Why you should make the switch to payroll software

Article6 mins read111 views | Posted on August 1, 2023 | By Aarthi

Different businesses process their payroll differently. Some use spreadsheets, some payroll software, while others outsource it to third parties. Each of these methods has certain pros and cons. Let's compare and analyze what they mean for a business and which would be the best solution for everyone.

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What is payroll software?

Any software application that helps you process your employees' payroll is a payroll software application. There are on-premise solutions that can be installed in a computer in your work location. This type of software would need you to be physically present in the place where the application is installed. Cloud-based payroll software, on the other hand, let you access and process your payroll anywhere in the world.

Most businesses, especially ones that have been around for quite some time, would likely have transitioned from using physical ledgers to write and process their employees' salaries to using spreadsheets on a computer. Since the process is pretty much the same, the change isn't an exceptionally difficult one.

Payroll software might seem new on the outside, but they come with quick and easy set-up instructions, bulk import capabilities, and contextual feature hints making the transition even simpler. The tool has been engineered to bear the brunt of all the complications on the backend, so payroll admins open their systems to a beautifully simple and intuitive user interface. Cloud payroll software solutions offer built-in compliance, automatic bank transfers, and EMI loan deductions from your employees, besides removing the possibility of errors from an otherwise tedious process.

While spreadsheets definitely have a lot of pros, payroll software is infinitely better for processing payroll. Choosing to use spreadsheets in 2023 would be as primitive as rubbing rocks together to start a fire while the rest of the world has moved on to lighters. Modernization of any field is inevitable so realizing that and migrating to a great payroll software is conclusively the best option.

The difference between payroll software and spreadsheets

Payroll software Spreadsheets
Automatic bank transfer of salaries can be done on the first or last working day (LWD) of every month according to your pre-set configuration so employees are paid with minimal hassle to the employer.Manual bank transfers need to be done on their pay day. (This also includes the payroll admin completing a ton of procedures and formalities within the stipulated time but more on that later.)
Compliance with all the relevant laws, statutes, and regulations are built into the system.No pre-programmed compliance with taxation laws.
Updates and addenda to the existing legal framework will be automatically coded into the system by the software's developers in the backend.Your HR/payroll admins will have to stay on top of all the changes made to the laws, factor in what that means for your business numerically, and do the necessary calculations.
When employees take out loans, you can deduct the EMI from their monthly salaries automatically.Not possible in a spreadsheet.
Organizing and compartmentalizing your business's payroll data has never been easier with the software doing most of the work for you.Organizing data is a separate task that will take time of its own.
You get ready-made salary templates with standard components filled in so you just have to enter the numbers.You have to read up on regulations and enter the salary components yourself.
You can generate payslips with inputted data within a matter of seconds.You have to draft payslips yourself manually.
Payroll software comes with a comprehensive view of employee-wise TDS details and helps you track your organization's TDS liabilities.You'll have to do all of this yourself in a spreadsheet.
Form 24Qs automatically generates via the software which you can then easily upload to the right government portals.You have to manually create Form 24Q that meets all the specifications required for it to be uploaded to a government portal.
Payroll software, like Zoho's, comes with an integration to Zoho Books, a powerful accounting platform. Through this integration, you can get journal entries vis-a-vis your employees' salaries automatically posted to your ledger.You have to manually enter your employees' salaries' journal entries.
Save yourself work by letting the software calculate the number of days your employees have taken off and accordingly pay them the right amount after factoring in their loss of pay (LOP) details.You have to count the number of days they've taken off, what each day's salary is, and then do the math to arrive at the amount to then pay it.
Comprehensive reports provide you up-to-date information on everything relevant to your payroll.This can't be done with a spreadsheet.
Pay all your employees in a single click from the software.Again, this is not possible in a spreadsheet.
Generate Form 16s in a few seconds.You have to create Form 16s manually.
Let your employees access all of their salary-related information from one convenient location in the form of an employee portal.While you can send your employees their salary slips and other documents via email, you don't have the option of consolidating all of those files in one bespoke location.

Why you shouldn't outsource payroll

Any company's main objective is to execute its core operational activity, whether that be making soaps or providing business consulting services. Payroll, while important, does not come under most companies' main operations. So, some might think outsourcing a secondary business process like this to someone whose primary job is processing payroll might be easier and more cost efficient. While these are two arguments in favor of outsourcing, there are plenty of reasons to keep it in-house. Some of them are:

Privacy

Salary information contains some of the most sensitive and confidential data a business collects second only to its sales and profit numbers. It is highly crucial that it all remains protected. If the wrong people get their hands on your employees' PAN and TAN, it could prove catastrophic for them and your business. As professional as they assure you they are, it still isn't a good idea to let third parties have access to your company's payroll data.

Accountability

When your in-house payroll admin's salary is directly dependant on his routine work, chances are he's going to do a really good job. This increases their sense of responsibility and thereby reduces the chances of errors happening.

Point of contact

If there is even the slightest mishap, or if an employee is confused about their salary, they can contact their payroll admin directly and get their questions answered. In this scenario, it is much easier for an employee to talk to a colleague as opposed to reaching out to an unrelated third party from a payroll company.

Cost

It can be more expensive to outsource your payroll to a third party. In-house payroll costs will only include the salary for your payroll staff plus the price of whatever tools you're using to process payroll. Whereas outside companies might include hidden fees and add-on charges that you'll only find out about after you've signed up for their services. The service provided with these high costs won't justify the premium you pay.

Compliance

Payroll laws and components differ from state to state and, at times, even city to city (HRA for instance). So finding a payroll service provider that will cover all your industry-specific, location-specific, payroll needs and requirements will be a hard task. Automatic compliance in Zoho Payroll makes this otherwise difficult process yet another thing that you don't have to worry about.

Professionalism

Small things snowball to make a big difference. A detail as small as adding your logo to your employees' payslips can make your company look more professional and their payslip more formal and legitimate. You can do this with ease using payroll software.

Time management

You can expect your in-house payroll admin to be better at managing time than a third party because they also live and work in the same environment. Since they're familiar with the work culture, they will be more effective at getting pay checks delivered on time than an outside company.

Unreliable vendors

While they promise to cover all your payroll needs, they might not be able to scale up with the growth of your business. They are also used to working in a certain way with rigid templates that might not suit your business. Tardiness, errors, and privacy breaches are examples of issues you can face if working with an unreliable vendor.

To sum up

In a world full of choices, it can be difficult to decide which payroll option is the right one. New entrepreneurs as well as business veterans feel equally conflicted about processing payroll. It can get confusing with pros and cons on both sides of the argument but rest assured, after doing your research, you will see why you should make the switch to payroll software.

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