The pandemic has brought about a sea change in employee expectations. It has accelerated the adoption of remote work models, flexible work timings, and supplementary benefits to attract and retain top talent.
The HR payroll function must also continuously adapt to these trends. In this context, automation software lends the necessary agility and efficiency to payroll processing.
Why Is Payroll Management System Important?
A payroll management system enables enterprises to streamline the processes defining the employee experience (EX) around compensation. It includes setting appropriate salary structures, determining variable components, ensuring accurate and timely payouts, and enabling effortless compliance.
Payroll Automation Software Checklist
How to Choose Automated Payroll System
Automation of Payroll System
Before greenlighting payroll automation initiatives, enterprises must review their AS-IS payroll process. Payroll automation benefits include tweaking payroll workflows to align better with industry best practices.
Moreover, it also enables HR teams to identify the most valuable payroll use cases for POC implementations.
As per the 2019 Gartner global labour market survey, compensation remains the top attribute influencing employer selection. About 47.1% of the nearly 30,000 survey respondents hailed it as the chief component of the employer value proposition (EVP).
The payroll system can be automated using a standalone app or a full-fledged HR management system (HRMS) that offers end-to-end functionalities along with payroll.
Payroll Automation Benefits
Automated payroll processing offers many benefits that contribute to a happier workforce.
1. Accurate Salary Calculations
Ensuring error-free salary calculations are not only one of the top priorities of an excellent EX but also one of the most significant payroll automation benefits. Manual data entry using physical documents or spreadsheets is vulnerable to human errors.
Automation eliminates the need for data entry and recalculations. Preset validations ensure that the data entering the payroll system is accurate and in the correct format. Computations for all salary components and taxes are automated as per payroll policies preconfigured in the system.
Automatic currency exchange calculations enable consistent figures across geographies.
2. On-time Payroll Processing
Payroll processing requires tight coordination among teams like HR, accounting, compliance, and payments. Automation enables streamlined workflows for all approvals related to payroll processing.
HR personnel need not waste time on ad-hoc calls and emails for following up with various stakeholders. Automatic reminder notifications and digital escalation mechanisms ensure payroll processing gets completed on scheduled deadlines.
It also saves time on data entry as all relevant data gets pulled from other enterprise systems through integration or from the modules present in the HR software as per pre-scheduled workflows.
3. Payroll Data Security
Salary data is sensitive and confidential. You can configure role-based or designation-based access rules to keep this data secure. You can also configure action-based rules that provide read-only or editing access to specific groups of employees.
Time-stamped audit trails are created automatically for every record modification done in the payroll software. Security features such as SSL encryption, automatic daily backups, pre-scheduled antivirus, and malware scans ensure that the payroll information is stored and transmitted securely.
4. Self-Service Options
Online self-service options help employees with-
- Investment declarations – Employees can upload supporting documents and initiate digital approval workflows.
- Employee Loans – Employees can raise loan requests per your organisation’s loan policies. The software ensures auto-deduction of EMIs from the salary.
- Expense reimbursements – Employees can upload digital copies of invoices. The automation tool will enable the settlement of valid claims within timelines per company policy.
- Salary document downloads – Employees can easily access payslips, tax forms, and PF-related documents without contacting the HR teams.
Self-service options save time and boost productivity for employees and payroll managers.
5. Statutory Compliance
Per the 2021 EY Global payroll survey results, 32% of organisations consider inaccurate employee source data as the topmost compliance challenge. A close 30% regard the biggest challenge to be staying aligned with regulatory compliance changes.
Automation helps alleviate both these problems. Secure data integrations and preset data validations ensure only accurate data gets imported into the automated payroll system.
Also, you can easily configure regulatory compliance parameters such as tax rates, deduction component ceilings, employee classifications, and more. These changes reflect in payroll calculations instantaneously.
6. Seamless Integration with Enterprise Software
Payroll processing requires timely data from several enterprise systems for accurate calculations. This data includes
- HR Policy data – Leave, overtime, benefits, and other HR policies
- Attendance data – Biometric attendance, shifts, timesheets, and leave data
- Employee Data – Designation, salary structure, appraisal data, variable salary components
- Recruitment data – New-hire CTC structures, provident fund details
- Accounting data – Tax calculation rates and rules, employee bank details
Cloud-based payroll tools offer secure APIs for integration with enterprise systems. You can easily configure batch or real-time integrations per the calculation use case.
You can also opt for an HR management platform that handles end-to-end HR processes to enable seamless data flow.
7. Automatic Payroll Tax Calculations
Salaries are subject to a deduction of tax deducted at source (TDS) as per income tax regulations. The calculation of this tax deduction is a multi-step process. Employees must declare their income sources, investments, and other tax-deductible components, such as insurance premiums and tuition fees.
The HR team must validate the supporting documents and calculate tax deductions per regulatory ceilings to arrive at the TDS amounts for each employee. Salaries are also subject to a monthly professional tax.
Payroll software helps collate the necessary data documents through employee self-service portals and other enterprise systems. TDS calculations are automated, leaving no room for human error.
8. Simplified Tax Filing for Employees
Employees need salary data for filing their annual tax returns. It includes TDS certificates and tax forms (Form 16) detailing all payout components. It also includes monthly payslips and provident fund contribution records.
If payroll is processed using software, all these documents can be digitally signed and emailed automatically to employees before the tax filing deadlines. These can also be made available on employee self-service portals for easy downloads.
Some payroll applications go one step further and integrate seamlessly with tax return filing software for single-click tax filings.
9. Insightful Reporting
Automated payroll software provides industry-standard reports and dashboards for tracking key business figures such as YTD employee costs, department-wise cost breakups, upcoming payout liabilities, processing time per pay cycle, and others.
It also offers reports required per statutory compliance detailing TDS deductions, provident fund contributions, benefits payments, and gratuity payments. Advanced payroll analytics also help understand CTC trends over time, optimise variable payout amounts and decide on annual increments.
10. Superior Employee Support
Since HR team members do not need to spend time on repetitive, manual tasks, they can focus on interacting with employees and providing top-quality support.
Self-service portals enable employees to search through FAQs and the HR knowledgebase for quick reference. If required, they can also raise a service request. The software auto-assigns the request to the appropriate HR representative based on the nature of the request.
In-built escalation mechanisms and automatic notifications ensure swift resolutions and a delightful EX.
11. Centralised Payroll Record Keeping
Manual payroll processing often results in multiple erroneous versions of payroll data stored in separate devices. Payroll software collates all payroll-related data into a centralised database. This database serves as the single source of truth across the organisation.
Duplicate or outdated versions of this data are not present in any other enterprise system. Every payroll record creation is time-stamped and user-stamped. This payroll database integrates with accounting and compliance-related systems enabling a seamless flow of current data.
12. Cost Savings
Payroll automation benefits include enhancing cost savings by
- Increasing productivity – Eliminating process bottlenecks and manual data entry tasks and empowering employees with easy self-service options boosts HR productivity. It leads to a direct saving of man-hours, thus saving wage costs.
- Eliminating calculation errors – Accurate payroll calculation reduces the chances of regulatory penalties and back wages.
- Reducing overhead costs – Reduce ancillary expenses such as printers, copiers, calculators, cabinets for storing physical documents, etc..
- Helping retain talent – Hassle-free accurate salary processing motivates employees. Also, flexible payroll processes accommodating remote employees and gig workers help attract the best to the talent pool.
13. Audit-Ready Payroll Records
The most common payroll errors uncovered in audits are related to-
- Improper classification of employees – Automation systems maintain accurate and current employee master data classifying each employee as a part-time, full-time, intern, or contractor.
- Wrong calculation of overtime wages – You can configure overtime HR policies and payments using the payroll software backend. The system automatically calculates the number of hours worked and applies these rules to compute overtime wages.
- Incorrect tax rates – Payroll apps fetch tax rates through seamless integration with enterprise accounting systems. Any change in the tax rates can be updated easily.
- Delayed payroll – Manual payroll calculations can be time-consuming and cause payout delays. Advanced payroll applications offer intelligent algorithms for 1-click error scanning before releasing the payouts. These algorithms compare the payout figures with the previous month’s figures and highlight wide deviations.
14. Reduced Paper Clutter
Payroll processing is a document-intensive function. It involves processing salary slips, expense invoices, tax forms, and statutory documents at scale.
Your HR team can easily upload the digital versions of these documents without storing physical copies except for regulatory purposes.
Digital documents enable quicker workflows, better indexing, easy search, and online collaboration. They also save physical storage space and reduces overhead costs such as paper, printers, copiers, and shredding machines. It also eliminates the danger of documents getting lost or spoilt.
According to the latest report by Technavio, the HR payroll software market will increase by $2.9 billion at a healthy CAGR of 8.57% from 2021 through 2026.
Payroll is a core HR function suited to automation as a fixed set of policies and regulations govern its calculations. It also has an immediate positive impact on employee experience. With the proper cloud-based payroll application, you can streamline and automate your payroll processes end-to-end in less than a month.