What are the differences between an automated vs manual payroll system?
- Effort
- Speed
- Bottlenecks
- Accuracy
- Security
- Data Maintenance
- Cost
- Continuity
- Scalability
- Productivity
- Skill needed
For every business to function smoothly, payroll needs to be done — it’s a crucial job performed by your HR department, and ensures your people are paid correctly and on time. But, conducting your payroll management in a standardized and efficient manner is a tall order, especially when it’s done manually.
That’s where automated payroll systems come in. This software allows businesses (and your HR) to run payrolls much differently than traditional, manual methods. But what is the difference between an automated vs manual payroll system? Keep reading to learn how they work, and which system is right for your company:
Effort
In manual payroll systems, the entire process is managed by individuals. This means they process everything entirely by hand — including analyzing spreadsheets, calculating various types of payments, then writing out checks by hand. Even with a sizable HR department, this task requires a significant amount of effort to achieve.
With automatic payroll systems, every step can be managed by a digital application. It requires little effort on the part of your HR, and the system itself can run all sorts of calculations and analyses to produce the right payments, from basic salary to more complicated over time, commissions, bonuses, retroactive pay, and more. Automated payroll eliminates the need for manual paycheck writing as well.
Speed
Because everything has to be done by an individual, a manual payroll system takes an incredibly long time to process every paycheck for every employee of your company. And, these steps also have to be monitored and checked manually, which also takes quite some time to do.
For automated payroll systems, the process is much shorter — in fact, most calculations and paycheck generation will take a matter of minutes. This is because almost all steps of a typical payroll process can be automated in this computerized system.
Bottlenecks
When any document has to pass through several hands, it’s common to experience plenty of bottlenecks. This is true for a manual paycheck system. It involves plenty of coordination, deadlines, verification, double-checking, and approvals from many members of your HR department just to generate a monthly paycheck.
There are little to no bottlenecks in automated payroll systems — this is thanks to their ability to centralize and collect information more efficiently, and present it on a real-time basis. This reduces the steps your HR needs to take to create your paychecks.
Accuracy
Humans are prone to making errors every once in a while. Even the most experienced HR employee can have inconsistencies and inaccuracies in their payroll calculations.
With an automated payroll system, it eliminates the risk of human error by reducing the amount of human input needed. Thus, they have little room for inconsistencies and inaccuracies — and do much better work at calculating everything you need.
Security
When everything is manually written down and managed, there is a lot of paperwork involved. This is a security risk, as the information is not protected or encrypted by any means — and is therefore much easier to tamper with.
But, this security risk is solved with the help of an automated payroll system. Your data is password protected and automatically encrypted every paycheck cycle. Only authorized users can access your payroll information.
Data Maintenance
Your payroll data is automatically updated or accessible when relying on a manual system. This is because any time a new addition is made, it requires manual data-entry work. Access is also limited to whatever physical copies you have of your payroll reports.
In an automated payroll system, data is updated and accessible automatically, and on a real-time basis. These systems also have built-in analysis functions, so reports and other forms can be generated in minutes.
Cost
The initial cost of using a manual payroll system is much less — all you really need are resources like papers and calculators, and compensation for your HR department. But, these will become ongoing costs for your company, and sticking with this system may end up being more costly in the long run.
On the other hand, while the initial cost of an automatic payroll system is much bigger upfront, this software provides an excellent return on investment. You’ll be able to reduce overhead costs, and make work more efficient for your HR department — they end up being the cheaper option after a matter of months.
Continuity
A manual process relies on a lot of paper trail, so backing this information up can be difficult and lengthy. Likewise, if not continuously backed up, paper records could easily be tampered with, destroyed, or misplaced — all of which pose problems for your company.
In an automatic system, all information is stored automatically. And, some systems are also cloud-based, meaning records are regularly backed-up and easily accessible. Even if there is temporary downtime in the system, data is stored and later uploaded to cloud servers, ensuring no information is lost.
Scalability
Traditional and manual systems cannot scale easily to accommodate new hires. Scaling for this system requires hiring and training new HR employees, which is work-intensive and time-consuming.
Scaling for automatic payroll systems is much easier in comparison — you simply have to register a new employee in your system. In fact, these systems are built to serve large numbers of employees at once, so it’s much easier to scale as per the demand.
Productivity
Sticking with the manual system can be counter-productive in the long run — your HR people will be stuck putting too much time into low-value tasks. Plus, this system requires too much time and effort overall, while also being prone to error.
An automatic system is superior in terms of accuracy, time, and effort — so, it’s more productive for your people to utilize this system instead. They are then free to focus on more pressing, high-value tasks with ease.
Skill Needed
Anyone doing payroll manually would need some training and experience in payroll management to do it correctly. They would also need to be knowledgeable about what contributions, taxes, and deductions each employee is subject to for compliance matters.
On the other hand, an automatic payroll system makes all of these steps and calculations easy for its users. It automatically factors in everything that would affect payroll, including tax deductions, contributions, etc. This is easier to use and requires less hands-on effort.
Key Takeaway
In a nutshell, when weighing automated vs manual payroll systems, the winner is clear. An automated payroll system outperforms a manual system in standardization, accuracy, reliability, ease of use, accessibility, among other areas.
If you’re interested in making use of an automated payroll system to take your business to the next level, then contact ELID today. We can help you easily set up this business solution for your company, and provide all the assistance you need to reap its benefits