Automation helps companies with their repetitive and time-consuming business processes allowing employees to work on more valuable tasks. And thanks to the recent development of affordable cloud-based solutions, many automation tools are now accessible to most Startups and SMEs. 

This is definitely the case for your payroll process and I will discuss why implementing an automated payroll solution can help optimize the daily operations of your company and how to actually implement such a solution. 

What are the benefits of using an automated payroll solution in the Philippines?

    1. Avoid Errors

The use of spreadsheets (online templates or self-made spreadsheets) for payroll computation is a common practice for SMEs in the Philippines. But due to the complexity and fast-changing nature of the labor and tax rules in the country, I have seen many companies fail to compute payroll accurately, leaving the employees frustrated and the companies with high risks of labor cases and/or tax exposures. 

For example, did you know that for an employee working during a Rest Day which happens to be a Legal Holiday, the rate to be considered for the 8-hours regular working hours shall be 260% of the employee’s regular hourly rate? So if this employee’s regular hourly rate is Php 500/hour, then in this scenario the hourly rate will be Php 1,300/hour. And there are many other scenarios, for all types of holidays, if overtime and/or night work are involved, etc. 

An automated payroll solution allows companies in the Philippines to bullet-proof all their computations for attendance, monthly/semi-monthly payroll, taxes, and government contributions.

    2. Save Time

If properly set up, an automated payroll solution can process the monthly/semi-monthly payrolls and send the payslips in a few seconds or minutes. No more complex spreadsheets with multiple tabs and no more payslips prepared and sent manually! 

This means more time for strategic decisions (or for doing sports or with the family)!

    3. Upgrade Data Security and Privacy

Compared to manual payroll processing, most cloud-based payroll solutions will upgrade your data security and privacy by providing:

• control over how data is collected, shared, and used with multi-level access and approval

• data protection against external attackers or insiders

• proper system and data backups

    4. Increase Employee Satisfaction

An automated payroll system with clear and intuitive workflows will allow your employees to interact and receive information related to their various requests (Overtime, Leaves, etc.). Also, an employee portal with important documents and payslips will make the life of your employees easier. 

    5. Improve Reporting

With an automated payroll solution, you can automatically generate both your internal and tax/government reports. Depending on your solution provider, you should also be able to generate some customized reports.

    6. Integrate Other Processes

Additional features or integration with other software will greatly change from one system to another. The more complete solutions will allow you to link your payroll process with some of your other business processes and help you with: 

• your payroll accounting entries

• your HR processes like Recruitment, 201 file, Appraisals, Memos, etc.

• monitoring the performance of your projects or business units

• invoicing your customers when you have billable hours

What are the steps (and timeline) to transition to an automated payroll solution? 

    1. System Configuration and Setup

This first step is crucial because, for the payroll system to be relevant, the system and your internal company policies (payroll cut-offs, payroll groups, overtime/tardiness computation, leave policy, etc.) have to match. 

Proper payroll solutions are configurable and will fit most of your policies. In some instances - usually for very specific cases - you will either have to adjust some of your internal policies or your solution provider will have to customize its system (and charge additional fees).

    2. Year-To-Date Import

Since your new system will probably not go live on January 1st (or on the exact date of your fiscal period) we highly recommend you import the year-to-date payroll data into your new system. 

With this, the payslips sent to your employees will contain their correct year-to-date figures and your payroll annualization will be done smoothly. 

    3. Parallel Runs

To validate the computations of the new automated payroll system, we also highly recommend doing parallel runs for at least 2 payroll cycles. In some cases, this step will make you realize that your manual computation (or previous payroll solution) was actually not computing payroll correctly!

    4. New System Live

Once the new payroll system is fully validated you can run it live and enjoy your automated solution!

    5. Overall Timeline

A lot of parameters may impact your timeline (number of employees, the scope of the payroll solution, parallel runs, etc.) but it usually takes between 2 and 6 weeks to implement an automated payroll solution.

What are the current offers for automated payroll solutions in the Philippines? 

There are two ways to get your payroll processed using an automated payroll system: you can either use the payroll solution yourself or decide to go for payroll outsourcing. With most of the payroll solutions, you will have the option to outsource your payroll process to the outsourced payroll service provider or to one of their partners.

The best option will depend on your particular needs and resources.

    1. Use the payroll solution yourself

This option is great for companies that want to benefit from automation and cloud-based technology but still want to be in control of their payroll. 

This will require a longer setup and training phase and the payment of set-up fees. Costs can vary greatly depending on the solution provider, your specific requirements, and the number of employees. 

After the payroll solution has been turned over to you, there will be a monthly subscription fee that can be based on different variables (fixed amount, the fee per employee, the fee per payslips, etc.).

    2. Outsource the payroll processing

For companies that want to focus on their core business and do not have time to lose on payroll, outsourcing their payroll is the best solution. And outsourcing the payroll process ends up most of the time being cheaper than hiring an in-house employee, especially for SMEs with less than 50 employees. 

With this option, set-up fees are low or inexistent. The monthly subscription fees will increase compared to the first option (“Use the payroll solution yourself”) and will again vary depending on the volume and scope outsourced (inclusion or not for the example of the government reports and fillings). 

 This blog article does not constitute professional or legal advice. It is only intended to provide general information on a subject.