5 Steps to Start Processing a Paperless Payroll

What are the first things that come to mind when you think of payroll? Is it paychecks, or taxes, maybe even direct deposits, how about your 401(k) contribution? When I think of payroll many of these things do come to mind, but there is one that is in the forefront of my mind. It’s paper. For most companies, payroll is one of the most paper intensive processes.

Think about it, each step in the payroll process has some type of paper involved. Payroll software has come a long way since 2007, when software as a service first hit the payroll industry. You now can completely get rid of paper. It is possible for you to start recording, transmitting, and communicating all the necessary pay information digitally with the ultimate goal of processing a paperless payroll. Here are 5 simple steps your company can take advantage of to start processing a paperless payroll, which will help you become a more efficient company.

1. Get all your employees to utilize Employee Self Service

The first, and probably the most important step to becoming a company that processes a paperless payroll is to make sure your employees are utilizing employee self service. There is no longer a need for you to spend your precious time and money printing off paychecks or paystubs. Employee self service can also eliminate all the paper used in requesting any type of PTO (Paid Time Off). Now you don’t need managers to sign paper requests. You can get rid of the stack of paper requests that is building up and keeping track of all those paper requests during each pay period becomes easy. During one of the most hectic times of the year, (i.e. year-end) you now don’t have to worry about W-2s for all your employees.

Employee self service can be your company hub for communicating all pay and PTO information directly to your employees. This feature can keep you and your employees organized. No more lost paychecks to be reprinted. No more having to reprint out multiple paystubs upon request when your employees are looking to get financing. No more reprinting lost W-2s in April so your employees can file their taxes. Your employees will be able to access all their pay information anytime they want from any device they choose.

2. Get all your employees on Direct Deposits or Paycards

The next step to get the ball rolling towards a paperless payroll is to make sure all your employees are receiving their pay via direct deposit or paycards. Don’t wait to jump on board; with 65% of employees receiving pay via direct deposit, it really seems that this is becoming the way companies are paying their employees. As your employees utilize other personal finance technologies like mobile banking and online bill pay, it is only natural for them to want be paid this way. Once you implement employee self service as the tool to communicate your entire employee’s pay information, it will make it a lot easier to move them to using direct deposit or paycard.

The great value of direct deposits and paycards is that they are a faster and simpler way for your company to facilitate pay to employees. You can now reduce the time it takes to process a payroll by 40%, because you don’t have to spend time printing, stuffing, organizing, and reprinting lots of paper. Also an added perk is that you get instantaneous check reconciliation. Your employees don’t have to wait until the end of the payday to get their paycheck and spend time going to the bank in order to deposit it. As well, your employees will be able to be instantly gratified.

3. Get all your reports emailed to the necessary people

Since you are processing your payroll with software there is no need for you to print off reports anymore. You should be utilizing the feature in your software that automatically emails all the different and necessary payroll reports to specific people in your company. Your executives and managers can also login into the software at any time pull standard reports or create custom ones with current data rather than having to wait. You no longer have to print off and distribute a bunch of reports after each payroll. This also removes the need of having to store all the reports in a bunch of filing cabinets.

Moving to a paperless payroll will allow you to be able to make decisions from data in real-time. No longer will your CFO have to wait until the end of the month for historical reports. Rather he or she will be able to see how the company is trending in relationship to all the different payroll expenses. Your Operations Manager will be able to monitor how the company is trending in relation to overtime hours. Your HR Manager will be able to see how employee’s PTO is trending for the year. Moving away from historical reporting towards forecasting as the basis of your decision making is an amazing aspect of going paperless in your payroll process.

4. Get all your hours imported

In order to dive all the way into a paperless payroll you will need to start having all your employees hours imported into the payroll. Ditch those paper timecards and start having your employees punch in and out on an electronic time clock or a computer. You can even go more high-tech by having your workforce clock in and out by getting their face or fingerprint scanned. This will allow you to be able to import your hours directly into your payroll software rather than spending tons of time totaling up all those paper timecards and then manually keying them in.

Not only does this save you time, but you reduce the chance of error. The American Payroll Association estimates that there is somewhere between a 1% and 8% chance of human error in computing paper timecards. For example,

  • 50 employees punching in and out on paper timecards
  • average work week of 40 hours at a $10 per hour rate
  • with a 1% error rate

Your annual cost of your payroll staff to manage paper timecards is about $3,120 with a $10,000 lost due to human error. If you start adding up wasted and lost time throughout the year you are looking at it potentially costing you upwards of $38,120. That is a lot of money that can be saved if you make the transition to paperless time collection.

5. Get all your files exported

The final step to a paperless payroll is tying up all of those loose strings of file transfers (payroll journal entries, 401k deductions, payroll taxes) between your payroll software and your other vendors. You can start by exporting all your payroll journal entries into your accounting software so that you can post it to your general ledger in a jiffy. Not only can your payroll journal entries be automatically taken care of, but all of your 401(k) deductions can be automatically uploaded to your specific provider also. The perks of using payroll software are that FUTA and SUTA taxes will be automatically deducted and paid on your behalf.  This means not having to fill out paperwork and then mailing it in.

When you utilize the export feature in your payroll software you are able to cut out most of your double entry, which means you don’t have to maintain multiple databases. You can now stop printing out reports that are used to key in the information, which you uploaded to your other vendors. This export ability of the software can keep you out of the 40% of businesses that have a payroll tax penalty on average of $845 annually. This export feature not only will help you process a paperless payroll, but like many of the other features it will make the whole process easier while saving time.

Greater Efficiency = Greater ROI

The goal of your payroll and HR departments is to continue to be as efficient as possible while providing the best benefits for your employees to help them be as productive as possible. This is very difficult to achieve but you can start with trying to implement these steps that will definitely help with being more efficient. Remember to educate the entire company about how going paperless is a benefit for both the employer and the employees. Let them know that you are moving in this direction as an investment in them and not just a cost cutting tactic by the company.

You don’t have to dive headfirst into going paperless. Rather you can do it in stages, (I recommend this) map out an implementation plan that lays out what each phase looks and a timeline for when. While you are moving through your implementation phases make sure that paper options are available for a set amount of time so that your employees are able to adjust. Also make sure you are checking in regularly with both the early adopters and those who are pushing back on the change. Going paperless will definitely help you become more efficient, but even more important your payroll process will have a greater ROI.