Automated Payroll Processing is for Businesses of all Sizes

Payroll management can be confusing and time-consuming for small business owners. Often it is a point of pride to those who carry the burdens of payroll processing alone without the help of a dedicated human resources department.  

However, paying employees accurately and on time is an essential part of the employment contract that should not be left to chance or human error. In the current labor market, where employees have the leverage to seek out more fulfilling or better-paying jobs, employers cannot afford to make payroll processing mistakes that could harm employee trust and lead to costly turnover rates.    

Almost half of U.S. employees will start searching for a new job after only the second mistake on their paycheck. Smaller, independent companies with fewer resources are simply the most likely to send late paychecks, making it harder for small businesses to retain their talent due to payroll processing mistakes like these.   

Common payroll mistakes that payroll automation prevents:  

• Miscalculating payroll  

• Misclassifying employees as exempt or non-exempt status  
• Misjudging employee status against independent contractor designation  
• Using the wrong tax table for bonuses   
• Calculating payroll taxes incorrectly  
• Processing wage garnishments erroneously  

• Keeping poor or inaccurate records   

Small businesses that take advantage of automated payroll services can save a lot of time and may reduce payroll processing costs by as much as 80%.   

An automated payroll services may seem cost-prohibitive for a small business, but there are hidden costs of manual payroll that can be avoided with an automated payroll system. Small businesses simply cannot afford to let the tech side of their industry intimidate them from achieving the kinds of exponential gains that technology can offer.  

Everything Involved in Payroll  

Because there are taxes to consider, payroll is more complex than simply writing a check at the end of the week. Calculating taxes accurately is challenging enough, but there are also employee benefit withholdings that need to be calculated as well. These withholdings are designated to pay for crucial benefits like health insurance and 401(k) contributions that employees depend on.   

Effective payroll processing also depends on accurate employee financial records and timely distribution of paychecks.  

Employers are legally required to pay an employee for the time they work. This makes it essential to keep accurate records to maintain compliance and avoid fines. Learning the specific labor, wage, or tax laws of each state your employees reside in can become a burden. This is especially true for businesses that recently transitioned to a remote work model, but this can all be simplified with automation.  

What is Payroll Automation  

Payroll automation involves streamlining payroll processing tasks to be as efficient as possible. An automated payroll system will save small business owners time with the following computerized functions:  

• Filing taxes (federal, state, and local)  

• Tracking and updating payroll information  
• Time and attendance monitoring  
• Generating payroll reports  
• Calculating pay rates for overtime, double-time, time-and-a-half, bonuses, raises, sick days, mileage, paid and unpaid time off (PTO), etc.  
• Processing direct deposits (same-day processing available)  

• Determining tax reductions  
• Financial planning  
• Improving recordkeeping and compliance  
• Employee self-service access  
• Customer support   

Automating payroll still depends on accurate data entry when collecting and inputting employee payroll data into the new system. This means ensuring that documentation such as the EIN, I-9, and W-4 is prepared accurately.   

Tailoring Automated Payroll Features for Business Needs  

Payroll service providers generally provide packages tailored to the individual business’ needs, considering the number of employees in the company, pay frequency, and how many features need tracking. Features like direct deposit can be added as an option, but this convenience is becoming the standard method of payment most employees have come to expect.   

Some payroll software companies will also offer assistance tax filing services which can significantly benefit companies with employees operating in multiple states with different tax laws. These situations are undeniably more complex for small business owners to manage on their own.   

Record-Keeping Compliance and Savings with Payroll Automation  

While an automated payroll service comes with a more significant upfront cost than DIY payroll, these services also offer potential savings. In 2021 the IRS levied $6 billion in employer penalties. A payroll service will help ensure you aren’t stuck paying fines for noncompliance. The IRS requires employers to maintain employment tax records for four years. The U.S. Department of Labor (DOL) requires payroll records to be kept for at least three years—here is the complete list of DOL fines and penalties.   

10 Benefits of Payroll Automation

1. Saves time on mundane or complex manual processes—and time is money.  

2. Reduces costs by paying a smaller payroll department to oversee the payment of employees.  

3. Minimizes opportunities for payroll errors.  

4. Avoids potential fines for non-compliance with data security or tax obligations.  

5. Increases easy access to payroll records for faster reporting and analysis.  

6. Reduces paper file storage that costs money, takes longer to search through, and isn’t eco-friendly.  

7. Cuts costs of office supplies for paper, ink, mailing paychecks and pay slips.  

8. Keeps sensitive payroll data more secure with encryption and firewalls that control who can access payroll information instead of relying on hard copies that can be misplaced or mishandled.  

9. Helps small businesses offer competitive benefits like convenient employee self-service features with instant access to pay and 24/7 customer support.  

10. Improves employee loyalty and confidence in compliant business practices.   

Bottom Line  

Automated payroll services can be customized based on the needs of businesses of all sizes. Ultimately, every business should be use automated payroll to reduce costly errors, retain employees, and avoid fines for noncompliance.