How to Automate Payroll
Automation has fast become the watchword of Human Resources departments everywhere. In a frenetic, highly competitive global economy, businesses face increasing pressure to do more in less time, using fewer resources. Modern businesses are faced with a stark choice: evolve or be left behind.
This pressure to become more agile and efficient is prompting many businesses to evaluate the way staff approaches daily vital tasks such as procurement, reporting, and payroll. These ‘back-office’ tasks are often labor-intensive and repetitive and bring with them a high risk of human errors. After all, no matter how diligent or keen-eyed your staff, they can only focus on doing the same repetitive jobs for many hours a day.
These repetitive but essential tasks – usually thought of as low-value tasks – are where a large portion of business operating costs are sunk. Research from EY estimates that between 20% and 60% of baseline full-time employee (FTE) costs could be saved by automating this work.
There’s a clear business case for automating repetitive work as a whole but consider certain business functions. Focusing on payroll specifically, ask yourself what makes it such a compelling candidate for robotic process automation (RPA). Look at it in practical terms. And most importantly, consider how to set it up.
What Is Robotic Process Automation?
First, an explanation of what we mean by automation. Mention automation to most people and they’ll immediately think of driverless vehicles, or androids popularized in science fiction. Automation is at its most useful and accessible when tackling more ‘everyday’ tasks. Those rules-based, often tedious, and labor-intensive processes are part of every workplace, just like the payroll cycle.
Robotic Process Automation (RPA) is an automation methodology that mimics and integrates our actions within digital systems. It works via automated scripts, software agents, and bots that can complete routine tasks at a speed and accuracy unthinkable for a regular employee. This makes it perfect for replicating structured work such as data entry and capture in payroll platforms, opening applications, and inter-system communication.
RPA works best in repetitive, rules-based environments where the bot is required to perform the same task on a template, again and again. Usually, these environments share one or more of the following characteristics:
● They involve manual calculation
● They have electronic start and endpoints
● They have high error rates
● They’re data intensive
● They’re repetitive
● They require an electronic trigger
Why Payroll Is Well-Suited to Automation
We’ve explained the justification for automating repetitive tasks, but what is it about payroll which makes it so well-suited to RPA?
Ironically, payroll wasn’t always considered a prime candidate for automation. The Global Payroll Management Institute initially considered RPA unable to deal with the complexities of manual payroll processes. One of the key roadblocks it cited was that manual payroll processes often aren’t properly documented to the ‘if/then’ levels of granularity needed for RPA to mimic. Unlike artificial intelligence (AI), RPA follows processes rather than making decisions. Due to this, the absence of universal payroll documentation across various scenarios and employee types had to be addressed before an automated payroll software could be established.
Fast forward a few years and the picture is very different. The digital transformation of HR functions is rapidly progressing, meaning proper documentation is now near universal and there are plenty of tools available to help overcome the payroll automation software hurdle.
So, now we return to our initial concern with a new perspective. Payroll processing is well-suited to RPA because it’s inherently rule-based. To illustrate, consider what’s involved in the payroll process. First, you must ensure everyone is paid the correct amount, including any deductions for tax, salary sacrifice, pension contributions, or student loans. Second, you must make certain all employees are paid at the same time each month. Third, you need to keep track of anyone who’s entitled to seek payment, has recently left or joined, is on long-term leave, or many other potential factors besides.
An accountant running payroll system processes will likely spend hours checking and cross-checking this information—hours that could easily be spent on more fruitful, productive tasks.
Additionally, it’s dull, repetitive work that lends itself to errors. In most businesses, payday falls around month-end — by far the busiest period for the finance department. Throw in tired brains with careful, methodical work, and you have the perfect cocktail for administrative errors. As an example, think about how often someone in your workplace has been over- or underpaid, paid too much tax, or had the wrong student loan deduction taken.
RPA software will complete the same task at a lower cost, in less time, and, unless there is an issue with the rules or process it’s following, without errors.
The Benefits of Payroll Automation
We’ve already touched on some of the benefits of automated payroll, but let’s look at them in more detail.
Perhaps the most obvious benefit of an automated payroll solution is cost. And the financial benefits of automation are well established at this point. Some 59% of respondents to Deloitte’s Global RPA Survey cited a benefit of cost reductions since deploying automation software to their payroll systems.
This could be from improved efficiency; RPA will simply complete the process much faster. Or perhaps it’s from cutting down on the expensive and disruptive errors that tend to be a natural part of the payroll process. RPA can even help deliver value in other areas of HR, as payroll professionals are freed up to work on alternative projects and achieve their full potential.
Humans are inherently bad at repetitive, process-driven work over sustained periods. It’s not our fault: even the most laser-focused among us get tired, bored, or interrupted from time to time. Our brains crave constant stimulus and problem-solving, something rarely offered by new-starter admin or salary processing tasks.
This situation inevitably leads to ennui--a loss of focus, mistakes, and hardly a winning cocktail for productivity. RPA suffers from none of these problems. Provided it’s been calibrated correctly and is following a sound process, it will diligently work through the task it’s been set until it’s complete. This is far quicker than its human counterpart.
It isn’t just the tasks assigned to an RPA bot benefiting from greater productivity. By freeing your payroll professionals from repetitive, manual tasks, you also give them time to work on the more complex and rewarding aspects of the role, particularly those requiring problem-solving or human interaction. Your bottom line will benefit from staff working on higher-value tasks, while your people will derive greater satisfaction and enjoyment from their work--itself a productivity booster.
Return on Investment (ROI)
RPA delivers almost unrivaled ROI. Research from both EY and Deloitte found that the average timescale for ROI was less than a year. It also benefits from comparably low operating expense (OPEX) costs. RPA can easily be integrated with your existing payroll processes and systems, with no need for an expensive or time-consuming overhaul.
Much like the earlier point on productivity, an RPA bot will complete payroll tasks much faster using fewer resources than the equivalent manual processes. For single tasks, such as salary processing, this can be invaluable. But when RPA is rolled out across several payroll software processes, it can deliver dramatic efficiency improvements for your business.
Compliance And Accuracy
The first is compliance. RPA is proven to boost regulatory compliance within businesses. According to Deloitte’s Global RPA Survey, 92% of respondents saw an improvement in compliance after implementing RPA. This is particularly useful to payroll departments, where compliance with statutory tax reporting is not only essential but is often time and resource-intensive.
Closely tied to this, RPA can also enhance the quality and accuracy of your HR functions. Again, responses to Deloitte’s Global RPA survey bear this out. 90% of businesses surveyed cited accuracy as a noticeable benefit of adopting RPA.
In both cases, it’s not difficult to see why. From a compliance perspective, an RPA bot will rigidly follow the process without deviation, unless there’s an error in the logic of the rules it’s been set. It also provides a constantly updated audit trail--an essential element of compliance. Accuracy is much the same; an RPA bot following carefully defined rules and processes is simply unlikely to make mistakes or oversights.
The simplest benefit is RPA’s reliability in automating payroll software solutions. Due to its relatively simple nature, RPA is unlikely to suffer extended outages, particularly if hosted by a cloud provider with guaranteed uptime. Unlike manual processes, RPA will continue churning away, even if the office is closed or other areas of the business are suffering disruptions.
An automated payroll solution improves employee satisfaction by reducing the amount of time on repetitive and manual processes. Payroll teams are then free to focus on more value-added tasks, helping to reduce workload and stress for employees. Additionally, as it is more accurate with administrative tasks and reduces payroll errors, employees spend less time fixing issues with functions such as wages or tax rules.
Which Payroll Processes Can It Be Applied To?
We’ve covered some of the benefits of RPA, but now let’s look at which payroll functions it’s best suited to.
Employee Onboarding And Transfers
Onboarding employees across all systems is a laborious process. It often requires repetitive data input and the crosschecking of information on several systems storing payroll records. And as we’ve already discussed, mistakes usually follow where dull, repetitive entry is found. With RPA, digital workers continually update employee data management systems, inform stakeholders using automated payroll system notifications and ensure staff is paid the correct amount on time.
Salary processing is a necessary task, but it’s few people’s favorite job. It can take hours and any error with payroll calculations will be met with disgruntled employees. RPA makes the process virtually pain-free. With its ability to manage multi-system employee payment processes automatically, the process of ensuring your staff is paid on time becomes faster, more cost-effective, and more accurate.
Like salary processing, reviewing what your people are paid can be time-consuming. This is especially true when regular salary changes are the norm, in sales or other commission-based environments. A digital worker will calculate these changes for you, managing salary budgets and updating records, taking the time and effort out of the review cycle.
Managing statutory tax reporting is resource-intensive for payroll managers--more so if your business spans multiple jurisdictions. RPA removes much of this burden. Digital workers automate payroll data transfers and synchronize reporting across multiple systems, keeping you compliant no matter how complex your business structure is.
Offering your people corporate benefits is a vital part of remaining competitive and attracting the best talent to your business. However, it can also be labor-intensive for your payroll staff. Tracking who’s set up for healthcare programs, salary sacrifice schemes or extra pension contributions takes time and resources. By automating subscriptions, updates, enrollments, and delivery, RPA allows you to offer first-class benefits without the drain on resources.
Automation in Payroll: How Do You Do It?
Payroll is one of the functions most suitable for HR automation. So how do you get from RPA being a ‘nice to have’ to a vital part of the day-to-day running of your payroll department?
The first thing to note is that RPA can be molded to fit your business and people. Some organizations will start only automating certain software for employee payroll systems, like salary processing and tax reporting. This is known as ‘tandem’ RPA; so-called because, rather obviously, it involves regular employees working alongside an RPA. This approach is often best if you’re looking to build a use case for RPA.
On the other hand, some businesses dive straight into automating the entire payroll process at once. This is known as unattended RPA.
Once you’ve decided which route to take, it’s simply a case of carefully mapping out each process you want to automate. You can do this much as you would for a new starter--a simple step-by-step guide to each element of the process, including any necessary yes/no decisions. This can then be fed into the RPA software and put quickly to work.
Automation is changing the world of work, and there are few tasks riper for RPA than payroll. In accounting and HR departments, the world over payroll administration is draining resources and valuable skills that could be put to better use on more fruitful tasks. But with a more efficient, cost-effective alternative readily available, it’s time employees’ payroll purgatory becomes a thing of the past.