A Day Ahead, Not a Single Dollar Short: a Quick Guide to RPA in Payroll

According to The Workforce Institute, 49% of American workers will start searching for a new job after just two issues with their paycheck. And there’s a good reason for that: 72% of employees admit they would experience financial difficulties if their paychecks were delayed by 1 week.

Severe as delays and errors are, even experienced HR and accounting teams can have a hard time preventing them. That’s because of the inescapable challenges all payroll professionals know too well: changing regulations, country- or state-specific tax policies, and loads of employee data. On top of that, there are dozens of moving parts like overtime, raises, or holidays that vary for every single employee.

These difficulties lead to mistakes, and mistakes cost money. In 2020 alone, Internal Revenue Service fined US companies $6 billion for payroll errors. The fact that 34% of small businesses run payroll manually using spreadsheets raises the risk of penalty even further.

Luckily, there’s a solution: RPA payroll automation. Let’s investigate the technology, its benefits, payroll processes that can be automated, and examples of companies that thrive thanks to RPA in payroll.

Payroll automation refers to the technology used to streamline payroll processing and management workflows. Payroll automation software can help payroll teams better handle tasks like entering and updating employee info, filling forms, and sending payments.

RPA (Robotic Process Automation) is one of the most common automation technologies. It uses automated scripts (or bots) that operate on preset rules to perform defined tasks faster and more accurately than human workers. RPA excels at handling processes that are based on rules, repetitive, involve large datasets, and are prone to errors.

The payroll cycle consists of many tasks that fit this profile and could benefit greatly from RPA automation. For example, in Deloitte Global Payroll Benchmarking Survey, 30% of respondents named the manual entry of inputs as the most time-consuming task in the payroll process. But what exactly can companies get from payroll process RPA?

Automation solutions such as RPA have already found their way into many industries. In the Global Deloitte RPA Survey, 53% of respondents said they have already started using or implementing RPA. This includes sectors where daily operations involve large volumes of sensitive data, such as healthcare or banking.

HR is no different. We’ve already described how to use RPA in recruitment to make better decisions in a shorter time. Running the payroll process is another essential function of HR teams, usually shared with finance and accounting departments. How can they all take advantage of the payroll process RPA?

Calculating, auditing, and submitting payslips is a time-consuming process that involves dozens of files and documents, usually stored in various formats and places. This creates a lot of room for time and cost inefficiencies.

Automated payroll solutions have a proven track record of decreasing these inefficiencies. It’s estimated that implementing automation can reduce the costs of payroll processes by up to 80%. This is achieved by improving access to necessary documentation, eliminating manual data input and duplicated tasks, handling complicated calculations, and tracking changes to employee information.

A study by Ernst & Young found that 1 in 5 payrolls in the US includes errors. While 80% accuracy is enough in some areas, in payroll, it just won’t cut it. The same report reveals that each payroll mistake costs organizations $291 on average.

Even the best HR specialists make mistakes when dozens of factors, such as deductions, overtime, bonuses, or PTO, must be considered. With payroll process RPA, you will no longer need to worry about entering this data manually, which will reduce the number of mistakes. Self-service is another convenient feature of an automated payroll system that allows employees to update their details independently to prevent further errors.

Another thing to consider is staying compliant with constantly changing regulations that vary between countries and states. This became even more problematic after the pandemic when companies became more open to hiring remote workers. As a result, 74% of organizations must use dedicated payroll systems for each locale rather than a centralized one.

Here, automation can help companies observe policies through automatic tax filing, data entry, and policy updates. Automation will also make migrating to a single, centralized, and global payroll system easier.

Tax documents, deductions, leave records, employee data, reimbursement forms… We could go on listing all documents used in the payroll process. Even worse, they usually come in several formats and are scattered across various sources.

Payroll process RPA makes it easier to store and organize your payroll data digitally, allowing HR professionals to retrieve the necessary data quickly. This improves not only the daily payroll operations but also reporting. Additionally, automatic encryption and security settings help you keep sensitive information safe.

On a more personal level, making sure that your staff is paid the correct amount on the correct date is a fair thing to do. Businesses that fail to do that put themselves at risk of hurting their employees’ trust and motivation or even losing them completely.

In that context, warranting timely and error-free payouts is necessary for businesses that want to preserve their workforce and keep morale high. Automation helps these organizations achieve their goal by streamlining the payroll team’s work and reducing delays.

But it’s important to be aware of challenges with RPA implementation.

RPA is a flexible tool. With the help of experienced RPA developers, it can be used to expedite tasks across the entire payroll workflow. Here are 12 payroll processes to automate with RPA:

1. Managing payroll data — Automation software keeps payroll records up-to-date across all systems as soon as changes are made.
2. Time tracking — Payroll software will pull and verify timecards from all systems and ask for approval if it finds any discrepancies.
3. Employee onboarding and transfer — Automation expedites cross-verification, data entry, and updates across multiple platforms required in both processes.
4. Calculating overtime and bonuses — Based on employee information and timesheets, payroll software will quickly determine any extra rates needed to calculate the final salary.
5. Termination processing — RPA bots can regularly scan the company’s HR systems for terminated employees and automatically calculate their final paycheck.
6. Tax management — The payroll system will calculate the withholding amount from each payslip and automatically file the necessary taxes.
7. Direct deposits — On a set date, the payroll algorithm will send the calculated and verified sum to employees via direct deposit.
8. Calculating salaries — Payroll scripts will quickly calculate the correct amount, factoring in overtime, bonuses, pay raises, benefits, and more.
9. Post-close administration — RPA can take over fiscal year-end tasks like tax reconciliation, handling leftover payroll journal entries, or reconciliation against benefit invoices.
10. Benefits administration — No matter how sophisticated your benefits program is, payroll automation will enable you to easily track and update subscriptions and enrollments.
11. Payroll reporting — Automation software allows HR professionals to generate various payroll reports with one click for faster and more informed decision-making.
12. Employee self-service — With automation, employees can independently handle operations like personal information management or employment verification, saving your HR team time and effort.

Find out what can be automated in all accounting processes with RPA.

Companies from various industries have adopted RPA to streamline their payroll operations. Here are three examples of organizations that already benefit from automated payroll processes.

As a part of its digital transformation efforts, Lenovo has set out to improve its payroll processes. Here, the challenge was navigating a network of interdependent systems like SAP, Workday, and PeopleSoft, replacing manual tasks that the company relied on for years.

To do that, UiPath RPA bots were deployed to several workflows, including tax processing, expense reimbursement, payroll calendar scheduling, and employee self-service. As a result, Lenovo’s HR team has freed up 6,000 hours yearly, while its process efficiency has increased by 5-8 times.

Leaders at BAE Systems, a defense, aerospace, and security company, recognized the need to improve their HR and finance operations. That included payroll, which faced two main problems: multiple payroll cycles and a limited number of clerks who could access the system simultaneously.

Using the Automation Anywhere platform, BEA Systems delegated uploading, processing, and updating data to RPA bots. Overall, the company has automated 50 processes, speeding up the payroll data upload by 7 times and saving over 2,600 hours per year.

The best testament to the potential of RPA in payroll is that even specialized payroll outsources use it themselves. Such was the case of Global Upside Corporation.
The company worked with an automation partner to identify issues and create an automation roadmap. Based on this analysis, RPA bots were tasked with generating, verifying, and distributing payslips, collecting data, reporting, and more. Automation has led to a 15% reduction in payroll leakage, compliance issues, and manual errors and has increased employee performance by 10%.

Payroll automation is an excellent example of one change making a company-wide impact. Relaying manual payroll tasks to RPA bots doesn’t just help your HR and finance departments work more efficiently; it also increases the quality of life for every single employee.

If you want to see how payroll process RPA can help your business, Flobotics is the right partner. Tell us about your business, and we’ll launch a free automation trial suited to your needs. Get started with RPA in payroll today!