What Is Payroll Automation And Why Should You Implement It Now?

Team Pento
7 min

Introduction

Over three-quarters of large companies in the UK pay their staff late or incorrectly. This is partly because 52% of businesses still use spreadsheets for payroll. Meanwhile, one out of every three UK businesses require employees to complete paper timesheets.

Fast-forward to pandemic-struck 2021, close to 70% of employees are now working remotely. Nearly half of them are committing to increased work hours, translating into more admin time. Ultimately, this leads to more HR mistakes.

Payroll automation comes at a time where companies dealing with the COVID fallout are doing everything they can to cut costs and eliminate expensive errors. Outdated payroll methods are simply no longer enough for companies to keep up in a fast-changing landscape, especially as we enter uncharted post-COVID territory. 

This article explores the benefits of automating payroll systems and why migrating from manual to software-powered processes is critical for businesses looking to succeed in 2021.

What is payroll automation?

To understand payroll automation, we must first consider it in contrast to manual payroll systems. Payment automation, in this sense, refers to the new tools that are now available to us. Not simply to take care of calculations but to leverage the entire payroll process, from beginning to end, without the need for extensive human intervention.

  • The manual payroll system requires that the payroll process be administered exclusively by hand, without using any digital systems to do the work. Often consisting of mounds of spreadsheets, manual payroll generally requires that data is collected and entered manually.
  • The automated payroll system, by contrast, uses computer-driven software to manage the payroll process, automatically executing tasks. From timekeeping to calculating tax and statutory deductions, payroll automation is geared towards eliminating errors, saving time, and simplifying the overall payroll operation.

Now, automation doesn’t necessarily mean “new”. Some forms of automation have been around for decades. Excel functions, for example, allow users to automate calculations, without the need to physically enter complex formulas every time they are needed. 

These automated systems have been designed to reduce and even eliminate human error, boost accuracy, speed up the process, keep up with the needs of growing companies and produce a more simple, streamlined overall procedure.

Manual vs automated payroll

While both manual and automated payroll techniques share many similarities and pursue the same objectives, there are some fundamental differences between the two that one must consider.


Accuracy

Manual Payroll :The Scope for potential human mistakes is large.

Automated Payroll: Less human intervention means fewer human-caused errors.

Time

Manual Payroll: Relies on each step being managed manually and with HR physically present.

Automated Payroll: The ability to automate almost every step in the process dramatically reduces time taken to complete payroll.

Effort

Manual Payroll: Managing payroll by hand is tedious, complex and can only be taken care of by people skilled in payroll.

Automated Payroll: With almost every task automated, people can redirect their effort to other duties that require attention.

Cost

Manual Payroll: Payroll mistakes cost money and payroll error expenses often cannot be recouped. Also, overtime can be expensive. 

Automated Payroll: While start-up costs may be higher, eliminated errors and lower overheads mean bigger long-term savings.

Consistency

Manual Payroll: New staff and human error can lead to massive payroll inconsistencies due to the dynamic nature of human beings.

Automated Payroll: The computerised nature of automation means these systems leave no room for inconsistencies.  


While maintaining a manual payroll infrastructure does offer some advantages to specific companies, the benefits of making use of payroll automation begins to become clearer the more we consider the needs of modern UK business.

These benefits become apparent when considered in the context of a world where more and more people are working remotely. Ultimately, business needs are evolving in response to the impact of COVID-19 on payroll.

The benefits of payroll automation

Reducing errors

Payroll automation can significantly reduce the severe effect that costly human errors have on a business. From incorrect entries to tax hiccups, people are prone to make a mistake eventually, no matter how meticulous and detail-oriented they are.

Source: Unsplash 

Payroll automation not only takes advantage of precise software to avoid these mistakes. Essentially, it also eliminates the time needed to identify any errors and resolve them. This means better employee-HR relations and less conflict arising from payslip errors.

Improved efficiency

Automation cuts out often overcomplicated, time-consuming manual data input, thus leading to better efficiency. Let’s assume that a change needs to be made in the payroll process. Automated systems allow you to make the change without the need to manually correct Excel files and all other affected documents.

Automated payroll tools like Pento allow users to make changes quickly, even as late as on payday. It also lets you manage the entire process without a single spreadsheet. Let’s take credit card company Pleo for one –  they save 80% of their time previously dedicated to payroll, and automate mundane tasks like pension enrollment, HMRC reporting, and payslip generation.

Reduced workload

Legacy tools require a high degree of human collaboration and interaction. This means more meetings, more emails, and more time attending to mundane, time-consuming tasks. These unnecessarily labour-intensive workloads can take a heavy toll on HR teams, consuming valuable time that would be better spent focusing on the company's bottom line or growth objectives.

Payroll automation systems administer these tasks with speed and accuracy. By taking advantage of this processing power, HR can rest assured that their duties are being managed effectively. While the time freed up can be better spent delivering on more important goals.

Designed for today’s needs

In a digital era where connectivity and remote working are the buzzwords of the day, payroll has been slow to adapt to the evolving needs of a modern workforce. Technologies such as cloud-based software are quickly replacing conventional legacy tools, prone to security and constraint risks. 

Traditional payroll methods and tools were initially developed as multi-faceted business solutions, incorporating other modules and roles. Unlike, modern payroll systems like Pento which are designed with one thing in mind – payroll. Pento's automation capabilities are not compromised by resources being diverted to other functions. They are entirely dedicated to powering a system created to focus exclusively on payroll and nothing else.  

Better Flexibility

Automated payroll systems don't take bank holidays or get sick. They are available 24/7 as a dedicated resource. Updates take seconds (in comparison to the months it takes to train new manual payroll employees), access is universal, and turnaround times are near-instant.

This improved flexibility allows companies to use this added processing power to take advantage of the resources freed up by payroll automation. In turn, effectively rendering human-constrained deadlines moot.

Scalability

One of the biggest hindrances to sustainable success in business is the inability of one element to grow with an organisation. Time and again, companies find themselves struggling to keep up with the payroll demands of new employees and bigger teams.

Source: Unsplash 

Automated payroll systems like Pento are scalable. This means that as your company grows, you won't be faced with the cost or stress of overhauling your HR department, searching for qualified new staff or dealing with maxed-out legacy tools.

Why you should be looking into payroll automation

  • It speeds up the process – For Primer, it takes as little as 10 minutes to run payroll every month with Pento. 
  • Easier Updates – Automation removes the tedious communication and critical last-minute change exchanges with your accountant or payroll contractors.
  • Reduces Errors – Automated payroll software solutions are proven error-busters that remove the burden on your HR team of getting every detail right.
  • It’s Scalable – Manual or outsourced payroll systems can cause big headaches for companies on a growth trajectory. Nobody wants to redesign their entire payroll infrastructure when new people join the company, and contractors have a knack for tagging on extra costs as the employee pool grows.
  • Easy to Adapt To – With all of the tedious tasks now taken care of, training can take as little as one day, meaning time and money saved. 
  • Getting Rid of Human-Imposed Deadlines – Any HR team will tell you that deadlines are the bane of smooth payroll. From employees forgetting to submit expense claims to external contractors expecting data 29 days before payday. The speed afforded by automation makes for a less stressful process.
  • You Operate in a Highly-Regulated Market – The UK has one of the most heavily regulated labour frameworks globally, which means that accuracy is paramount. Automation allows companies to adhere to tax and labour requirements without worrying that they're forgetting something.

Summary

Payroll automation is quickly becoming a must-have for businesses, both big and small. The benefits afforded by automation are undeniable, and as we move further into a new era of remote working, digital connectivity and more advanced employee needs, antiquated legacy tools are doing more harm than good. 

Payroll automation is a proven time-saver, allowing HR teams to get more done in minutes instead of days or weeks. Traditional and manual payroll systems require extensive communications exchanges and can stop the process dead in its tracks when errors and problems pop up. Payroll automation is easy to implement, often taking a short amount of time to install and become familiar with. 

Pento's automated, cloud-based software solutions are suitable for remote teams, all the while allowing businesses to manage their traditional in-house payroll needs for those working from (intending to return to) the office. This hybrid design approach makes Pento the ideal solution for companies looking for a flexible, efficient, cost-saving system that allows HR and finance teams to shine. Just give it a try, and see for yourself!