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Why Payroll Automation Creates the Perfect Pay Stub

Why Payroll Automation Creates the Perfect Pay StubWhy Payroll Automation Creates the Perfect Pay Stub
How to handle pay stubs?

Updated: February 14, 2024

Payroll software has revolutionized payroll processes with its hefty features and automation capabilities. HR professionals leverage payroll software to provide employees with timely payments, accurate pay stubs, streamlined services, and maximize organizational efficiencies.

This article will examine pay stubs and how payroll automation can make them perfect. We'll discuss why more businesses are moving towards payroll automation, how this software can streamline everyday processes, the benefits of employee payroll portals, automation and compliance laws, and employee satisfaction.


What Is a Pay Stub?

A pay stub, pay slip, or paycheck stub is the document an employee receives with every paycheck. In it, the employee's compensation and payroll deductions for a specific pay period are broken down. Both employers and employees use pay stubs to confirm the accuracy of compensation. Lenders frequently use them as proof of income and employment before loan approval. Pay stubs also include the following:

  1. Employee taxes: This includes federal income taxes, federal Insurance Contribution Act (FICA) taxes, and state unemployment taxes
  2. Employer taxes and contributions: This includes state unemployment taxes, FICA taxes, health insurance premiums, retirement plans, and any other employee benefits
  3. Paid time off (PTO): This includes the number of hours used for vacation and sick or personal days
  4. Pay rates and hours: This usually includes overtime hours and labor costs

While no federal law mandates employers to provide a pay stub, several state and municipal governments require that companies do so. In the specific states where it's mandatory, the IRS requires that you keep all relevant employment tax records saved for at least four years. The Fair Labor Standards Act (FLSA) also mandates that businesses keep payroll records for three years and documents demonstrating how salaries were calculated for two years. Employers should use the more extended recordkeeping period if federal and state laws differ.

Because of their complexities, companies now prefer electronic pay stubs over physical checks. Employees can quickly review and catch mistakes independently, preventing conflicts between employer and employee.

Moving Towards Automation

What does a pay stub mean?

Payroll automation is the process of transitioning traditional payroll tasks to automated systems. A payroll manager has several duties, many of which can be outsourced to computerized systems. Hiring a payroll manager is particularly important for larger companies or organizations with many employees.

Below are just a few of the payroll processing tasks that payroll automation can handle:

  • Data input, including employee information, hours worked, time off used, and other metrics
  • Onboarding and off-boarding processes for new and leaving employees
  • Recording clocked hours on timesheets
  • Compiling payroll reports and analyzing the data
  • Providing insights on data analysis
  • Performing regular payroll audits to ensure accuracy
  • Ensuring proper tax filing for each employee
  • Keeping records of previous pay stubs, benefits enrollment, and 401K savings and status

In addition to these processes, automation software can also deal with employee payment ins and outs, making for a more accurate and accessible employee pay stub.

Many businesses have saved time and money by using payroll software. HR specialists have found that answering some questions through an online system can save hours of sifting through paperwork for employees. Companies no longer have to hire an entire payroll team to perform the tasks that can be automated instead. This allows HR professionals to spend more time on analysis and budgeting tasks than on menial data entry.

Streamlining the Process

Though errors can occur through an automated system, they’re the exception rather than the rule. Computers are far more adept with data analysis and optimization than humans. Automation software simplifies payroll by accurately calculating gross pay, net pay, and tax withholding. Using a payroll processing system also allows employees to clock work hours, ensuring that an employee receives the proper amount of pay for hours worked. When both functions exist in one system, it's also a lot easier to calculate overtime or holiday pay or make changes in salary.

Even if errors happen on an automated system, a payroll specialist can spot the mistakes more quickly and easily in an online system rather than on paper. Mistakes can be more easily remedied, helping a company avoid the headache and expense of reimbursing lost pay or recalculating taxes or benefit withholdings.

When it comes to taxes, automated software can be updated with changes in the tax system and adjust paychecks according to current tax laws. An automated system will also contain information on federal and state-level taxes, simplifying withholdings in companies where remote workers live in different states. Using the tax calculation features on payroll software means that your company won't have to outsource to third-party tax professionals to ensure that employee tax withholdings meet regulations.

Employee Payroll Portals

What are the benefits of an automated payroll?

One of the best things about automated payroll software is the ability to set up payroll portals for employees. Portals help payroll specialists because they save them time and frustration in chasing down employees to gather payroll information. Employees can update their information through a portal as needed, such as direct deposit information changes, address changes, or tax filing status updates.

As far as pay stubs go, payroll portals allow employees to view them and spot any inconsistencies the software or HR department may have missed. A portal is an all-in-one system, eliminating employees needing to talk to a benefits specialist or chase up another HR team member to go over timesheets, saving everyone time and money. Employees can view deductions, benefits statements, time sheets, vacation and personal time used, and tax paperwork like W-2 or 1099 forms through the portal.

Payroll Automation & Compliance

Like tax laws, payroll compliance regulations vary from state to state and at the federal level. Global companies have the additional headache of ensuring compliance for employees who live in other countries. Abiding by compliance laws is vital to your company because violations can damage your company's reputation at best and put your company out of business at worst.

Technological advances have made it easier for payroll systems to meet compliance laws worldwide, allowing businesses to expand into nationwide or even global markets. In addition to saving employers time and money in payroll processing, this particular feature of automation software can alleviate liability worries for a company.

Automation & Employee Satisfaction

Does payroll automation help with pay stubs?

Payroll issues are among the top reasons employees quit. LinkedIn estimates up to 50 percent of employees will look for a different job after two payroll errors. Most people live paycheck to paycheck and literally cannot afford mistakes in pay.

Employees continually quitting will lead to a high turnover rate, making your company unattractive. Investing in payroll automation will save you time, money, and good employees. The upfront cost of investing in automation software will quickly be absorbed in the money you save in hiring and firing processes and the costs to reimburse lost pay.

Investing in payroll software that provides employee payroll portal access can bring in several benefits. With all payroll processes included in the software, employees now have greater access to their pay stub information than ever before. Apart from verifying their correct pay and updating personal information, employees can also use the software to enroll in benefits programs, complete training, and view their 401K statements.

Employees appreciate automation software because sensitive payroll information, such as bank account numbers, social security numbers, tax information, and personal addresses, is more secure when stored in an encrypted database than on paper. Security is just as essential to payroll as accurate pay calculation.

Is Payroll Automation Worth It for Pay Stubs?

Payroll automation, when it comes to pay stubs, offers many benefits, including significantly reducing errors in pay, streamlining the payroll process, offering payroll portals, maintaining compliance, and increasing employee satisfaction. It's no wonder more companies are moving towards automated payroll processing.

Not only does it save HR departments a lot of time in processing, but automation software saves companies money by reducing employee turnover, ensuring tax compliance, and decreasing the number of payroll professionals needed on staff. Employees are more likely to stay on board when payroll is accurate and timely, boosting your company's reputation and attracting more reliable staff.

If you're considering using payroll software for your business, our blog contains various articles about choosing the right software. You can check out our reviews and comparisons to help you make an informed decision.

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