Payroll Automation: Complete Guide

Learn what payroll automation is, how to do it and what systems are available with this guide from QuickBooks’ on payroll automation.

Payroll is a necessary part of running a business to ensure your employees get paid accurately and on time. Unfortunately, payroll accounting can be confusing - especially for small business owners who don’t have a dedicated department to handle these responsibilities. This is where payroll automation comes in.

Payroll automation involves using dedicated payroll software to automate the process of calculating payroll - including taxes, deductions, contributions and more. It helps to simplify payroll tasks to make it easier to manage a business and pay your employees.

Let’s take a look in more detail.

Contents:

• What is payroll automation?

• How to automate payroll

• How can QuickBooks help with your payroll?

What is payroll automation?

Payroll automation is the process of streamlining payroll tasks to reduce the amount of manual work required, and to make payroll as efficient as possible.

There’s a lot more work involved in payroll accounting than simply sending your employees money each week or month! It also must be HMRC compliant, follow proper record-keeping and take into account a whole range of factors that influence an employee’s take-home. This includes national insurance, benefits, pensions, student loans and more - these can change throughout the year, as well as at each new tax year, and from employee to employee.

All these different factors can make payroll complicated. Payroll automation is designed to simplify each element and calculation, reducing the risk of error and streamlining the process. Importantly, it helps to free up your time.

What is payroll automation software?

Payroll automation software handles your business and employee information, is able to run payroll tasks and calculate all the necessary information for your payroll each month (and end of year reports).

All of these processes would take much longer to do without payroll automation. You can leave payroll to the automation software and focus your efforts on business growth.

In other words, if payroll automation is streamlining the payroll process and reducing the amount of manual work - payroll automation software is what allows you to do it.

What can an automated payroll system do?

Various business functions can be performed by an automated payroll system. 

If you look for software that integrates into a full accounting system, like QuickBooks, then your software will be able to do even more of your business’s financial leg-work. 

These are just some of the functions that an automated payroll system can perform:

• Track and update payroll data

• Run payroll each pay period (monthly or weekly, for example)

• Time tracking and factoring this into pay

• Filing taxes

• Calculating overtime, double-time, bonuses, raises, etc.

• Tax deduction calculations including national insurance, student loans etc

• Pension calculations, as well as other contributions and benefits

• Improved recordkeeping

• Financial planning for both the employer and employee

• Generating reports

An automated payroll software can do all of this for you in just a few minutes. As you can imagine, this can save you a significant amount of time during the month!

The benefits of automating payroll

We’ve already mentioned that the goal of payroll automation is to speed up the process, reduce manual tasks and save you time, but let’s take a more detailed look at all the benefits:

1. Increases efficiency

Running payroll by hand requires a lot of time and resources that could be spent on other business matters that require your attention. An automated payroll system can save you time and money by streamlining complicated payroll processes. It also helps with organising payroll records for future reference.

2. Lowers the risk of error

Using automated software also eliminates the risk of human error that can happen with manual data entry for payroll calculations. A payroll software uses advanced technology to calculate figures like deductions and overtime pay for the highest level of accuracy. It will also automatically keep up to date with changes in tax each financial year.

3. Ensures employees are paid correctly and on time

Your employees work hard for your business. You want to make sure they’re paid correctly and on time, and payroll automation does just that. Automated payroll helps ensure that you meet payment deadlines and calculate the correct withholdings for your employees, so even when you’re busy, your team gets paid.

4. Helps with regulation compliance

Taxes are undeniably confusing, but automated payroll software makes it a little bit easier to navigate. Payroll automation will handle things like deducting national insurance tax and pensions from employees’ wages, so you don’t have to figure it out on your own. Not only will this make things easier for you, but you can also enjoy peace of mind knowing that you’re complying with HMRC regulations and tax laws.

5. Allows for a smaller payroll team

With payroll automation software, you don’t have to hire a large team of professionals to oversee paying employees. Instead, you can work with a smaller department that benefits from more efficient processes. Alternatively, it will free up existing employees to dedicate more time to other aspects of the business - such as new ways to grow.

This will ultimately save your business money as you’ll be paying fewer salaries and wages. It can also minimise the need for outsourcing to service providers - although we’d still recommend using an accountant or bookkeeper to help with your finances!

6. Helps with financial planning

Using a payroll automation system means funds will be automatically transferred into the payroll account. Your employees will be notified of their paycheck as soon as it hits their bank account. Since money is deposited more efficiently, financial planning is easier for both the employer and employee.

If you choose software that integrates with your accounting software, then all the better. You can then smoothly factor payroll into your financial forecasting, business plan and cash flow planning.

7. Allows employees to update their information easily

Many automated payroll systems offer employees the freedom to view their paychecks and edit their information. This reduces the burden on you. With an automated payroll system, employees can view their payslips, update their personal information, and view deductions.

With these benefits in mind, you can see why many small businesses are turning to payroll automation to simplify their payroll runs.

How to automate payroll

If you’re ready to use payroll automation, then you might be wondering how to go about doing it!

They’ll be variations according to the payroll automation software you choose, but it will likely follow these steps:

1. Find the software that works for you

All the payroll software that’s available will be a bit different. Different user interfaces, functions, and costs… it can be hard to find the right one for you. We would suggest considering what your top priorities are as a business and choosing the software that best meets those demands.

For example, it might be important to you to be able to integrate payroll into your accounting software so your financial decisions can be made from one source of information. You would need to choose payroll automation software that can be integrated into a wider set of tools - like at QuickBooks.

It’s a great idea to talk to your accountant or bookkeeper about what they would recommend. They are likely to have experience using different automation softwares and can point you in the right direction.

If you already use payroll software but are looking to switch, read our article on switching payroll companies.

2. Input all necessary information into the new system

Your provider will guide you through what information they require, but this will be things like:

• Your business details - such as your employer PAYE reference number and number of employees

• Your employees’ details - their national insurance numbers and bank details, as well as contributions, student loan plans etc

• Payroll records - such as all salary and wages payments, staff leave and absences, copies of all PAYE coding notices (P9T) which have been received etc

It’s important all this information is correct to prevent mistakes in the first round of payroll from your new system.

3. Train the relevant employees on how to use the system

This might include making sure you yourself know how to use the system if you lead the payroll process. Try to make sure there’s plenty of time for your team to familiarise themselves with the new software.

4. Inform your employees

It’s important to be transparent when it comes to people’s pay so informing your employees of the change can be really helpful. It means if their payslips look different, they won’t be confused or concerned about the change.

Choosing the right payroll automation software

As we’ve mentioned, different payroll software providers will feature different things in their products. It’s important to find the one that meets your business’ requirements.

First consider what you’re looking for from your automation system and you can prioritise features from there. Some things you might wish to prioritise are:

• PTO tracking

• Employee data management

• Reporting

• HMRC compliant tax filing

• Time and attendance tracking

• Employee self-service access

• Software integrations

• Same-day direct deposit

• 24/7 support

In addition to these features, you may also want to ask yourself a couple of questions to gauge if it’s the right fit. Questions to ask may include:

• Will this automated payroll system work with my current HR software or process?

• Will this software work with the size of my company?

• Can this software keep up with my growing business?

• Does this system include all the features that are important to me?

• Will using this automated payroll system save my business time and money?

• Does this solution fit into my current business budget?

Once you’ve answered the above questions, you should have a better idea of which payroll automation system is right for you.

When is the right time to start using automated payroll?

Automating payroll is beneficial for businesses of all different sizes. Regardless of your number of employees, managing payroll is time-consuming if you don’t have the right tools on your side. But switching over to automated payroll can ease the burden and free up resources for your business.

Therefore it can be wise to start using automated payroll as soon as you can!

You might be holding off due to budgetary concerns; after all, many small businesses find themselves strained in the first few years. However, while manual payroll may work if you have a few employees, keeping up with it will become increasingly difficult as your business grows.

That’s why it’s beneficial to set up automated payroll before you get to a point where you’re overwhelmed and things start slipping through the cracks.

It can be that software saves you money - as you can then free up yourself or employees time to work on other things.

The bottom line is, the sooner you make the change, the sooner you can take advantage of freed up time and resources.

If you’re looking to switch between payroll providers, on the other hand, there are more reasons to choose your timing carefully. Find out more: the best time to switch payroll providers.

How can QuickBooks help with your payroll?

QuickBooks’ payroll software is designed to make payroll smooth and easy for small businesses. It integrates with our accounting software and other financial tools so you can keep all your finances in one place - easily accessible at the click of a button.

In today’s world, just about everything can be automated. So why shouldn’t your payroll be automated too?