The Complete Guide to Payroll Automation: Top 6 Things to Know

Manual payroll processes are time-consuming, error-prone, and often fail to meet the needs of growing organizations. Thankfully, payroll automation has matured to the point where it’s both proven and accessible.

In fact, 31% of businesses leveraging payroll software report fewer mistakes in calculating wages and updating employment records, according to a study from G2. Organizations investing in payroll automation now are poised to gain significant advantages through faster processing and superior accuracy. 

This comprehensive guide explains how payroll automation works, dispels common misconceptions, and highlights some of the most compelling benefits of leveraging it. 

What is payroll automation?  

Payroll automation uses technology to help teams simplify and manage critical payroll tasks, minimizing or eliminating the need for manual data entry, spreadsheets, and calculations. As a result, the payroll process becomes more accurate, secure, and efficient, while teams are empowered to focus on more strategic and productive work. This has the added benefit of increasing employee engagement and morale.  

Which payroll processes can you automate?  

The administrative tasks consuming most of payroll’s time are also the most error-prone when done manually. Thankfully, automation can transform these routine processes with precision and speed: 

• Calculating wages and taxes – Even small mistakes can lead to bigger issues. Automatically calculate gross pay, taxes, and net pay, resulting in fewer errors and headaches.  

• Employee benefits management – Payroll automation helps you easily track and process benefits like health insurance, retirement contributions, and more.  

• Compliance – Missing tax deadlines or making calculation mistakes can result in fines or costly penalties. Stay current on tax laws and filing deadlines with regularly updated payroll software. 

• Time tracking – Integrate payroll automation with your time-tracking software to accurately calculate pay based on work hours. 

• Payment processing – Pay your employees through direct deposit, checks, or pay cards. 

• Reporting and analytics – Strategically leverage your data with detailed reports for audits, budgeting, and decision-making. 

What are the most common misconceptions about payroll automation? 

New tools often come with misconceptions that can prevent organizations and teams from fully embracing solutions that could help them work smarter. Some of the most powerful misconceptions about payroll automation include: 

• “It’s too expensive.” – While implementing payroll automation is an investment, you’ll see long-term savings in the form of fewer mistakes and less manual administrative work, which can boost employee satisfaction and engagement. 

• “It’s only for large companies.” — Businesses of every size use payroll automation. A scalable solution allows you to find the right balance for your needs. 

• “It replaces HR teams.” — Quite the opposite. Automation empowers HR professionals to focus on other initiatives by reducing repetitive tasks. Since 47% of payroll automation focuses on streamlining how to manage employee benefits and direct compensation, HR and payroll staff can automate administrative tasks and be more efficient with their time.
• “It’s difficult to implement.” — With proper planning and the right vendor, implementing payroll automation will go smoothly and you’ll be up and running in no time.

6 benefits of payroll automation  

Automating payroll does more than streamline the payroll process. It unlocks benefits that directly resolve many common pain points, from resource constraints to concerns about security or compliance. 

1. Save time and effort – Rinse and repeat no more. Automating manual administrative tasks gives HR and finance teams more time to focus on strategic initiatives that add value and contribute to growth.  
   
   
2. Improve your accuracy – Less time spent on manual data entry means fewer errors, and employees are paid correctly and on time. 78% of America’s workers would experience financial difficulties if their paychecks were delayed for just one week. No more scrambling at the last minute to correct mistakes. 
   
   
3. Avoid penalties – Stay compliant with complicated regulations and ever-changing deadlines. 
   
   
4. Reduce costs – Reducing manual labor and the need to rely on outside services can translate into significant savings. 
   
   
5. Fewer growing pains – Scalable payroll automation helps companies accommodate changes in size, location(s), and more, so their payroll system is always efficient and manageable.  
   
   
6. More security – Sensitive employee data is safeguarded with encryption and secure access controls, helping protect information from cyberattacks. 

What to look for in a payroll automation solution and how to implement it   

Using any tool or solution requires knowledge and preparation. This means asking questions and ensuring you understand the tool you’re considering. Here are some essential questions to ask yourself before implementing any payroll automation solution.  

• Is it easy to use? – A simple, intuitive interface reduces frustration and makes implementation easier. 

• Is it easy to integrate? – The payroll software should seamlessly connect with your existing HR, accounting, and time-tracking systems to maximize their capabilities. 

• Is it automatically updated? – This ensures compliance. 

• Is it customizable? – A payroll automation solution must fit your unique business needs—and fit them well. 

• Is it scalable? – Will it adapt to your organization’s growth, and how will it do that? 

• Is it supported? – Great support and training will ensure your success in deployment. 

Answering these questions brings you closer to a solution, but your implementation process is crucial. The following steps can assist you in implementing payroll automation.  

• Evaluate your needs – Where would you like to save money? What are your current payroll challenges? What features do you need to help you overcome them? 

• Choose the right vendor – Research them carefully. Do they align with your business’ goals and size? 

• Migrate accurately – Work closely with your vendor to ensure no data slips through the cracks during the transition. 

• Run parallel tests – Before fully transitioning, run the automated system alongside your current process to identify and resolve any issues.  

• Train your team – Get them into great shape to maximize your new payroll automation solution’s potential. Expert training and support are both critical. 

• Keep your eyes open – Constantly monitor your system’s performance to make any adjustments so it keeps humming along and keeps saving you time and money. 

Take automation further with payroll outsourcing 

Are you looking to streamline your operations beyond a payment automation solution? The right third-party service partner for payroll outsourcing can provide even more relief for you and your employees.  

Why should you consider outsourcing your payment automation?  

Outsourcing combines payroll automation with expert management to help you save time, improve accuracy, and reduce your total operating costs by approximately 20%. It delivers other benefits that can also help your organization stay focused: 

• Expert support – Access professionals who stay updated on tax laws and keep you in compliance. 

• Less work – Reduce the need for an in-house payroll team who will have the time to focus on more strategic initiatives. 

• Cost savings – Avoid the expense of maintaining payroll software—your payroll outsourcing vendor takes care of that for you. 

• Improved accuracy – Ensure precision with every calculation using the latest automation technology. You’ll always be up to date. 
  
  

When is the best time to invest in payroll automation?  

The business landscape is becoming more complex with tighter compliance regulations and a greater need for operational efficiency. The best time to start was yesterday. The second-best time is now. Investing in payroll automation now will help you: 

• Ensure timely and accurate payroll processing – Employees can rely on consistent and prompt payments, which boosts their confidence in the organization and helps improve employee satisfaction and retention. 

• Avoid penalties for non-compliance — Manual payroll systems are rife with costly errors. Payment automation helps eliminate them. 

• Support business growth with scalable solutions — Automation empowers your business to adjust more easily to major organizational changes.  

• Gain valuable insights — With detailed analytics, your team can make data-driven business decisions that enhance your organization’s ability to work smarter. 

With all this in mind, finding the right partner is essential. You need someone that offers scalable solutions backed by comprehensive training and support. With this support, time previously spent calculating pay and processing tax forms can now be redirected towards more strategic work, like connecting with employees and exploring solutions that help elevate the pay experience to improve engagement, recruitment, and retention.  

Ready to transform payroll from a headache into a strategic advantage? 

Let OSV show you how automation and outsourcing can simplify your processes, ensure compliance, and free your team to focus on growth. Talk to an OSV Payroll Expert today.