability. Complex industries, such as software, require enhanced wage and hour tracking per project. Contacting a support team should be easy..
Streamlining the payroll process has never been easier. By swapping out inefficient legacy systems for payroll automation technology, you will have more accurate payroll calculations, more efficient departments, and simplified compliance and eligibility for tax benefits.
Contact Workforce PayHub today to learn more about how we can enhance your payroll system.
