Whether you're shopping around for a new payroll management tool, looking to dive deeper on how automation works, or make a solid business case for switching providers...
Below, we'll delve into the benefits of payroll automation, how and when to migrate as well as some of the types of software that's out there.
The basics: what is an automated payroll system?
In simple terms, automated payroll software is a system designed to streamline and simplify the process of managing payroll - helping with things like calculations, reporting and paying employee salaries.
Generally speaking, the alternatives to using automation software are...
Managing payroll manually in-house: (very) small business may keep their payroll in-house and manage the entire process themselves - often using a lot of spreadsheets. Whilst this may be manageable when you have just a handful of employees, the risk of manual errors and the sheer volume of administrative tasks means that this is rarely viable once a business starts to grow.
Outsourcing payroll to a traditional bureau (or accountant): some businesses choose to hand over their payroll process to a specialised provider. If you have limited resources and a low headcount, traditional outsourcing will relieve some of the burden... although you'll still be required to regularly send over documents and do double-checks/entries.
Benefits of an automated payroll system: making the business case
Reduce payroll errors
Tired of wasting time double-checking for human errors? By automating payroll calculations (e.g. wages, tax deductions etc) you'll be able to eliminate the risk of errors and save yourself the unnecessary round of checks.
Spend less time running payroll
Automating laborious payroll tasks is going to measurably reduce the amount of time you need to spend each pay cycle. Using software to handle manual tasks like data entry and calculation will free up time to spend on more impactful, strategic work.
Teams using Pento, for example, tend to cut time spent on payroll by around 80%.
Most payroll automation software will ensure you adhere to the latest legislation and submit reports to HMRC on time.
Your software should automatically update things like employee tax codes and student loans as changes happen, as well as assist you with end of tax year duties and reporting benefits.
Simplify tax filing
Payroll software can generate tax reports and submit tax payments to HMRC electronically, streamlining the year-end reporting process.
Build a scalable process
As businesses grow, payroll systems can easily scale to accommodate additional employees, making it a versatile solution for companies of varying sizes.
Switching to an automated payroll solution will usually save money in the long term, since you'll be reducing administrative overheads, cutting time spent on manual payroll tasks and often spending less than you would on a traditional outsourced bureau with all of the hidden costs that come with them.
How to automate payroll: here's how to works
Step 1: Audit your current process
First off, you'll want to take stock of where you're at right now.
Ask yourself what the most pressing pain points are in your current payroll process and what you might want to solve for.
Is compliance a priority? Do you need to save time and find software thats easy to use?
Here are some of the signs that you might need to change providers:
- Payroll eats up too much time
- You need more data/insights
- You're unable to make last minute changes
- You're looking to introduce enhanced benefits that will change your contract with your current provider
- You find yourself frequently double-checking for errors
Step 2: Choose your provider
The best software depend on your specific needs (we'll cover the various types of solutions that are out there further down👇).
Be warned: not all payroll software providers will offer the same level of support and flexibility.
You'll want to consider:
- How much internal expertise you already have within your Payroll/HR/Finance Team and how much support you'll be needing.
- Whether or not your team will be growing in the near future - more starters/leavers each month means you'll want to find a scalable solution that doesn't need too much admin from your end.
- The complexity of your payroll - take stock of things like pension schemes, payroll benefits, bonuses and working patterns. The more complex your requirements, the more flexible the solution you go for needs to be.
- What your current tech stack looks like. If you're using HR or accounting software, you might want to consider whether or not your payroll provider integrates with them to avoid having to duplicate information cross multiple platforms.
Step 3: Get your data ready
Before starting with your new provider, you'll need to prepare your data for migration.
This may include employee information, salary details, tax codes, and historical payroll records.
To do this, you'll have to clean and validate your data to make sure its accurate before you can copy it over to your new software.
Step 4: Migrate your data to new system
Next, you'll have to work with your new software provider to migrate your data from your old system to the new one.
Migrating might take some manual data entry - depending on the provider you choose to use.
Once you've imported your data, you'll need to verify that it's been accurately transferred.
Step 5: Don't forget to test
Before you can go ahead and start using a new automated system, you'll want to perform thorough testing to make sure that calculations, deductions, and other payroll processes are accurate and compliant.
You can always ask your new provider to perform a parallel run to check the right data is being pulled through.
What features does an automated payroll solution usually have?
Employee data management
Automated payroll software will capture and store employee information - like names, addresses, National Insurance numbers, tax codes, bank details etc.
You'll be able to automate manual calculations like employee salaries, tax deductions, National Insurance contributions and pension contributions. ion updates and submit EPS and FPS'.
Switching to an automated solution will help you keep up with legislative changes and manage end of tax year responsibilities. Most platform should let you auto-update employee tax codes and student loans, automate legislation.
Payroll journal reporting
Software like Pento will enable you to customise your payroll journals or automatically report to your preferred accounting software.
Automated payments to employees and HMRC
Automating payments will mean everyone gets paid at the same time, every pay day. You should also be able to pay HMRC (Pento pays right before the deadline so you can maintain cash-flow and keep your accounting clean).
Although this will vary depending on your provider, modern solutions like Pento will integrate with your current HR software or accounting system so you don't have to copy data across.
Moving to an automated platform will allow you to generate a variety of payroll reports, such as payslips, P60s, and P45s, for both employees and HMRC reporting.
Types of payroll automation software: what are your options?
Legacy enterprise resource planning (ERPs)
ERPs are your large, well-known platforms. These payroll management services will offer you some dashboards to interact with and will automate repetitive tasks.
However, they're not very tech heavy and function like a cross between software and services - there'll still be humans working behind the scenes.
This means that your experience will be more like a traditional outsourced service than a modern tech solution, except with some basic software to upload data to.
Some bigger HR platforms are now branching out, adding a basic payroll solution.
Whilst this may make life easier for very small teams and be more tech-based than ERPs, these solutions are usually pretty rigid and lacking in support since payroll is just an add-on.
This means you'll need to have some payroll expertise already in the team.
Modern payroll software
Modern payroll tools are built to automate manual payroll tasks and give you more control over your process.
Instead of just weaving basic software into the traditional process, modern payroll software gives you full control over your process so you can make changes up until the last minute.
Whilst most payroll software will be able to automate most of the process, here at Pento, we ensure you get real, human support from a CIPP accredited payroll specialist whenever you need it.
These platforms are generally considered the most scalable payroll technology - since your process will be mostly automated, more changes each month won't have to mean more manual processes for you.
How to know which solution is best for you?
When it comes to choosing a payroll management solution, start by defining what problems you're looking to solve...
How big is your team? Are you expecting it to change over time?
If you're planning to grow your team anytime soon, you'll need to choose a solution that will scale alongside your businesses as the intricacy of your payroll steadily increases.
Most modern solutions will be able to handle small-medium sized teams but if you're headcount is 500-1,000+ you'll probably need a solution like Pento that has been designed to manage any level of complexity.
How complex is your payroll already? Do you need to support different types of worker?
You'll want to break down how many variables and moving parts there are - if your payroll is fairly complex, you're going to need a solution that is flexible enough to support you.
How complex are your employee benefits?
What are your compliance requirements?
Do you need to run payroll weekly/bi-weekly?
How may different working patterns/worker types do you need to support?
How much support are you likely to need?
An automated solution will do most of the heavy lifting and reduce repetitive tasks, but there will inevitably be times when you run into issues that require outside help.
If you have a fair amount of payroll experience/expertise within your team already (e.g. a dedicated payroll manager) then the degree of support offered won't make a huge difference.
But if you're lacking in internal expertise, you might want to make support a priority. How available will your provider be? How qualified are their support team?
Do you really need to time your switch perfectly?
Whilst a lot of businesses tend to wait until the end of the tax year to switch providers, there isn't anything stopping you from getting it into your 2024 plans.
Waiting might help reduce the amount of data-migration needed and make for a slightly cleaner switch over - but the amount of manual work needed will usually depend on your provider and how much they do for you.
Here are some other factors that you might want to consider:
The date of your current provider's renewal: If your contract is nearing its end and you can't afford to be left without any software, this could be a natural time to switch over to anew solution.
Compliance changes: Are there any significant changes in legislation on the horizon? if you're about to be affected by changes in laws and regulations, you might need to make the transition before they come into effect.
Seasonality: Depending on your industry, your HR or payroll team might naturally have quieter periods with less payroll changes. Choosing one of these quieter periods will to minimise disruptions in payroll processing.
Pento - the automation software with expert support
Pento is the payroll software designed to help HR/People, Finance and Payroll Teams run stress-free payroll without any errors by automating repetitive manual tasks, removing payroll deadlines, and offering expert payroll guidance.
- Intuitive platform with a simple, easy-to-use interface
- Automate manual payroll processes and calculations
- Edit pay until payday, no deadlines or extra fees
- Take the stress out of payroll compliance
- Get support from CIPP experts
- Integrate with your current tech stack
- Support any worker type of working pattern in the UK 🇬🇧
Payroll automation FAQ
What are the advantages of payroll automation?
Automating payroll saves time by handling repetitive calculations and payments, makes HMRC-compliance easier and significantly reduces the risk of errors.
What are the features of automated payroll?
Whilst different automated payroll management tools will have different features, most will have features such as data management, automated calculations and payments and reporting.
What kind of payroll platform is best for my business?
At a high level, small businesses with straightforward payroll and no plans to scale could use a modern payroll tool, an all-in-one HRIS system or a legacy ERP... businesses with complex requirements and larger/growing headcount will likely require a scalable, modern software solution like Pento to minimise manual legwork and get expert support.