2 min read
Payroll involves more than simply cutting a check at the end of the month. Payroll management involves calculating taxes, tracking employee benefits, storing financial records, and ensuring compliance with all state and federal employment laws. It’s a lot for any small business to keep track of, which is why payroll automation can help.
What are common payroll challenges to overcome?
Automated payroll systems for small businesses are designed to overcome the common challenges you’re likely to face. Small businesses may not have a dedicated human resources department, leaving the burden of payroll processing to a single manager. Payroll processing mistakes can be costly, leading to higher employee turnover rates if wages are paid incorrectly. When tackling payroll tasks manually, it’s all too easy to make miscalculations with pay rates, tax categories, and employee statuses.
What is an automated payroll system?
What do we mean when we talk about payroll automation? What is an automated payroll system, exactly? This refers to software or other forms of technology that automate repetitive payroll tasks. With the use of automation, human resources can remove typical pain points and streamline payroll processing where possible. A good system will perform functions including the following:
File federal, state, and local taxes
Track payroll information
Track timesheets and attendance
Issue regular payroll reports
Calculate employee wages and rates
Calculate sick days, bonuses, raises and paid time off
Tackle payments for freelancers
Process and pay out direct deposits
Ensure compliant recordkeeping
Verify tax documentation including EIN, I-9, and W-4 forms
Many systems will have portals allowing both employees and HR professionals to login and update records, with full customer support.
The benefits of automated payroll systems
Convenience is one prime advantage of payroll automation, but what about cost? Many of the benefits of automated payroll systems involve greater efficiency, reducing the time and money spent on payroll-related admin. According to the American Payroll Association, payroll automation can reduce processing costs by up to 80%.
Another advantage of payroll automation is the reduction in human error. Even the most highly trained HR professional can make a mistake, whether it’s a typo or miscalculation of benefits. Because payroll deals with tax compliance, even small errors can be costly. Payroll tax errors can result in IRS fines and even criminal charges.
Along the same lines of compliance, payroll automation helps ensure that you have all required records in a central location. Employers are required to keep payroll records on file for a minimum of three years, according to the Fair Labor Standards Act. With automated systems, these are kept securely for easy retrieval as needed. Digitize and store files in the cloud, safe from natural disasters or theft. Payroll software is encrypted for safe data storage, preventing security breaches and leaks.
How to choose automated payroll systems for small business
If you’ve decided that the benefits of automated payroll systems are worth the investment, the next step is to choose the best payroll software. Be sure to look carefully at factors including:
Security: Does the system use SSL technology, encryption, and two-factor authentication?
Tax compliance: Can the system handle tax compliance at the local, state, and federal level?
Integration: Does the system integrate with accounting and payment software?
Cost: Are there rolling monthly fees or an annual subscription?
Compare these features side by side to find the best automated solution to suit your company, whether you’re just starting out or experiencing a period of rapid growth.
When it comes to taking one-off or recurring payments, GoCardless integrates easily with over 300 partners, including payroll processing and accounting software. Manage your company’s financials from a central dashboard, all with quick and easy set-up for faster onboarding.
We can help
GoCardless is a global payments solution that helps you automate payment collection, cutting down on the amount of financial admin your team needs to deal with. Find out how GoCardless can help you with one-off or recurring payments.