Payroll Automation: What is it, Benefits, and 5 Best Tools

If you're still crunching numbers in Excel, battling with ever-changing tax laws, and losing nights to payroll compliance worries, you're not just wasting time – you're bleeding cash. Every hour spent on manual payroll is an hour stolen from strategic planning, client relationships, or product development. Costly errors when processing payroll manually can lead to penalties.

The solution is to automate your payroll and let the system handle tedious tasks.

In this guide, we'll break down how payroll automation works, its key benefits, and how to choose the right tool for your business. We'll also review the top 5 payroll automation platforms, helping you make an informed decision to streamline your payroll process and focus on what really matters - growing your business.

What is Payroll Automation?

Payroll automation is the process of using software and technology to handle the tasks involved in paying employees. Instead of manually calculating wages, deducting taxes, and issuing payments, an automated system takes care of these activities with minimal human intervention.

While manual payroll often involves spreadsheets, paper records, and extensive calculations, automated systems digitize and integrate these processes.

Benefits of Automating Your Payroll Process

It reduces payroll processing time

Automated systems handle routine tasks like calculating wages, withholding taxes, and processing payments, which drastically reduces the time required for payroll processing. For instance, what used to take days can now be completed in a matter of minutes. This efficiency allows HR and accounting teams to focus on more strategic activities, such as employee development and financial planning.

By freeing up time from these repetitive tasks, companies can allocate resources to areas that drive growth and innovation. Ultimately, this increased efficiency contributes to the overall productivity of the organization, enabling it to achieve its business goals more effectively and stay competitive in the market. Check out how Thera helped Oceans free up 100+ hours in payroll processing.

You'll see way fewer mistakes in paychecks

Automated payroll systems greatly improve accuracy by minimizing the risk of human errors that are common in manual payroll processes. Manual calculations and data entry are prone to mistakes, which can lead to payroll discrepancies and employee dissatisfaction. Automated systems, on the other hand, use precise algorithms to ensure that all calculations, including overtime, deductions, and tax withholdings, are accurate.

This reliability builds trust with employees, as they can be confident that their paychecks are correct and timely. For the company, improved accuracy reduces the risk of costly errors and potential legal issues related to payroll mistakes. This accuracy supports the company's goal of maintaining a trustworthy and efficient operational environment.

It reduces operational costs significantly

Automating payroll processes can lead to significant cost savings for businesses. Manual payroll processing requires substantial labor, time, and resources, which translates to higher operational costs. By automating these tasks, companies can reduce the need for extensive manual labor, thereby lowering labor costs. Additionally, the reduction in errors means fewer costly mistakes and less time spent on corrections.

Over time, the initial investment in payroll software pays off through these savings. Cost savings can then be redirected towards other critical business areas, such as marketing, research and development, or employee benefits, ultimately contributing to the company's financial health and growth objectives.

Your employees' info is safe

Automated payroll systems offer enhanced data security compared to manual processes. Payroll data includes sensitive information such as employee salaries, social security numbers, and bank details, which need to be protected from unauthorized access and cyber threats. Automated systems provide robust security features like encryption, secure access controls, and regular security updates to safeguard this data.

This level of security helps prevent data breaches and ensures compliance with data protection regulations. By protecting sensitive information, companies can avoid the financial and reputational damage associated with data breaches. Enhanced data security aligns with the company's goal of maintaining trust with employees and stakeholders and ensuring operational integrity.

How to Choose a Payroll Automation Tool for Your Business

Assess Your Business Needs

Start by evaluating the specific needs of your business. Consider the size of your workforce, the complexity of your payroll processes, and any unique requirements you might have. For instance, if your business operates in multiple locations or countries, you'll need a tool that can handle multi-location payroll and different tax regulations. Understanding your needs helps narrow down the options to those that can effectively address your company's particular challenges and requirements.

Integration Capabilities

Ensure the payroll automation tool can seamlessly integrate with your existing systems, such as HR management, accounting, and time-tracking software. Integration is crucial for streamlining processes and reducing the need for manual data entry. A well-integrated system ensures that data flows smoothly between different platforms, enhancing overall efficiency and accuracy. This integration helps maintain consistency across various business functions, ultimately supporting better decision-making and operational efficiency.

Cost and Pricing Structure

Evaluate the cost of the payroll software, including any setup fees, subscription costs, and additional charges for features or support. Consider the long-term value and potential cost savings from reduced errors and increased efficiency. Compare the pricing model of different tools. A flat monthly fee based on the number of employees is ideal for stable workforces and predictable costs. While a pr payroll run charges are better for fluctuating employee counts or seasonal workers.

Security and Compliance

Payroll data is highly sensitive, so it's essential to choose a tool that takes necessary security measures. Look for features like data encryption, secure access controls, and regular security updates. The tool should help ensure compliance with relevant tax laws and regulations, automatically updating to reflect any changes.

5 Best Tools for Payroll Automation

Thera

Thera is an all-in-one global payroll and payments platform designed for fast-growing companies with international teams. It offers a comprehensive suite of services including global payroll, contractor management, employer of record (EOR) services, and accounts payable/receivable (AP/AR) solutions.

Thera can help you with:

1. Global Payroll: Thera supports payroll processing in over 135 countries, handling multi-state US payroll, benefits administration, time off tracking, and employee tax management.
2. Contractor Management: The platform facilitates seamless onboarding of international contractors, provides locally compliant contracts, and supports payments in over 135 currencies.
3. Employer of Record Services: Thera enables companies to hire employees in countries where they don't have a legal entity, managing local HR tasks, payroll deductions, and offering access to benefits and health insurance.
4. AP/AR Automation: Thera streamlines accounts payable and receivable processes, allowing businesses to pay bills and get paid through a single platform.

Pricing for Thera starts from as low as $10/user/month. Schedule a demo to get a personalized tour of the platform and ask any questions you have about how to automate your payroll.

Rippling

Rippling is a comprehensive workforce management platform that combines payroll, HR, IT, and benefits administration. It's particularly well-suited for technology companies and startups but serves businesses across various sectors.

Rippling's standout features include its ability to manage global payroll and its deep integration capabilities with other software. The platform is known for its modern interface and automation features. On the downside, some users find the initial setup process complex.

Rippling's pricing is quote-based, typically starting at $8 per employee per month, with additional costs for advanced features.

ADP

ADP is a long-established payroll and HR solutions provider, serving businesses of all sizes across multiple industries. It offers a range of products, from basic payroll processing to full-service HR management. ADP is known for its reliability, compliance expertise, and scalability.

It's particularly strong in tax management and reporting. However, some users find its interface less intuitive compared to newer competitors, and its pricing can be higher for small businesses.

ADP uses a tiered pricing structure based on company size and selected features, with costs typically starting at $59 per month plus $4 per employee for basic payroll services.

Gusto

Gusto is a popular payroll and HR platform built for small businesses and traditional businesses.

It offers a user-friendly interface and combines payroll processing with benefits administration, time tracking, and basic HR tools. Gusto is known for its ease of use. It also provides strong customer support. Limitations include slower disbursement of payments to employees.

Gusto's pricing starts at $40 per month plus $6 per employee per month for its basic plan, with higher tiers offering more advanced features.

Deel

Deel is a global payroll and compliance platform specifically designed for companies hiring contractors internationally, across over 150 countries.

Deel's strengths include its ability to handle complex international payroll regulations, currency conversions, and contractor payments. It also offers built-in HR features for global teams. The main drawback is that it may be overkill for companies only hiring domestically.

Deel's pricing is based on the number of contractors or employees, starting at $49 per contractor per month or $599 per employee per month for the Deel Grow plan, which includes full payroll services.

‍