In the early years of the 20th century, many business owners began to utilize a payroll system, due to the lack of proper technology, automated payroll systems were not available yet. Most business owners outsourced payroll management. Nowadays, there are not many reasons to manual payroll in a time when automated payroll software is affordable, secure, convenient, and accurate.
In this article, you will learn everything you should know about manual and automated payrolls, their differences, and their benefits. Additionally, you will be able to find information about what suits best for your company when you find yourself in the process of establishing a payroll method. Let’s observe:
- When does it make sense to run payroll by hand?
- Advantages of Manual Payroll versus Automated Payroll
- Disadvantages of Manual Payroll
- What is an Automated Payroll System?
- When does it make sense to use payroll software?
- Advantages of payroll software
- Disadvantages of payroll software
- 3 Reasons to may want to Switch from a Manual to an Automated Payroll Software
- Why is an automated system the best in terms of accuracy?
When does it make sense to run payroll by hand?
Manual payroll means that any employee within your company will calculate the payroll for each pay period completely on paper. Payroll processing requires extra careful handling to ensure the paychecks are accurate, also, compliance with the federal and state taxes in addition to local tax laws and regulations.
This means that the payroll process is completed manually. It will not require an investment in payroll software. However, such software has rates embedded in the programming of the software, which gets rid of all the manual calculation of taxes. Nonetheless, it’s possible if you have only a couple of employees and you don’t want to deal with the setup of an automated environment.
Manual payroll will save your company money, but it won’t save time. Before you run the payroll calculations without the assist of any software program, you have to learn the way payroll works and which payroll taxes apply to your company. Manual calculations are more likely to cause errors. If you make a mistake with tax withholding, you are more likely to face hefty government penalties.
Advantages of Manual Payroll versus Automated Payroll
- Lower Cost: Manual accounting is cheaper than a computerized automated payroll system, which requires a computer and software. However, this process will eventually reach the cost of the automated payroll system and it may end up being costlier. Due to the cost of the additional resources used and the long hours spent in processing the information, and also internet connection, papers, and calculators.
- Wider range of customization: manual payroll processes can be personalized based on the needs of the employees and the company.
- Small businesses oriented: This system works better when is applied to a small organization with a small workforce.
Disadvantages of Manual Payroll
- More likely to cause errors: one of the disadvantages of this system is its high room for error. While more manual computations the payroll representative has to make, the more errors are expected to happen. Furthermore, it takes more time because the employee will need to ensure the payroll is accurate, the employee has to double-check the data before starting to print checks.
- More time-consuming: manual payroll involves checking spreadsheets, calculating several types of payments, and writing out checks manually. Even with a small number of employees, this task takes a significant amount of time each pay period.
- Slow evaluation of data: the data will not be available in real-time. This is because it involves a higher amount of work transcribing the data and more manual effort. reports might not be available right away. Any evaluation of the reports will require concentrated effort and time. However, a wider variety of analyses is possible as it is up to individuals to execute them.
- Needs prior training: all the hired individuals would need in payroll management. They would also need to know about regulatory laws and compliance matters.
A manual payroll process could be ideal for a small organization with a small number of employees. It can be personalized and customized to fit the requirements of any company. It could be more flexible, unlike an automated system. Additionally, it is easier to acquire because it requires a lesser investment.
What is an Automated Payroll System?
When comparing Manual payroll vs automated Payroll , Manual processing is time-consuming. if you add the fact that you will deal with compliance, then your HR employees will have a large task at hand each pay period.
Therefore, an automated system will find precision, efficiency, and almost no processing time. As you can see, it is the perfect solution for your company whether you’re a small-sized corporation or a multinational. Let’s visualize some of its features:
- Automatic computation: the automatic computation is an exceptional function since you will be able to run your payroll calculations with no errors.
- Tax calculation: taxes are one of the biggest parts of any payroll process. Any miscalculation can (and will) lead to risk and will cause issues with your employees.
- Global payroll system: you will be able to process the payroll for your international staff simply and successfully.
- Payslip: processing and distributing your payslips is time-consuming. For this reason, an automated payroll system can be of great help.
- Reporting: with an automated payroll system you can visualize all your data and track all your expenses.
When does it make sense to use payroll software?
An efficient automated payroll system is important if your company employs people. It helps ensure you comply with your legal obligations and deduct the right amount of income tax and insurance. It depends on the number of employees you have, the number of transactions you process, your pay frequency, etc. Even small companies can operate automated payroll software due to its clear advantages:
Advantages of payroll software
- Wage calculations are easier: An automated payroll system performs all types of payments quickly, from the basic wages and hourly rates to complex functions like overtime, double-time, extra commissions, bonuses, raises, retroactive pay, wage deductions, and tuition reimbursements. This automated payroll system eliminates the need for manual paycheck processing. The system generates paychecks and remnants and enables direct deposit.
- No skills required: Almost all the processes in the payroll system are automatic. This would include statutory reporting and all tax removals. Automated systems are easier to use and require almost no data entry. It will not need highly skilled employees to operate it.
- Productivity oriented: In the long run, this method saves time, effort, resources and is more reliable. All of the individuals in the organization are free to focus on essential activities. This method increases productivity in the company.
- Keeps the information in an easier way: since all the information is in one place automated payroll systems make keeping tax records much easier, and since there are no copies that could be damaged.
Automated payrolls systems also make it much easier to create other kinds of reports as well as collect statistical data for any research or improvement purposes.
When finding differences between Manual payroll vs automated Payroll , An automated payroll system is the best option for small and large businesses. This ensures productivity and eliminates much of the effort. It requires much less time and resources and will be a little higher investment, and like any other investment, the company will gain a lot in the long run. For bigger businesses that have a huge staff and multiple offices across various regions, a manual process may be quite impractical and impossible to handle.
Disadvantages of payroll software
Investment cost is a little higher: although the start-up cost is considerably higher in this case, automated payroll systems will not require a lot of time and resources. Also, in the long run it may eventually end up being a cheaper option
Responsibility when handling your taxes: your automated payroll employee must make sure that all the data is completed accurately and the payments are made on time. Paperwork mistakes and wrongly paid taxes can lead to hefty fines.
You must back-up all your data: you will have to consider the physical and digital security of the computers where the payroll software will be installed, using strong passwords and any strong antivirus are strongly recommended.
In summary, going for an automated payroll system would be saving money in terms of future savings. These savings include both time and money because of accurate automated computation vs mistakes in manual payroll accounting.
3 Reasons to may want to Switch from a Manual to an Automated Payroll Software
- Time Management: rather than having to check emails or review paper timecards to calculate hours, an automated payroll system provides a centralized hub of information that mechanically synchronizes with a payroll run. This will save you hours of your time and offer great significant convenience to your employees.
- Formalized Processes: being able to access the HR resources and payroll information from an easy-to-use dashboard is one of the reasons. When you use an automated system for your companies’ payroll, every user must follow the same general process for tracking time and paid time off. This is yet another way that automated payroll software saves your time and effort.
- Reduction of errors: the employees will be able to have access to payroll in a human resources system input their data, this eliminates the need for a designated HR manager in this matter. And if you need to share information with your entire staff or just an individual employee, the dashboard provides a place for you to store documents and communicate with them in one click.
Why is an automated system the best in terms of accuracy?
While comparing Manual payroll vs automated Payroll , An automated payroll system will give you the best benefit in terms of accuracy. It is important to be accurate with calculations; otherwise, your employees will not be pleased.
Therefore, a system that can provide accurate calculations in your company is a must. With manual calculation is difficult to achieve proper levels of accuracy since there’s human interference. But with an automated payroll system, you will achieve the results you expect.
How can an automated system ensure accuracy?
With an automated payroll your company will not have to worry about mistakes or human errors since you can get the following benefits:
- Computing income taxes and deductions accurately
- Handle the processes completely automatized.
- Make sure all the compliance is followed.
- Avoid wrong entries of data
One of the benefits of an accurate data and processing system is that you will have better functioning HR management.
How can ConnectHR help your company set an automated payroll system?
Now that you know what are the differences between a manual vs automated payroll system, one of the first things you should do is request guidance from one of our professionals.
With ConnectHR by your side, you can easily set up an automated payroll system for your company and take the advantage of all the previously mentioned benefits.
After you have completed your company’s setup process, you should also request our other services to benefit your company’s growth. Or in case you want to improve your HR department, you can request us for HR consultancy , insurance, or our attendance management.
We have more than 20 years working with a variety of businesses in various industries in the UAE.
Would you like to contact ConnectHR to obtain more tips and useful information about the business setup process in the UAE? If you have any questions, call us on +97143316688 and you will talk to one of our representatives who will answer all of your questions.