10 Benefits Of Payroll Automation For Growing Businesses
When you have five employees, preparing payslips is a trivial exercise. Someone just takes out the laptop on the last Thursday of the month, opens up a spreadsheet and completes it in an hour. With 30 or 60 people, the process becomes significantly more involved - there are new people joining midway, others changing working hours and a few more leaving with unsettled leave. It makes for an increasingly time-consuming activity, and the person responsible grows more concerned with avoiding mistakes at each stage.
This is when a company realises that the best approach to handling its growing payroll needs is through automation. Leaving a manual, spreadsheet-based system behind will deliver some obvious advantages, but the main impetus for change usually comes from recognising how an automated solution will be vital to the long-term health of an increasingly complex organisation's processes and compliance frameworks. Here are 10 concrete benefits of using dedicated HRMS software and payroll software that growing Indian companies can expect:-
1. Pay Runs Take Less Time
This is a rather direct benefit that you'll realise in handling your first few pay runs. While manually entering salaries for everybody makes up roughly 70% of the task for a middle-level accountant, the automated process stores employee-specific parameters only once. This is not to say that a new salary run is just a matter of pressing a few buttons: you still have to enter values for deductions and LOP or approve any submitted claims. Nevertheless, an experienced grower can routinely finish salary-related tasks of a 100+ member company within an hour.
2. Fewer Calculation Errors
When paying salaries, a human has to enter every value manually, whether that's the figure at the beginning of a row representing a new employee or the final result. They also have to ensure that every cell with a formula that Excel understands is copied accurately. This is bound to cause a few Excel errors, especially when working with tax slabs – where values need to be placed in specific cells for proper deduction. An automated system does away with this entire process: a consistent logic is used across all entries, without having to individually adjust for each and every employee. TDS, PF, ESI and PT are all calculated without the possibility of errors, and even sanity checks can be added to look out for incorrect or missing PAN details.
3. Statutory Compliance Made Easy
Indian companies have to report several statutory filings to bodies such as EPFO and ESIC. In addition to the ECR for EPF needs, the ESIC contributions have to be submitted as a separate entity, and income tax slab-wise summaries are also required. To be clear, even if the tax rates themselves remain unchanged, these rules are subject to periodic review, and fresh rates for both the old and new tax regimes are published on every Union Budget. An automated payroll system uses the latest rules for all slabs, calculations and filings, and is always ready to assist with quarterly TDS returns and other related compliance needs.
4. Simplified EPF and ESI Calculations
As an increasing number of people join your organisation, you'll find that calculating an individual's provident fund contributions and employee's insurance is a cumbersome but highly important task. The EPF comes into effect at a certain basic salary threshold, and you'll need to make sure that you're deducting the minimum percentage - if at all - from each member, depending on their salary bracket (basic+DA). As with TDS deductions, a computer-driven approach eliminates the possibility of errors during this process, and a good software solution should even allow generating ECR text files for EPFO upload during ESIC audits.
5. Protection of Employee Data
Spreadsheets do not have the capability of being secured; a single misplaced email or insecure cloud service can jeopardise employee details, including bank accounts, PAN, Aadhaar and even Universal Account Numbers. Not only does the new process keep this sensitive information behind layers of encryption, but an integrated HR solution puts the data in a more organised, accessible and secure platform with restricted permissions.
If the manager of the marketing department needs to take an eye-off-the-ladder leave application under his wing, he can have a look without getting access to other employees' banking details or salary structure.
6. Higher Trust Among Employees
A misplaced comma in an Excel document or an off-by-one error while typing a number can leave any employee with significantly less income than expected. When an automated system calculates everything accurately and pays out the correct salary every month, they're able to rely on it to make proper long-term financial plans. Moreover, this level of confidence means that they're unlikely to pester the HR or finance departments for adjustments and approvals, which in turn becomes a stress reliever for these teams.
7. Lower Administrative Expenses
There is an opportunity cost to any manual process when an experienced professional has to spend valuable time handling a tedious task. The process also creates costs through additional errors, physical slips that need printing and correcting, and even new hires if the finance team grows to cope with increasing workloads. By contrast, an automated system removes the scope for nearly all administrative errors and the accompanying expenses. Payroll automation reduces overall time spent on the process - and so, administrative expenses - sufficiently enough that rushing to hire a new accountant just for this purpose is often not worth it, and emergency consulting fees due to month-end leave are also avoided.
8. Clarity on Costs and Budget
It's necessary for a growing organisation to understand not only how much it spends on salaries but also which costs come under this category. While a few people handling salary slips can create ad hoc adjustments to their own salary structure if necessary, and a bigger finance team should be able to break down the figures to understand where exactly the money is going – in either case, an automated payroll system makes categorising and recording simpler, faster and more systematic. A good system should be able to display figures for gross and net salaries and any additional costs incurred towards PF, ESI, OT, and even break them down by each department at the click of a button.
9. Higher Scalability with Less Hassle
There is a reason why every large company has an entire finance team dedicated to the payroll process. This allows one person to handle salary calculations and related tasks for a small business with 10-15 employees. But when expanding to 50 or even 100 people, automation is almost always preferable because the learning curve of this process is significantly steeper. Not only can a person who understands a manual process better appreciate the changes needed for a higher employee count, but actually performing tasks such as adding a new employee's information takes seconds with an automated system, as compared to minutes or even hours.
10. Integration with Overall HR and Finance Software
The entire purpose of a separate payroll application is to integrate well with other pieces of software in the finance ecosystem. In particular, it needs to be fed the correct information about when a new employee joins, what their revised salary structure is, what their working/leave pattern is, and so forth. That's where having HR software that understands payroll calculations comes in handy: changes to employee information or approved leaves are instantly reflected in the payroll system without any double-entry, and generated journal entries from completed pay runs are ready to use in accounting software.
Conclusion
Processing a company's payroll is a necessary but thankless task – when done incorrectly, it violates labour laws and causes serious issues with employees. An automated payroll software ensures compliance with labour and tax laws while also reducing the burden on managers and finance teams by a significant amount. Payroll automation solutions, when coupled with integrated HR software, reduce the time needed for the finance team to focus on larger and more important matters and ensure absolute protection of employees' confidential data.