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Automating payroll saves a tremendous amount of time and effort over a manual process, as well as reducing the likelihood of errors. Here’s a closer look at the benefits of automated payroll.

Quicker, Easier Wage Calculation

Manual payroll involves poring over spreadsheets, calculating various types of payments, then writing out checks by hand. Even with a small number of employees, this task involves a significant time commitment each and every pay period. Even worse, what happens if someone needs an extended leave from the office?

An automated payroll system quickly performs all types of payments, from basic salary and hourly wages, to more complex functions like overtime, double-time, commissions, bonuses, raises, retroactive pay, wage deductions and tuition reimbursements. Another bonus? Automated payroll eliminates the need for manual paycheck writing. The system generates paychecks and stubs, and enables direct deposit.

It is important to note that these processes are not absolutely error-proof. Calculations are based on the data the payroll representative inputs. The accuracy of the result depends on the accuracy of this input.

More Accurate Timekeeping

Manual payroll systems require calculating time clock data and hourly wages by hand, which is time-consuming and offers an opportunity for error. With automated payroll and timekeeping systems, time clock data can be imported directly into the payroll software.The software then calculates the total time worked. Any necessary edits (such as an employee forgetting to clock in or out), can be made quickly and easily.

Easier Tax Deduction Calculation with Less Chance of Errors

Mandatory federal, state, Social Security and Medicare tax withholdings are time-consuming and difficult to calculate manually. Adding to the challenge, tax rules and regulations change frequently.

Automated payroll systems have tax rates coded into the system, and can calculate the withholding tax for each employee. This reduces the likelihood of errors, which can result in penalties from both the IRS and the state taxation agency.

Improved Recordkeeping with Less Clutter

The IRS requires employers to keep employment tax records for at least four years, while the U.S. Department of Labor requires payroll records to be kept for a minimum of three years. That adds up to a substantial number of paper forms, which must be filled out by hand, filed and stored. Automated payroll systems generate and store employment tax and payroll data, cutting down on time and clutter.

Assists in Financial Planning for Both Employer and Employee

An automated payroll process allows funds to go into the payroll account at the same time each pay period, allowing employers to budget more effectively. It also reduces the chance of late paychecks that erode employee trust and can lead to penalties.

When making use of direct deposit, employees benefit by knowing exactly when their paycheck will be deposited in their account. Trips to the bank and any check-cashing fees are eliminated.

Easier to Make Changes

Making payroll changes manually involves providing an employee with a paper form, then waiting for it to be returned. Automated payroll simplifies the process by allowing changes to be made directly in the system, where they’re stored for easy access. Some online payroll systems streamline the process still further by allowing employees to make these changes directly.

These changes might include:

  • Adding new employees to the system
  • Updates to W4 information (such as changes in number of deductions, address or tax status)
  • Adding or changing bank account(s) for direct deposit
  • Printing W-2 forms

With all these benefits, it’s no surprise that so many businesses are choosing payroll automation. Still others are taking it a step further by outsourcing their payroll, relieving them of the time and stress burden.