In the rush to establish themselves in the market, SMEs often lose sight of the copious fine print that is involved in HR and payroll management. That these tedious tasks hold no allure for today’s growth-focused SME does not help things either. To miss out on a single deadline or failure to comply to with statutory requirements can often mean long-drawn-out legal procedures and fines, some small and some hefty.
Such consequences can result in truly unpleasant situations for SMEs. The IRS estimated that approximately 40 percent of small businesses incur an average of $845 per year in IRS penalties. That is to say, small businesses have nothing short of a $4.5 billion payroll tax problem.
However, things needn’t stay the same. With the arrival of HR and payroll software on the scene, the situation has changed dramatically. Today, it’s possible to roll out an error-free and timely payroll without compromising on cost-effectiveness, a critical aspect for SMEs. Yes, you can have the cake and eat it, too.
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Even so, we found that SMEs are still in two minds when it comes to HR and payroll software. Here’s why you shouldn’t be.
Key reasons why manual HR and payroll management is costing your organization its revenues, reputation and efficiency
Organizations that perform their payroll manually face a big threat from human error. From the correct entry of PAN card numbers to the calculation of statutory deductions, such as PF, PT and ESI, have all got to be done manually. This naturally brings in a big element of human error that could lead to an erroneous payroll being rolled out. The hit to the organization’s reputation and the loss of the trust of employees that result from such errors, not to mention the legal implications, is hardly worth the trouble.
Legal landscapes that are often complex and constantly evolving translate into a vast amount of number crunching for the HR and payroll executives. It is best to avoid these altogether and trust an HR and payroll software that ensures precision in every respect. In the words of business services expert Rhonda Abrams, "One of my rules is if you have one employee, get a payroll service. The penalties for screwing up are so much more expensive than the cost for payroll."
The National Small Business Association (NSBA), based in the USA, found that one in three small businesses report spending more than 80 hours - the equivalent of two full weeks of work - each year on federal taxes, which include payroll taxes. Payroll, while being a critical hygiene factor for the success of an organization, is governed by a fairly robust set of rules and steps, and hence lends itself well to automation. Given this, should your HR and payroll department be spending man day after man day each month calculating payroll while that time would be better spent focusing on meeting your business goals?
What a software has to offer
Automation eliminates human error
HR and payroll software are automated systems that minimize the need for inputs by personnel and handle all calculations - both complex and simple - on the back end. Moreover, modern HR and payroll software are powerful enough to recognize small but critical details such as the accuracy of the alpha-numeric code that constitutes a PAN card number, employee ID, etc. What this means is the reduction of human error to a bare minimum, bordering on its complete elimination.
Improve the efficiency of your HR and payroll departments by leaps and bounds with an HR and payroll software. Our studies show that, typically, payroll would take anything between 3 to 7 man days per month when performed manually. This can be replaced with just a few hours of work once an HR and payroll software is introduced. And the actual processing of the payroll take so more than a few minutes. The software achieves this through a combination of automation and in-built rules and formulae.
Automated updates mean effortless compliance
Cloud HR and payroll software affords you the convenience of receiving automated updates without the hassle of having to keep up with the often frequent changes to statutory requirements. This means your HR and payroll team is spared the need to follow government notifications in obscure spaces in newspapers, gazettes and government departments. The changes are coded into the back end and the software is updated automatically and puts in place new limits and checks in keeping with the changes to legal requirements.
Sharp reduction in queries to HR
When handled manually, endless employee queries around HR and payroll usually take up a sizeable chunk of the HR team’s time. HR and payroll software, on the hand, by making available employee information around HR (leave, attendance, etc.) and payroll (payslips, tax-related information, etc.) to the employee in question (through an employee self-service portal) brings in unprecedented transparency and ownership and sharply reduces queries to HR. This has other positive fallouts too which arise from the availability of information that allows employees to better manage their finances, leaves and the like.
Manage complexity and scale with ease
With growth, a company needs grow more complex. By opting for a payroll software that covers all the basics, small businesses build a solid foundation for future HR processes. This is reflected in the fact that small businesses with one to 50 employees represent 42% of payroll software buyers. Moreover, systems such as cloud HR and payroll software easily lend themselves to scaling without any fusses whatsoever.
In the final analysis, opting for an HR and payroll software is a cost-effective means for SMEs to ensure the organization stays lean and efficient in its processes while also making sure all your compliance needs are met without missing a beat.