It wasn’t long ago when employers were timid about going digital. Especially in the Philippines, where trust, honor, and respect are hallmarks of work culture, the employment relationship goes beyond the confines of the four walls of the office or production floor.
This culture that existed between worker and boss extended beyond the mere transaction of giving someone’s pay stub. An employee’s salary used to be handed personally, through an envelope, and workers ‘punched in and out’ to document their workday. Back then, there was an overtly physical dimension to payroll management. For some companies, this was their state barely a decade or two ago.
Today, however, payroll processing has transformed and evolved to address the needs of both a modern workplace and an inclusive society. A company’s workplace must adapt to new technologies. Otherwise, competition will cause workers and their customers to churn. Rapidly changing policies in taxation, social welfare, and privacy rights must also be considered.
Are you planning to move from manual payroll processing to automated solutions? Read on to know more about the challenges of manual payroll and how shifting to an HRIS is a logical step forward.
Pain Points of Manual Payroll Processing
Overwhelms HR, Finance, and Admin Staff
Manual processing burdens HR and admin teams when they’re swamped with paperwork, calculations, and compliance requirements. Instead of having the bandwidth for tasks requiring creative and strategic thinking, ‘payroll week’ comes on like a tsunami that submerges talented people deep into repetitive tasks.
The overwhelming nature of manual payroll adversely impacts a worker’s job satisfaction. According to the 2023 Australian Payroll Association Survey, two out of five professionals working in payroll suffer from burnout. As to what contributed to their burnout, 8% cited the lack of payroll resources, and 7% cited the lack of investment in the payroll function.
While hiring a dedicated payroll analyst is common—even in companies that do invest in payroll automation—employing more of them as the business scales is a guarantee. Fulfilling manual processes, such as data entry, time tracking, and record-keeping are limited by the number of workers a company employs to do them. But to keep payroll administration costs low, employers must be strategic when it comes to hiring.
In effect, a tug of war ensues between overworking payroll analysts versus staffing up.
Compromises Security of Employee Information
Data breaches continue to be a threat in the digital age. In 2023, for example, the country’s agency for universal healthcare suffered a cyberattack that compromised the information of 13 million people. To add, in 2020 alone, over 43 million data breach incidents in the Philippines were reported.
Having a manual payroll system, per se, doesn’t mean that employee data is less secure. Some might even argue that keeping things pen-and-paper would ensure that outsiders couldn’t hack their way through. They might contend that moving to automated payroll systems would expose employee information to cybercriminals.
What these proponents have yet to consider, however, is the human factor that undermines security. With every spreadsheet required to hold data, there is the potential for threats such as malware and ransomware. And even if the company hadn’t used any digital copies to keep all of this information, people entrusted with access to these files could go rogue and become a security threat themselves.
Manual processes introduce gaps where security issues can seep in, especially when only bare-bones security features, such as password-protecting files and making backups, are available as recourse.
Prone to Inaccuracy Despite Being Resource Intensive
The great paradox in manual payroll processing is that even though it sucks productive man-hours from your business, it’s a system that’s prone to inaccuracies. According to research by Experian in 2015, on average, U.S. organizations believe that a staggering 32% of their data is inaccurate. Because of this, 9 out of 10 respondents believe their revenue is affected by inaccurate data due to wasted resources, lost productivity, or wasted marketing and communication expenses.
Unfortunately, having a manual payroll system doesn’t increase confidence in one’s data. The more people manually entering data, making computations, and keeping records, the higher the chances of typographical errors, miscalculations, and misclassifications.
HR, finance, and admin staff who dive straight in and do all the grunt work should be lauded for their valiant effort. They’re well aware, however, that any minor error brings about tremendous consequences. Applying the wrong tax bracket could lead to an angered worker, escalating to job dissatisfaction, and become the last straw for them to resign. Even the slightest human error, like missing SSS contributions from a few employees, could lead to fines and penalties.
Knowing that these scenarios can happen without much controls in place nag at those who have to do the tedious manual work. This is too much pressure for anyone.
Fortunately, for the vast majority of businesses today, automated payroll management is a viable option. Here are some major advantages when you automate your payroll system.
Benefits of Automated Payroll Management
Scalable and Flexible
Automated payroll systems are not intended to replace payroll analysts and related admin workers. However, they enable companies to hire fewer payroll administrators even as the business scales. With payroll software that reduces or eliminates the need for manual data entry on the part of HR or finance staff, these workers can instead focus on more value-adding tasks, such as monitoring trends in attendance and interpreting reports.
Payroll management software is also often flexible and able to adjust to specific benefit structures and regulatory requirements. Since these structures and requirements are subject to change, a system admin or payroll officer can make the one-time switch in settings and then never have to sweat over it again.
And if the rules somehow take a turn the following week, then it’s a matter of adjusting those settings once more. Imagine training payroll staff on a new income tax regulation that they’re able to apply for the next pay period, but then the Supreme Court decides on a case that overturns those rules just weeks later. What a nightmare for manual processing, right?
The scalability and flexibility of automated payroll allow businesses to keep payroll admin costs low and let them adjust on the fly for any new requirements.
Able to Generate Reports Accurately and in Real-time
Having data within grasp is a huge advantage for organizations. For manual systems, generating reports on attendance, attrition, and performance that would otherwise take days, if not weeks, could be done with just a few clicks. If management is on the cusp of a crucial decision and reliable data is required on demand, then staff could generate it even within short notice.
However, automated payroll systems and other HR software are not perfect, so this ‘gap’ is where your best people come in. Armed with transparent data, HR professionals are able to know which teams have worked extended hours, allowing them to stay ahead of burnout and then suggest solutions.
Finance staff can also stay on top of labor costs and overtime spending. Timely report generation enables an organization’s leaders to use data as an asset, allowing them to make more informed and nuanced decisions.
Convenient for Stakeholders
An added advantage of managing payroll in an automated system or an HRIS, is the self-service benefit. Instead of managing leave applications and pay discrepancies through forms routed via email, payroll software solutions allow organizations to manage these on the same system. With these integrated systems, employees can file for Personal Time Off (PTO) seamlessly, and their approvers can receive prompts both in the platform and their inboxes.
HR managers and executives can also define access levels, which can be customized for some systems. Establishing tiers and workflows not only helps companies reduce the admin workload for their managers, but it also ensures information is kept tightly. This lowers the chances of sensitive information, such as salary, getting leaked and causing a stir among employees.
Auditors, external or internal, can also leverage the system to pinpoint inconsistencies. They can create detailed audit trails that check every action taken within the system. This helps them identify any red flags for suspicious activity, making it easier to hold violators accountable.
Suffice it to say, that moving from manual to automated payroll management satisfies multiple stakeholders enough to consider it a worthy investment.
Enables Better Security Management
Lastly, automating your payroll system allows you to manage security according to your needs. Beyond internal protocols, available solutions are required to adhere to regulations in data privacy and information security in whichever region they serve. Here in the Philippines, for instance, the improper disposal of sensitive personal information merits imprisonment for 1-3 years and a fine of at least PHP 100,000.
All of this means that you can specify the level of security based on your business requirements, while staying confident of the security baseline that is government-mandated and built into these systems.
The use of payroll management software doesn’t make a company free from cyber risks, but it does help them manage these risks. Managing security often boils down to strengthening the frontlines, that is, equipping employees with training and tools. Automating payroll is one way to reduce any added workload from manual processing, which consequently frees up employees’ tasks to better prepare for cybersecurity threats.
What is Unified Data, and What Value Does It Add for Companies?
Unified data, or centralized data, comprises all of a company’s external and internal data, and indicates the entire scope of its information needs. An organization that has unified data can merge multiple fragmented data sources into a singular view.
In the context of payroll management software or HRIS, unified data allows a company to break down the silos dividing HR, finance, admin, and business units in terms of employee and company data. Having unified data is impossible in manual payroll systems, and this represents a great loss.
With cloud solutions like Payruler, your HR team can generate payroll reports remotely, all while helping your finance and compliance staff ensure that updates in government tax regulations are being followed. With data storage and backup through the cloud, managers and executives can also rest assured that security risks are kept at bay.
Winning Over the Organization’s Decision Makers
Having considered both the pitfalls of manual processing and the benefits of automation, you’re still left with the daunting task of winning over your organization’s leaders.
How will you convince them that this digital shift is not only favorable but imperative?
It might help to highlight that moving to digital only increases the level of trust, honor, and respect baked into your work culture. The physical aspect—the Bundy clocks, paper cheques, and cash envelopes—may all be falling down the wayside as companies undergo a tech transformation, but this doesn’t mean that the values we hold dear disappear with them.
After all, organizations are run by people. And ultimately, they’re the ones who determine a company’s values.
Automated systems won’t magically make payroll processing perfect and tamper-free. Their transparency, however, just might help bring the good out of people.
Payruler can steer your team toward the digital shift. Ready to go all in with automated payroll management? Discover the seamless transition to automated excellence with Payruler. Book a personalized demo now to witness firsthand how our cutting-edge HRIS transforms the way you handle payroll or reach out to us at hello@payruler.com for more information.