Do SMEs need a HR & Payroll Software in 2020

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By Thushara
4 minute read ● October 04, 2016
SMEs need a HR & Payroll Software in 2020

In a rush to establish themselves in the market, SMEs often lose sight of the copious fine print 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 with statutory requirements can often mean long-drawn-out legal procedures and fines, some small and some hefty.

Such consequences can result in genuinely 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 cost-effectiveness, which is a critical aspect for SMEs.

RELATED: 5 Problems with Payroll Management

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

Human Error

Organizations that perform their payroll manually face a significant threat from human error. 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 significant human error element that could lead to an erroneous payroll rolled out. The hit to the reputation and the loss of employees' trust resulting from such errors, not to mention the legal implications, is hardly worth the trouble.


Legal landscapes, often complex and continually evolving, translate into a vast crunching for the HR and payroll executives. It is best to avoid these altogether and trust payroll management 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."

Time Consumed

The National Small Business Association (NSBA), based in the USA, found that one in three small businesses reports spending more than 80 hours - the equivalent of two full weeks of work - each year on federal taxes, including payroll taxes. Payroll, while being a critical hygiene factor for an organization's success, is governed by a relatively robust set of rules and steps, and hence lends itself well to automation. Given this, should your HR and payroll department be spending working day after working day each month calculating payroll while that time would be better spent focusing on meeting your business goals?

What does HR and Payroll software has to offer

Automation eliminates human error

HR and payroll software are automated systems that minimize the need for personnel inputs and handle all complex and simple calculations on the back end. Moreover, modern HR and payroll software are powerful enough to recognize small but critical details. These include the alpha-numeric code's accuracy that constitutes a PAN card number, employee ID, etc. That means reducing human error to a bare minimum, bordering on its complete elimination.

Improved efficiency

Improve your HR and payroll departments' efficiency by leaps and bounds with HR and payroll software. Our studies show that payroll would typically take anything between 3 to 7 working days per month when performed manually, which can be replaced with just a few hours of work once HR and payroll software is introduced. And the actual processing of the payroll takes 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 afford you the convenience of receiving automated updates without the hassle of having to keep up with the often frequent changes to statutory requirements. That 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.

RELATED: How to evaluate payroll software for small business

A 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. That has other positive fallouts, too, which arise from the availability of information that allows employees better to manage their finances, leaves, and the like.

Manage complexity and scale with ease

With growth, a company needs to grow more complex. By opting for payroll software covering all the basics, small businesses build a solid foundation for future HR processes. That reflects that small companies 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 fuss whatsoever.

In the final analysis, opting for 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.

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