Payroll automation: key benefits and steps for successful adoption

HR leaders are wearing more hats than ever, with 71% needing more people-centric skills and 74% needing more technical skills than last year.* That means they’ve got an increasingly diverse array of tasks on their to-do lists. People professionals might take on work related to recruitment, marketing, public relations, analytics, and — notably — payroll.

Effective payroll processes are essential for thriving businesses, yet they’re often time-consuming and complex. That’s especially true for HR teams juggling multiple responsibilities.

‍Payroll automation is one handy way to overcome that obstacle. The right software tools can speed up many parts of your organization’s payroll process, help you stay compliant, and assist you in building a seamless, scalable payroll system over time.

This article covers what payroll automation is, its top benefits, how to implement it, and how to choose the best software for your needs.

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*Leapsome’s Workforce Trends Report, 2024
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What is payroll automation?

Payroll automation does what it says on the tin: it uses technology to automate core payroll tasks that people would otherwise have to complete manually.

From calculating wages and coordinating direct deposits to ensuring compliance with relevant labor and data privacy laws, payroll automation software is designed to make the processes involved in paying employees quicker, safer, and more accurate.

And payroll automation isn’t just for large organizations. This kind of tool is especially valuable for small to medium-sized businesses (SMBs) that don’t have large in-house teams to deal with payroll preparation and delivery. These smaller companies often have limited HR resources, meaning that tasks like data entry, time-tracking, and payslip distribution may fall on a few individuals who can quickly become overwhelmed. With that in mind, it’s no wonder that many HR professionals find the payroll period stressful.
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How to implement payroll automation within your organization

Now that you know the basics of how payroll automation works and the value it can bring to your business, you may be eager to give it a try.

Below, we’ve broken down five essential steps you should take to adopt payroll automation within your company.

1. Audit your current payroll process

Before introducing new software, assess your existing systems and investigate how your business currently manages payroll. Doing so will help you understand your needs and wants, identify inefficiencies, and think about areas for improvement, while allowing you to ensure that all your internal data is up-to-date and accurate before migrating it to a new platform.

This step is vital as even seemingly minor errors can lead to larger problems and compliance issues down the line. Suppose your organization misclassified a full-time employee as a freelancer or independent contractor. In that case, you’d likely make incorrect tax deductions and maybe even find yourself in a complicated legal situation, depending on the country.
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2. Choose a software provider

Next, select a payroll tool to help you address the issues you identified in the previous step. There are several kinds of payroll software to choose from, so consider your options and identify which will best suit your business:

• HRIS platforms — Some human resources information systems (HRIS) come with built-in payroll features alongside core HR capabilities. For example, the payroll tool within Leapsome HRIS launches payroll cycles based on predetermined settings and automatically pulls data from across the platform into the payroll process. This feature allows users to export Excel files in custom formats so they can send them to their accountants or integrate them with DATEV.
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• ‍Third-party providers — A third-party payroll provider will take care of most aspects of your payroll process. You’ll still need to do the groundwork each pay period when updating payroll data and employee information, but they’ll typically carry out tasks like calculating and withholding deductions, paying employees, and filing applicable taxes. Third-party payroll providers will often limit services to exactly what’s detailed in your initial service agreement, which can be tricky if unexpected payroll needs arise.
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• ‍Full-service tools — These all-in-one payroll systems are more costly options that take care of all the elements of the payroll process in a single platform. These software solutions support the full spectrum of payroll management and offer comprehensive support that can be useful for organizations with complex requirements like managing payroll across several different countries.

💡 Considering an HRIS that prioritizes core HR functions like payroll and the employee experience? We’ve got a free HRIS requirements checklist to guide your selection.

3. Prepare for data migration

Moving to an automated payroll system is a great idea, but transferring employee data can be challenging — and proper preparation is crucial for avoiding errors.

To ensure a successful and secure data migration process:

• Review and update payroll data, removing outdated information.
• Map and cleanse data, in line with data quality best practices, to ensure consistency.‍
• Test the migration process to ensure everything works before switching to your new payroll solution.
  

💡 Be sure to train your HR team to use the payroll software securely and effectively to avoid errors and improve adoption rates.

4. Transfer data to your new platform

Once you’ve audited, categorized, and cleansed your payroll data, you can transfer it to your new payroll automation platform.

It’s essential to make sure you’ve mapped your data correctly to fit seamlessly into your new payroll system. If you don’t, the system won’t work as it should, and it won’t make your payroll process as streamlined and efficient as it should be with the power of automation.

After you’ve finished the transfer, cross-check your imported payroll records against your original data to confirm that all information is accurate.
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5. Test the process before running payroll

As the saying goes, failure to prepare is preparation to fail! Performing a thorough test of your new automated payroll system on a small data set will flag any process snags or inaccuracies that could lead to issues following the rollout.

This step might involve ensuring that the payslips your software solution prepares are accurate and contain all the necessary information. It might also include checking that the tool has correctly pulled data across the platform and integrated it into your payroll process.

In addition, ask people on your team to test different scenarios to get an accurate view of the software’s performance and ensure the experience is intuitive and user-friendly. Continue to run these tests over time (or double-check that your provider is taking on this responsibility) to ensure you get the most out of your tool.

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Questions to ask when choosing payroll automation software

It may come as a surprise, but many organizations still rely on spreadsheets and even paper-based methods for payroll management. As such, many businesses are yet to embrace automation to offer their teams a much-needed solution to their payroll frustrations.

If you’re keen to integrate payroll automation into your organization’s operations, ask yourself these questions to make sure you make the best possible decision for your needs:

• Can the platform scale alongside my business?
  Growing companies need a flexible payroll automation system that can accommodate staffing, process, and legislation changes — no matter how many employees or locations need managing. Leapsome, for example, is a flexible platform that can easily scale and grow alongside your business. 

• Is this software the most cost-effective option?
  Ideally, you should choose a solution that provides all the features you need — for payroll and other HR and people management tasks — without requiring you to pay for anything you don’t need.
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• Does the provider provide adequate support?
  Whether you opt for a comprehensive HRIS platform or a third-party service, ensure the solution you select has a reputation for excellent customer service during implementation and beyond. 
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• ‍Will this tool work with my existing HR software?
  Payroll and people management responsibilities are closely linked. To maximize the value of your payroll automation software, ensure it can help you manage your existing HR tasks or integrate smoothly with your current HR processes.

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The top benefits of payroll automation

Like any business automation solution, payroll automation can help you run more productive, accurate, and cost-efficient operations. Essentially, it can enable you to do more with less and overcome the challenges that payroll processing can bring. For instance:

• Smarter resource allocation and more balanced workloads  — It’s not ideal if HR professionals spend their workdays fixing payroll issues rather than concentrating on other crucial responsibilities, like employee onboarding and engagement initiatives. Effective payroll tools mean HR team members can free up some of their time to better manage their workload and focus on the activities that contribute to business growth.
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• ‍Improved compliance — More companies than you’d think face penalties and legal problems due to non-compliance issues. Using automated software to your advantage can help you abide by the compliance requirements that apply to your business.
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• ‍Cost savings — Payroll automation means you don’t need an entire team of finance professionals and accountants to fulfill your monthly payroll commitments. Instead, this kind of software enables you to manage critical steps in the payroll process, helping you save money on staffing and outsourced payroll services.

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Empower your people teams with an automated payroll system

With payroll automation, HR teams can leave behind the manual, tedious payroll tasks of the past.

These systems handle data entry, tax filing, and payslip generation efficiently, enabling prompt and accurate payroll management every cycle.

Choosing a solution that integrates seamlessly with other HR functions can transform payroll from an administrative burden into a process both employees and HR love.

And if you’re wondering how to choose an HRIS software provider with all the capabilities your organization needs? That’s where we can help!

Leapsome’s new HRIS offers flexible payroll automation designed to grow with your organization. Combined with advanced employee engagement and people enablement tools, it can centralize all stages of the employee lifecycle, helping you build a high-performing workplace.

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