payroll automation

Payroll is a company’s biggest line item, its single biggest expense. It also goes to the very heart of the relationship between a company and its employees. Workers rely on receiving their correct pay on time every two weeks or every month. When errors prevent that from happening, a deep distrust could enter the relationship.

At an extreme level, it could cause workers to lose motivation and eventually leave the company. At that point, the company has to spend resources recruiting, onboarding, and training a new worker.

Errors in payroll can also cause a great deal of other unexpected expenses. Some may trigger tax penalties from local authorities. Others could be smaller in scale but cost significant work hours to find the cause of the error and set procedures to ensure it never happens again. An error that isn’t discovered immediately could cost even more work hours ensuring that all financial reports are correct—otherwise the company is once again exposed to tax penalties for false tax reports.

In short, payroll must be perfect every single time. There is no room for error. And yet, it is impossible to eliminate all error from a manual process that requires people to input data again and again from multiple sources and possibly in multiple languages. It is simply unrealistic to expect humans to avoid all manner of human error.

What is a small business to do?

The future is payroll automation

Fortunately, technology has provided the perfect solution in the form of automation. In fact, payroll may be the perfect model to demonstrate the benefits of automation. The tasks most suited for automation are repetitive in nature and take up a great deal of worker time and effort. Payroll, a finance task that is often handled by human resources teams at mid-size and larger companies because of concerns for worker data privacy, fits both criteria perfectly.

There is tremendous added value in the consistency and accuracy of automation. The software “bots” charged with the task of doing payroll are usually part of a process called robotic process automation (RPA), which sits on the lower end of the intelligent automation spectrum. 

RPA, in contrast to artificial intelligence (which sits at the high end), can do nothing more than imitate human action, not thought. It can be set to run a series of actions. So long as the initial inputs are correct, it will do it again and again, perfectly.

That means that payroll can be done quickly and completely without any threat of human error, every time. That alone is enough reason for smaller businesses and startups to start moving toward payroll automation immediately. 

But the added advantage is the positive effect on the workers who are relieved of the duty. They will be freed from an unwanted task so they can spend more time bringing additional value to the company.

Setting up an automated payroll system

A company that has never jumped into the deep end of automation will be surprised at how easy it is to get started.

With RPA programs, much of the work is already done. Most of the software is capable of running alongside the company’s pre-existing system, which means that implementation is relatively simple, especially in contrast to a complete system overhaul.

Here are five steps to a successful implementation:

1. Digitize all payroll

At a time when people fear that nearly all of the modern workforce is going to be taken over by computers, it’s stunning to note how many companies are still using pen and paper to calculate their monthly payroll expenditures.

There is no reason to avoid using automated software for payroll management, with many companies like Papaya Global and Gusto offering solutions that can bring your payroll service into the current century in one shot. 

It’s a vital step in the automation process because the bots that will do the job need digital records to work with. You can’t automate if you are committed to a pen-and-paper solution.

2. Bring all payroll together

Whether your company is a startup with fewer than a dozen employees or an established business with workers in different countries, aggregating all of the information into one place on a single platform is not only good for automation, it’s also a great way to start collecting business intelligence data from your payroll and planning for the future.

Since payroll will always be the biggest expense item in virtually any company, finding ways to be more efficient will be increasingly essential to growth and competition. Missing out on the biggest source of useful data would be a tragic missed opportunity.

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3. Choose an automation system

With relatively low-cost RPA solutions, such as IUPath or BluePrism, it’s hard to go wrong with an automation solution. However, it is worthwhile to look at certain factors to make sure that they align with your automation goals. If you are trying to grow your workforce quickly in the coming period, make sure it can scale as necessary.

If you plan to use payroll automation as a test model to see if automation can work in other departments, such as finance or human resources, make sure the software company can handle those areas as well. Automation is moving quickly. You want to make sure you can use your experience with payroll to your full advantage.

4. Prepare your workforce

Many workers continue to see automation as a threat that is not only going to push them out of their jobs, but also permanently take them out of the workforce with no way to earn a livelihood. Good managers prepare the workers for automation by presenting the benefits for everyone involved. When it comes to automating payroll, workers should recognize that the time they save will go toward more fulfilling and creative tasks that robots can never do.

The future of work is both more digital and more human. Workers fear the digital half of the equation—so it is essential that they are fully aware of the human side as well. Instead of feeling threatened by losing their jobs, they can feel empowered and inspired to be doing things of greater value that could result in higher pay.

5. Stay alert to external changes

While simple payroll compliance is one of the biggest benefits of digitizing and automating payroll, there is still a need for human involvement in the process, especially when it comes to tracking changes in legal matters.

Compliance is an ongoing process, not a one-time fix, and failing to stay up-to-date on changes in the law could end up costing money in fines.

In short, even the best automated system requires human involvement at various levels. The bots may be able to deliver high-quality service in speeds five to 15 times faster than a human, but the system needs oversight. It would be a mistake to program it and forget it, especially when the stakes are so high with payroll. 

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Alec Sears

Alec Sears is a small-business expert who loves to write about the latest trends in PR, marketing, and SEO. He now lives in the Silicon Slopes of Utah, where he loves trail-running with his dog and snowboarding with his wife.