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Payroll is perhaps the most crucial business function and (no pun intended) it pays to get it right.

Here’s how an automated payroll system can benefit your payroll process and benefit your business.

What Is An Automated Payroll System?

An automated payroll system is a digital tool designed to streamline and manage the payroll process.

It automates various tasks associated with payroll management, such as calculating salaries and reductions, saving time, and minimizing errors.

7 Benefits Of An Automated Payroll System

Automated payroll systems offer numerous benefits for businesses of all sizes. Here are the key benefits:

Greater efficiency

Automated systems streamline the payroll process, significantly reducing the time required to calculate and process payroll. This allows HR and accounting staff to focus on more strategic tasks.

Accuracy

Automated payroll systems minimize the risk of human error in calculations, leading to more accurate and reliable payroll processing.

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Cost savings

By reducing the need for manual data entry and minimizing errors, businesses can save on labor costs and avoid costly payroll mistakes.

Compliance

Automated systems are often updated to reflect the latest tax laws and regulations, helping businesses stay compliant with local, state, federal, and even international requirements.

Data security

These systems offer enhanced security features to protect sensitive employee information from unauthorized access and data breaches.

Reporting and analytics

Automated payroll systems provide comprehensive reporting and analytics capabilities, allowing organizations to generate detailed payroll reports and gain insights into labor costs and workforce trends.

Transparency

Using an automated payroll system can promote transparency and help build trust with employees.

Firstly, the system ensures your employee feels confident their pay will be on time and accurate. These payroll services also allow staff access to their employee benefits and time and attendance information.

Key Features Of Automated Payroll Systems

Automated payroll systems come with a variety of features designed to streamline and enhance the payroll process. Here are some key features:

  1. Automated calculations: Automatically calculates employee wages, taxes, deductions, and benefits based on predefined rules and rates.
  2. Direct deposit: Facilitates direct deposit of employee salaries into their bank accounts, reducing the need for physical checks and saving time.
  3. Compliance management: Keeps the system updated with the latest tax laws and labor regulations to ensure compliance with legal requirements.
  4. Employee self-service portal: Provides employees with access to their payroll information, including pay stubs, tax documents, and leave balances. Employees can update personal information and manage direct deposit details.
  5. Time and attendance tracking: Incorporates or integrates with time-tracking systems to automatically import employee hours worked, reducing the need for manual data entry and ensuring accurate pay.
  6. Customizable payroll reports: Generates detailed payroll reports and analytics, allowing businesses to track payroll expenses, identify trends, and make informed decisions.
  7. Benefits management: Manages employee benefits such as health insurance, retirement plans, and other perks, automatically calculating deductions and contributions.
  8. Leave management: Tracks employee leave balances and accruals, and integrates with payroll to ensure accurate leave payouts.
  9. Multi-state and multi-country support: Supports businesses operating in multiple states or countries, handling different tax laws, currencies, and compliance requirements.
  10. Security and data protection: Implements robust security measures to protect sensitive payroll data from unauthorized access and cyber threats.
  11. Customizable settings: Allows businesses to customize payroll settings to fit their specific needs, such as pay schedules, employee classifications, and unique deductions.
  12. Integration with accounting software: Easily integrates with accounting software, ensuring accurate financial records and simplifying the reconciliation process.
  13. Automated alerts and notifications: Sends automatic reminders and notifications for important payroll tasks, deadlines, and compliance requirements.

How To Choose Payroll Automation System

Choosing software as important as a payroll automation system can be a bit nerve-wracking. Here’s a process to help you make the right decision.

Step one: Identify needs

Before diving into vendor research, take time to understand the specific needs of your stakeholders e.g. payroll team members, leaders, and regular employees.

Questions to help you identify your needs:

  • What are the most common challenges faced by the human resources/payroll/accounting department?
  • How will each stakeholder use the new software?
  • How is the current HR system or process falling short (process mapping can help here)?
  • What are the most frequent payroll-related complaints?
  • How will any new software you purchase fit into your HR tech stack?
  • What are your company’s policies and regulatory requirements regarding data security, supplier diversity, vendor contracts, etc.?
  • How tech-savvy is your team? The software you select shouldn’t be more complex to set up and use than your team can manage.
  • What is your budget?
  • What kind of return on investment (ROI) would you expect to see?

Asking these questions will help you determine what exactly it is you need from your HR software.

Get input from your stakeholders (IT and finance are always useful) and use their feedback to write use cases and build a matrix comparing what’s important to each stakeholder group.

You’ll now be able to lead the conversation with vendors and give them a list of need-to-have and nice-to-have features for each user.

Step two: Research vendors

It’s time to do some research on the payroll software market and familiarize yourself with the leading automated payroll systems for your use case.

Luckily, the web is full of informative websites (like this one) comparing automated payroll software tools to one another. Reading a handful of these is a good way to get an overview of your options.

Take the time to study their websites and take notes of any questions that arise. Are there case studies and reviews that demonstrate the tool's main USPs?

You can also join online communities or tap into your network for recommendations. 

Some vendor-specific questions to ask:

  • Who are the top vendors for your use case?
  • Which are the best-rated in their category?
  • What is each tool’s top-rated feature?
  • Does the tool cater to small and medium-sized businesses or is it more suited for enterprise use?
  • What do customer reviews and testimonials have to say? What are the most commonly reported benefits and drawbacks?
  • What kind of onboarding, training, support, and other resources does the vendor offer?
  • Is robust documentation available?
  • Do the tool’s features meet your needs?
  • Does the software integrate with the HR tools you’re already using?
  • User interface: is it visually appealing?
  • User experience: is it intuitive to navigate and easy to use?
  • Is this tool simple or complex enough for your human resource management needs? 
  • Does it offer the flexibility or customizability you need?
  • Does it offer robust security standards and comply with data privacy regulations and best practices? Is an on-premise option available?
  • Does the pricing meet your budget? Is the pricing clear? Is the price warranted based on the software’s capabilities? Are certain key features only available in more expensive pricing tiers? 
  • Does it offer a demo or free trial?

Step three: Make a shortlist and reach out

Now you’ve identified some likely vendors it’s time to go a bit deeper and book some demo calls.

  1. Send each vendor a request for information (RFI) so you can compare your options point for point
  2. If you want to be really thorough, send each of your shortlisted vendors a request for proposal (RFP). This will include key information about your company, your specific needs, a vendor questionnaire, and any specific proposal submission rules they should follow, such as submission deadlines.
  3. Schedule a meeting with their sales rep and go through your questions.

These calls, which should ideally include demonstrations of the product in action, will also help you get a feel for the vendor and whether you can form a good partnership.

To help compare vendors, use this handy evaluation template.

Step four: Make the business case

With all the above data gathered, it's time to put together your business case. This doesn't have to be a 10-page document, it can be as simple as a one-page memo (because who has time to read 10 pages anyway).

 Decision-makers are looking for answers to the following questions:

  • How much does it cost? 
  • What pain points will the software solve?
  • If we didn’t invest in the software, then what?
  • How long will it take to implement?
  • Why do we need to invest now?
  • What is the ROI of implementing this software?

You may not know the answers to the cost question; however, seeking approval at this stage will set you up for success.

Here's a business case template you can use for payroll automation software

  • Executive Summary: Brief overview of the proposal, key benefits, and conclusions.
  • Current Situation and Problem Statement: Description of the current state and specific challenges or problems being addressed.
  • Proposed Solution and Benefits: Detailed description of the proposed solution and its expected benefits, including a cost-benefit analysis.
  • Implementation Plan and Risk Assessment: Step-by-step implementation strategy, timeframe, and a summary of potential risks with mitigation plans.
  • Conclusion and Recommendations: A concise summary of the business case with final recommendations for decision-makers.

Step 5: Implement and onboard

Make sure stakeholders are aware of your new solution and feel confident using it. 

The main reason companies fail to see ROI on software purchases is failing to follow through on implementation and properly integrate their shiny new tool into day-to-day operations.

Effective change management is crucial. For employees to use your new software, they need to understand how it benefits them (e.g. it saves them time/their PTO requests get approved faster) and know how to use it.

Here are some tips to help with this.

  • Clearly communicate that you’re adopting the new system and what this will mean for employees. Invite employees to come forward with questions.
  • Take advantage of any onboarding and training offered by the vendor and make it mandatory for employees to complete this training within a realistic timeframe.
  • Charge someone with the responsibility of spearheading implementation and being a point of contact for any questions (and feedback) employees might have.
  • Make employees aware of any self-service resources available and make sure they know how to log a support ticket if they run into difficulties.

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Finn Bartram
By Finn Bartram

Finn is an editor at People Managing People. He's passionate about growing organizations where people are empowered to continuously improve and genuinely enjoy coming to work. If not at his desk, you can find him playing sports or enjoying the great outdoors.