We explain how to use cloud-based technology to automate your payroll. The article will provide step-by-step instructions on how to set up and manage your payroll system using cloud-based software so you will understand how to automate your payroll and save time and effort.
What is Payroll Automation?
Payroll automation uses information and computing technology to speed up the process of tracking time, calculating basic salary and hourly wages, managing wage deductions, issuing bonuses, and more. Payroll automation streamlines and manages the entire payroll process without the need for manual intervention. It automates tasks such as calculating employee wages, withholding taxes and deductions, distributing pay, and maintaining payroll records.
Advances in accounting, bookkeeping, and time-tracking software have dramatically reduced the time and manual effort required to manage the payroll function. With technology, most of the tasks associated with payroll can be managed very quickly and effectively.
This allows even very small businesses to avoid manually tracking time, managing payroll deductions, and issuing (gasp!) paper cheques to employees. Here are common automated payroll features and functions:
Employee Information Management
- Stores and manages employee data such as personal, bank, and benefits information. These data points will include the employee's full legal name, address, and SIN.
Time and Attendance Tracking
- Integrates with timekeeping systems to automatically import employee work hours, manage overtime, and track leaves and absences.
Automated Calculations
- Automatically calculates gross wages, deductions, taxes, and net pay based on the data entered for each employee. This includes handling different pay rates, overtime, bonuses, benefits, and other variables. Generates payslips that are either printed or electronically distributed to employees. Specifically:
- Wages and Salaries: Automatically computes gross pay based on hours worked, overtime, commissions, and bonuses.
- Taxes and Deductions: Calculates federal and provincial taxes, Canada Pension Plan (CPP) contributions, Employment Insurance (EI) premiums, and other deductions like health benefits or retirement plans.
- Net Pay: Determines the final amount to be paid to employees after all deductions.
Tax Updates and Compliance
- Keeps up-to-date with the latest tax laws and updates payroll calculations accordingly to ensure compliance. This includes federal, provincial, and local tax regulations. Automatically updates to comply with tax laws and regulations. Calculates and files payroll taxes to the appropriate local, provincial, and federal departments, ministries, or agencies. Handles other deductions like social benefits and public pension deductions.
Integration with Other Systems
- Seamlessly integrates with timekeeping systems, human resources management systems (HRMS), and accounting software to pull in work hours, employee details, and other necessary data.
Direct Deposit and Payments
- Processes payments through direct deposit, reducing the need for issuing physical checks and ensuring timely payment.
Reporting and Analytics
- Generates reports on payroll expenses, tax withholdings, and other payroll-related metrics that can aid in financial planning and analysis.
- Provides customizable reports on payroll expenses, tax liabilities, and workforce costs.
- Offers insights into overtime trends, benefits utilization, and other key metrics.
The Benefits of a Cloud-Based Payroll Workflow
Taking advantage of cloud-based payroll solutions can simplify and streamline your payroll workflow. Better still, research presented by payroll specialist Wagepoint estimates that automation reduces payroll processing costs by as much as 80%.
There are dedicated online systems available for every step of the payroll process, making it easy to:
- reduce manual payroll entry for greater efficiency,
- eliminate the collection, printing, and filing of paper timesheets and
- access your employee data virtually and securely prepare your payroll from anywhere, at any time
- scale up to accommodate more employees or adapt to increased complexity in payroll needs
- regularly create backups along with disaster recovery capabilities to further enhance data safety
- integrate payroll with other HR and financial software systems, providing a more seamless flow of information across groups or teams
System integration that allows payroll data to flow seamlessly from an online time-tracking system to cloud-based payroll and bookkeeping software is the key to automating your workflow. It's important not to overlook this component, so it's wise to ensure that your systems can integrate and allow data to flow between them.
How to Automate Payroll for Your Business
You'll need to onboard your staff before you can automate your payroll system. One effective way to accomplish this is with the help of a software service like Bamboo HR.
As a cloud-based human resource information system (HRIS), Bamboo HR makes collecting, organizing, and managing employee data efficient. You can consolidate in one location each of your employee’s pay details, including:
- individual pay rates,
- personal tax forms (like Personal Tax Credits Return (TD1s) and void cheques for direct deposit),
- Social Insurance Numbers, and
- vacation pay data
Using a secure HRIS like Bamboo HR makes accessing the payroll data easy. And with all the relevant information at your fingertips, you can move on to payroll processing in three cloud-based steps.
Step 1: Assess Your Current Payroll Process
Before automating, understand your existing payroll system:
- Identify Pain Points: Note areas where errors frequently occur or processes that consume excessive time.
- List Requirements: Determine what you need from a payroll system, such as tax compliance, direct deposit capabilities, or integration with accounting software.
Step 2. Choose the Right Payroll Software
Selecting the appropriate software is crucial to the success of the transition to a new system.
Consider Features
- Automated Calculations: Software should handle wages, overtime, bonuses, taxes, and deductions automatically.
- Tax Compliance: Ensure it stays updated with federal and provincial tax laws.
- Direct Deposit: Facilitates electronic payments to employees' bank accounts.
- Reporting: Provides detailed payroll reports and analytics.
- Integration: Ability to integrate with accounting, HR, and time-tracking systems.
Evaluate User-Friendliness
- An intuitive interface reduces the learning curve.
Check Customer Support
- Be sure the provider offers the level of support you may require o during setup and once the system is up and running. Reliable support is essential for troubleshooting.
Cost
- Compare pricing models (monthly subscriptions, per-employee fees) to fit your budget.
Popular Payroll Software in Canada
- QuickBooks Online Payroll
- Wagepoint
- Ceridian Dayforce
- ADP Canada
- Payworks
Step 3. Gather Necessary Information
Compile all the data you'll need to set up your new payroll system:
Business Information
- Business number, legal name, address, and banking details.
Employee Information
- Personal details, Social Insurance Numbers (SINs), bank account information, tax forms (TD1), and employment agreements.
Historical Payroll Data
- Year-to-date earnings, deductions, and tax withholdings if transitioning mid-year.
Step 4. Set Up the Payroll System
- Configure provincial tax settings as applicable.
- Create Company Profile: Input all business-related information.
- Add Employees: Enter each employee's details, compensation structure, and tax information.
- Configure Payroll Settings: Set pay schedules (weekly, bi-weekly, monthly). Define pay types (hourly, salary, commissions). Set up benefits, deductions, and allowances.
- Tax and Compliance Setup: Input CRA tax rates and contribution rates for CPP and EI.
Step 5. Enter Timesheets into a Cloud-Based Time Tracking Software
Two useful cloud-based employee time-tracking apps are TSheets and Harvest. This software plays an integral role in automating your payroll because both your regular staff and any contractors you employ can use them to track and submit working hours.
These time-tracking tools can typically be accessed from any device, making it easy for employees to manage their time and for you to approve it. A key benefit is that they often integrate directly with your payroll system; some even have built-in systems that allow timesheets to be submitted and processed for payment.
Depending on your current payroll software, it is important to confirm before investing in a time-tracking tool that it will integrate with your payroll system. Technology integration is key.
Step 6: Export Pay Data into Cloud-Based Payroll Software
Your company has several options for exporting employee timesheets and other payroll data to a cloud-based payroll processing software.
Software like QuickBooks Online, Payworks, and Wagepoint lets you manage payroll activities remotely and offers secure, multi-user access that lets you collaborate with your bookkeeper or payroll administrator.
Other functionalities of cloud-based payroll software include:
- direct deposit capabilities,
- automatic generation of employee T4s and ROEs, and
- generation and remittance of payroll taxes directly to the CRA (in the case of Payworks)
Using one location for all your employee payroll data also means doing away with paper files and storing digital files in multiple offline drives.
Step 7: Create Journal Entries in a Cloud-Based Accounting Program
Once payroll processing for a pay period is complete, you can use your payroll software to create and export journal entries directly to a cloud-based accounting program like Xero or QuickBooks Online.
Automating this important data entry step in the payroll process saves time and ensures the accuracy of your accounting records. Your company will benefit from an up-to-date set of books, and you’ll be less likely to endure the headaches and extra costs accompanying bookkeeping errors and audits.
Step 8. Implement Employee Self-Service Portals
Enable functions that allow employees to:
Access Pay Stubs and Tax Forms:
- View and download payslips, T4 slips, and other documents.
Update Personal Information:
- Allow employees to manage their contact details and banking information.
Submit Time Off Requests:
- Streamline leave management.
Step 9. Test Your New Payroll System
Before fully implementing:
Run Parallel Payrolls:
- Process payroll using both the old and new systems to compare results.
Verify Calculations:
- Check gross pay, deductions, net pay, and tax withholdings for accuracy.
Adjust as Necessary:
- Make corrections based on discrepancies found during testing.
From understanding payroll deductions to complying with tax laws, payroll has become more complicated than ever. Discovering how to automate your organization’s payroll with the help of cloud-based technology is an enormous step forward.
But contact us if you’re not technology-savvy - or you simply can’t find the time to make the switch. As back-office payroll professionals, there’s nothing we like better at Enkel than helping small business owners take the pain out of payroll.
How We Select and Evaluate Our Recommended Software
We thoroughly research and test the apps we include in our regular workflow for Client bookkeeping services. After deciding on criteria for evaluating the software and then researching the app itself, we tested the app, noting its strengths and weaknesses. We then work with the app for at least a few weeks before deciding whether to recommend it to our readers. We use the software as it was designed for its intended tasks. For a detailed walk-through of how we select and evaluate software, please see the details of our process.
