10 Advantages of Automated Payroll System for Companies and Employees

Payroll automation will save your company both time and money, as well as reduce security and error risks. Check out the list of advantages that automated payroll can deliver to a company and its employees.

Anja Simic
Written by Anja Simic
September 28, 2021
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Automation has been used to make human lives easier for centuries. Ever since the industrial revolution, humans have gotten rid of repetitive and tedious tasks by teaching machines how to do them. In today’s age, we have come a long way in all aspects of automation in various fields, from cleaning our homes to processing payroll data in a company.

Automation is useful in business and automating the payroll process provides various benefits to companies using it. These advantages are not exclusively reaped by the companies either. Employees, too, can greatly benefit from automated payroll solutions.

1. Automation provides faster payroll calculation

Manual payroll calculation takes an immense amount of time. A company needs people looking over various excel spreadsheets, comparing information from different sources, and calculating everything “by hand”.

With an automated payroll system, all a human resource employee needs to do is to enter all of the information once, and the system will take it from there. The final result will be the correctly calculated payroll for each employee.

2. Payroll automation saves money

Companies that employ some form of automated payroll software do not need to have a lot of HR and financial personnel. This will greatly reduce the company’s operating costs and improve the bottom line each year.

Automating payroll processing will be especially beneficial for companies that do not have an in-house solution for payroll management and rely on outsourcing payroll services. These companies will not only reap the benefits of automated payroll in-house but also save money they would usually spend paying someone else to pay their employees.

3. Tracking time is less stressful

Tracking working hours for employees via manual processes is a time-consuming and stressful task for the human resources department. The HR employees need to pay attention to the time clock and hourly wages of all employees in a company. Companies that automate payroll will greatly reduce the stress their human resources department is experiencing during each pay period.

Automated payroll will also benefit employees as they will receive a simpler way of timekeeping that will make tracking their working hours much easier. Additionally, they will have a payslip that perfectly corresponds to their working hours and hourly wages, each pay period.

4. Automated payroll = fewer chances of human error

Automation reduces the chance that an overworked HR employee will make a mistake with an employee’s wage calculation or that a piece of employee data will get improperly entered. While these types of mistakes tend not to happen very often, they still happen from time to time. And once they do happen, they take a lot of time to correct and cause issues for both the employee and the company through various reimbursements and legal vicissitudes.

Introducing automated payroll will reduce, if not completely eliminate, the chances of someone missing an Excel box, or improperly entering information.

5. Payroll automation makes payroll tax calculation easier

Calculating taxes is a dreaded task for most people across the globe. And if there was a way for them to streamline the process, they would take it in a second. The situation is similar for companies determining payroll taxes and withholding tax amounts for their employees’ income.

This is another advantage of having an automated payroll system. These types of payroll software solutions already have tax rates and tax rules embedded in their code. This means that they make wage deductions such as employment tax and employee benefits automatically.

6. Automating payroll allows faster payroll processing

Automation introduces self-services for employees looking to collect their paycheck. They can enter their own information into the HR software provided by the company and, once the data has been checked and approved by the company, the employee will receive their paycheck automatically, each pay period.

This greatly reduces the time required for each pay stub to be processed and paid into the employee’s account, no matter which type of payment the employee uses.

7. Better security

Another important benefit of automated payroll processing is the company’s security. By removing the human factor, the chances of information leaks are reduced.

Additionally, keeping hard copies of payroll information is not secure. By automating the payroll process, a company can ensure that all of the sensitive information is encrypted and protected by a wall of passwords. This way no one but the right people can access it.

8. Automation provides an easier way of record-keeping

Automated payroll systems make tax filing and keeping tax records much easier since all the information is in one place, and there are no hard copies that could be misplaced or damaged.

Automation also makes it much easier to create other kinds of reports as well as gather statistical data for research and improvement purposes.

9. Easier to make alterations and corrections

While payroll automation will reduce the chances of human error, there is no guarantee that it will prevent it entirely. Thus, the company will be required to make changes in the system every once in a while. Additionally, changes might have to be entered regardless of human error, things connected to employee information, or payroll information.

These might include, but are not limited to:

  • Increases in wage due to promotions
  • Names of recently married employees who changed their last name
  • Updating IRS forms in accordance with the latest policies and regulations
  • Changing bank accounts for employees receiving their patrol via direct deposit
  • Changing addresses or places of residence
  • Adding new employees or removing old ones from the system

10. It allows the company to focus on its growth

Finally, removing distractions and the time spent on manually processing paychecks and employee onboarding will allow a company to dedicate more time and energy to its development. According to the American Payroll Association, automating the payroll process can reduce a company's costs by 80%. The effort and resources spent on hiring and maintaining an HR department large enough to manually process payments can be invested into other fields such as product research, customer satisfaction, or marketing. This is especially important for small businesses managing payroll for their employees. These businesses might not have the resources to invest in all the fields and could greatly benefit from saving and reinvesting some funds.

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