From Paper to Paperless Payroll: Why Automation is Perfect for SMEs

payroll management system

Many startups are showing the world that they have what it takes to succeed nationally. Some of these companies have even made their brand successful in the international waters. Usually, small businesses do not face difficulty in managing employees and their data with less than 10 employees to handle. But, once they start growing, the number of employees goes from 10 to 100 really fast.

This is when managing the employees, their data, their attendance records, their performance evaluations, and most importantly, their payroll calculations become extremely tricky. Mistakes occur, costly blunders happen, miscalculations are seen, and so on.

This is what every company faces when they are using manual processing by using spreadsheets and paper. The American Payroll Association estimates an 8% human error rate when manually processing payroll, which can lead to significant issues and costs for organizations.

On the other hand, businesses using integrated payroll and timekeeping solutions on average beat their revenue targets by 7%, demonstrating the cost-saving potential of automation by using software for payroll.

The Challenges of Traditional Payroll

Labor-Intensive Processes

Think of data entry, you have to add all data manually by collecting it from different places. Similarly, when calculating payrolls, specifically by ensuring compliance with tax and labor laws, it is common practice that the process is done at least twice to make sure that any kind of error is not made.

Both these examples show how manual work takes a lot of energy, concentration, and time. These labor-intensive processes are not only time-consuming but also require a higher number of employees to manage them.

Don’t you think SMEs can use these valuable resources elsewhere, for multiple processes, instead of a few manual tasks?

Prone to Errors

Mistakes are not unusual or strange and these happen all the time by anyone. However, manual payroll processing shows a higher risk of errors. These errors usually end up costing millions if not thousands of dollars at the end.

For example, a simple typo while calculating payroll can result in overpayments, underpayments, and compliance issues. Some studies reported error rates to go as high as 8% in manual payroll calculations.

Compliance Issues

Every country has its own set of legal laws and relevant regulations. This fact is important because today freelancing, remote work arrangements, and other similar options are available in the market for employers and employees simultaneously.

In such a situation, non-compliance becomes more common. Legal issues, fines, and other similar stress-causing elements become common in handling various business activities manually.

Limited Scalability

Scalability is the ability of a business to expand and manage the expansion in a well-organized manner. On one side, expansion and scaling the business is full of opportunities and better for the future.

On the other hand, the ability to manage this expansion and scaling means the possibility of struggling to expand the human resources and manage them.

So, with manual processing, limited scalability is the obvious outcome. In addition, a traditional payroll system becomes challenging to handle when your company is growing but automation needs to get the preference.

Benefits of Payroll Automation for SMEs

Now that you all know why manual payroll is a headache for businesses, let’s talk about the benefits of using payroll automation for SMEs  by using the payroll management system below:

Time and Cost Savings

One of the most exciting reasons for SMEs to adopt automation is saving both time and money. When an automated payroll system is accepted by businesses, it not only helps in making the calculations faster but also helps in reducing the rate of error leading to lower costs.

On average, a 40% reduction in time usage was seen after adopting automation.

Accuracy and Error Reduction

With an automated system in place, it becomes easy for the employees and employers both to ensure accuracy and error reduction throughout. It means that the mistakes often part of manual data entry or payroll calculation decreases. In addition, automation leads to a substantial accuracy guaranteed by up to 95% as compared to manual processing.

Enhanced Compliance

A recent survey by the Payroll Association found that 85% of SMEs improved their compliance record within the first year of using payroll software. The reason is pretty simple to comprehend.

Once you start using automation, like HR and payroll software, you will see that the businesses will no longer have to worry about non-compliance issues or associated costs.

Scalability and Adaptability

With process automation at the front, all businesses will find that expanding in new markets, diversification, recruiting more people to ease the expansion, and so on will not only become easier but also efficient and effective.

Payroll software is fundamentally flexible in nature. It means that the changing needs of SMEs will be easily managed. You may face an increase in the number of employees when expanding into new markets.

This indirectly means that you will not have to calculate new benefits and deductions for the new and old recruits. By using the automated systems, handling it becomes seamlessly fast, and less costly; both time and money wise. This compliance is undoubtedly a game-changer for SMEs determined to develop and grow.

The Future of Payroll Automation for SMEs

As technology continues to advance, the future of payroll automation for SMEs looks extremely promising. Some of the emerging trends include AI-driven payroll, blockchain-based security, and more extensive integration with HR and accounting systems. SMEs should prepare for these developments to stay competitive in the evolving business landscape.


If you are thinking about going paperless in your payroll management system, then consider this to be a sign. Undergoing this transition from paper to paperless payroll is not only more convenient but also a necessity for small businesses in 2023-24.

Saving time and cost, improving compliance and scalability, and improving accuracy are what businesses need today, and all of these are exactly what payroll automation provides.

Going further into the future, using process automation promises strategic growth for SMEs. Among all processes, payroll automation has the ability to offer the highest reduction in errors and costs. You can try payroll automation for free by using demos or trials of HR and Payroll software available in the market.


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