Payroll is also becoming digitalized as more business requirements are met online. Paper checks and manual payroll tabulation will be replaced by paperless payroll. All you need to know about the switch.
What is paperless payroll?
Any payroll system that is completely electronic and paperless can be called paperless payroll. This software typically has fully electronic tools to deliver pay stubs, tax forms, track employee time, create payroll reports and pay employees. While no two payroll platforms are exactly the same, the best payroll management system will have all of these functions.
How does paperless payroll typically work?
Paperless payroll typically works through the following method:
1. Install paperless payroll software.
The installation of payroll software, or any HR software that includes payroll, will enable paperless payroll. Although it is easy to install these platforms, implementing them and training your staff in them can be difficult. These obstacles and solutions will be addressed later.
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Also read: How to Choose right Paystub Generator for Business
2. Register your employees for the payroll software.
After you have installed your paperless payroll system, employees will need to create an account within the program. They can access their accounts to receive pay stubs and tax forms, as well as paychecks. Your employees will need to provide certain information in order to receive the paychecks.
3. Have your employees input banking information.
Direct deposit can only be enabled if your employees add their bank information to your payroll software. Direct deposit should be possible once employees have added their routing numbers and bank accounts.
4. Integrate your payroll software with time-tracking systems.
Payroll software’s key function is to connect employees’ work hours with the payment amount they should be receiving for that period. This task is easier for many payroll platforms when they are integrated with time-tracking or scheduling tools. This integration eliminates the need for employees and you to manually enter hours into both platforms. This integration reduces the chance of errors that could result in underpayment or overpayment.
5. Make sure to train your employees about the system.
It is likely that some training will be required to get your employees comfortable with the new payroll platform. Your payroll provider may offer guided training and onboarding to relieve you of some of the burdens. You should meet with your team to discuss how you can get started.
You may need to obtain the consent of employees in some states before you can pay them electronically. Before you allow employees to use your paperless payroll system, it is important that you learn and comply with the laws in your state. All states require that you obtain the consent of your employees before you can electronically submit their W-2 forms. If employees decline to sign, they must be given paper forms.
Also read: How The Perfect Payroll Software Will Engage Your Employees Happiness
6. Generate tax forms and payroll reports.
Tax forms are required to ensure that you pay your quarterly or annual taxes on time. These forms can be generated electronically by paperless payroll software and sent to employees as required. You can also get payroll reports to further detail your tax obligations. These reports are also useful for verifying vacation time.
Types of paperless payroll solutions
The majority of paperless payroll platforms can be classified into one of three categories: employee self-service, electronic payroll records, or electronic funds transfer.
- Electronic payroll records: This is the simplest type of paperless payroll system. This platform has basic electronic payroll tracking and calculation functions.
- Self-service for employees: ESS software lets you link your electronic payroll records to other HR tools like employee handbooks or benefits. ESS platforms automate employee clock in and out, and therefore your calculation of hours worked.
- Electronic funds transfer: This category includes electronic payroll records that can be linked to direct deposit tools. EFT platforms eliminate paper clutter and allow for quick payments. EFT platforms may require employees’ consent, as we mentioned before.
9 benefits of paperless payroll
These are just a few reasons why you might want to incorporate paperless payroll.
1. Cost savings
Direct deposit can save several dollars per payroll run, according to the American Payroll Association and the Electronic Payments Association. Sending your pay stubs online rather than through the mail can save you an average of $1.20 per payroll cycle. Paperless payroll eliminates the possibility of checks being lost in the mail, and the cost of printing and remailing them.
2. Streamlined tax payments
Many paperless payroll systems will notify you when it’s the right time to create tax forms, file taxes, or create them automatically. Your platform can be used to file your payroll taxes. It will notify you when it is time. You’ll be able to get better forms and file your taxes on time in all cases. This will result in a lower risk of paying tax penalties.
3. Time savings
It can take a lot of time to cut paper checks and sign and mail them. These steps are not part of paperless payroll. The time saved can be significant. It will also help you save time when you address checks that are lost in the mail.
4. Consistent employee payments
Post office closures due to federal holidays could delay payments for employees who mail checks. While employees can come into the office to pick their checks up, it is rare for them not be unhappy about the inconvenience. Paperless payroll solves both of these problems. Automated payments ensure that your employees get paid when they should.
5. Data and records security
It is becoming more common to store sensitive information electronically rather than physically. Because electronic encryption is more difficult to break than physical locks, digital storage often includes greater security. Digital storage does not require physical storage, so even if your property is damaged by fire or other natural disasters, your records will still be intact.
6. Ample storage
Each type of physical storage has its limitations. The theoretical limit of digital storage is infinite. Although your payroll provider may limit the data you can store on your computer, you can request more and it will likely take a while before you reach your cap.
7. Eco-friendly
In order to produce 100,000 sheets, paper manufacturers must cut eight trees. If these trees were alive, they would absorb carbon dioxide and help to combat climate change. Even worse, the paperless payroll generates substantial carbon emissions at 2,000-kilowatt-hours per 100,000 sheets. Paperless payroll is a great way to reduce your company’s carbon footprint.
8. Accessibility
Employees can access their online tax forms and payroll data via their mobile devices. This convenience is not available for paper payroll. Your employees will need to access your paper records and look through them in person. Your files would also have to be unlocked for your employees. This is an extra step that both you and your employees will find annoying.
9. Integrations
You can lose a lot of time entering payroll records into your accounting software if you have automated your business accounting, but still, manually run payroll. Paperless payroll systems can be integrated with your accounting platform so that numbers entered in one program will instantly appear in the next. These integrations reduce errors and save time.
Also read: Why should Use Financial Planning Software for Small Business
4 drawbacks of paperless payroll
While paperless payroll systems are a powerful tool, they have their limitations, just like any other technology.
1. Expenses
Payroll software is expensive to use and can take time to set up and to understand. To keep your costs down, you may need to use paper if your company is not in the black. These budget templates for small businesses can help you get started with budgeting.
2. Internet issues for businesses
Paperless payroll can cause more problems than it solves if your business doesn’t have reliable internet access or computers. Although convenience and security are paramount, paperless payroll can cause more problems than it solves.
3. Personal internet concerns
Many employees may not have access to high-speed internet or computers. One in four people in certain parts of the country lacks internet access. This number drops to 6% across the country, but you cannot assume that all employees have reliable internet access. Paperless payroll will be difficult for employees without this access.
4. Bank account requirements
As 6% of Americans lack reliable internet access, so do 6%. Direct deposit is impossible because there is no bank account. This problem could be overcome by electronically storing payroll records and continuing to pay using non-electronic methods. However, you must follow state law.
Paperless payroll is often the best option unless you have bank accounts or internet access for your employees. Assess your team’s access and then decide which method would be best for you.
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