Payroll automation: What are the benefits, and how do you set it up?

Running payroll is one of the most critical responsibilities for any business, but it’s also one of the most time-consuming. From calculating salaries and deductions to filing taxes and issuing pay stubs, even small errors can lead to compliance risks, unhappy employees, and wasted hours for payroll teams. For small and mid-size businesses, where resources are often stretched, managing payroll manually can quickly become overwhelming.

Which is why payroll automation is now changing the game. By using an automated payroll system, your company can streamline the entire payroll process, from data entry and payroll calculations to tax filing and reporting. Instead of juggling spreadsheets and deadlines, your payroll team can rely on secure software to handle the heavy lifting, saving time, cutting costs, and reducing the risk of errors.

But how?

In this guide, we’ll explore everything you need to know about payroll automation: what it is, how it works, the benefits it brings, and how to set it up in your organization. So let's jump straight in.

What is payroll automation?

Payroll automation is the use of software to manage and streamline payroll tasks such as employee data collection, payroll calculations, tax filing, and pay stub generation. Instead of relying on spreadsheets or manual processes, an automated payroll system handles these steps automatically, reducing errors, saving time, and improving compliance.

This is all done with minimal input from your payroll team. And it gets smarter; modern payroll management systems can even manage benefits contributions, file taxes, and integrate directly with general accounting ledgers and HR tools.

This makes payroll automation more than just “software that cuts paychecks.” It’s a complete approach to payroll management that reduces human error, improves compliance, and frees up time for your finance and HR teams to focus on higher-value work.

What are the benefits of payroll automation?

For small and mid-size businesses, payroll can feel like a constant balancing act: staying compliant, paying employees on time, and avoiding costly errors.

Payroll automation software takes much of this weight off your team’s shoulders, allowing you to:

1. Save time on repetitive tasks

Manual payroll is tedious. Collecting timesheets, calculating wages, entering data, and filing taxes can take hours every pay cycle. Payroll automation software streamlines these steps, allowing your payroll team to run payroll in minutes instead of days.

2. Reduce costs and improve efficiency

Fewer manual processes mean fewer errors, less rework, and lower overhead costs. By cutting down on administrative tasks, you can reduce the size of your payroll team headcount, or free them up to focus on higher-value initiatives.

See how this eCommerce SMB saved $60,000 on payroll costs, and reduced payroll tasks by 77% by automating with Remote

3. Strengthen your payroll security

Manual payroll processes — especially those run on spreadsheets — create opportunities for fraud, lost files, or unauthorized access. Automated systems like Remote offer built-in data encryption, audit trails, and role-based access controls, ensuring sensitive employee and company data is protected. How does Remote Payroll protect your data?

4. Improve your employees' experience

Employees value transparency and easy access to their pay information. With an employee self-service portal, staff can download pay stubs, update personal details, and review tax documents without needing to contact HR. This reduces administrative bottlenecks and improves overall satisfaction.

5. Ensure accuracy and compliance

Errors in payroll calculations can result in employee dissatisfaction, compliance risks, and financial penalties. Automated systems minimize these risks by applying tax updates automatically, ensuring accurate deductions, and managing benefits contributions.

See also: What is the real cost of payroll errors?

6. Streamline your tax filing and reporting

Payroll automation ensures taxes are filed correctly and on time. Many systems integrate directly with government agencies to submit payroll taxes automatically, reducing tax compliance risks and saving businesses from costly late fees or audits.

7. Integrate payroll with your wider business

Modern payroll management systems sync directly with general accounting ledgers, HR software, and benefits platforms. This eliminates duplicate data entry, improves reporting accuracy, and gives you a clearer picture of your workforce costs.

Manual payroll vs automated payroll software: A comparison

So how exactly does payroll automation work?

Most automated payroll systems work by replacing manual payroll processes with software that handles each step automatically. Instead of HR or finance teams entering data and running calculations by hand, the system collects information, processes payments, and ensures compliance, all with minimal oversight.

Here’s how this works in practice:

1. Data collection
   Your employees' details (such as hours worked, salaries, overtime, benefits, and tax information) are stored in the payroll system. This data often syncs directly from time-tracking tools, HR software, or self-service portals where your employees can update their own information.
2. Payroll calculations
   Based on this information, the software automatically calculates gross pay, deductions (i.e., taxes, insurance, and retirement contributions), and net pay for each employee. As well as saving time, this reduces the risk of human error and helps ensure accurate payroll processing across the workforce.
3. Payroll processing and pay stubs
   Once the calculations are complete, the system issues direct deposits and generates digital pay stubs. Employees can access these documents anytime through the employee self-service portal, which improves transparency and reduces administrative requests.
4. Tax filing and compliance
   The best payroll software stays up to date with tax regulations, and files payroll taxes with the appropriate authorities on your behalf. This helps your business stay compliant and avoid penalties. How does Remote Payroll keep you up to date?
5. Integration with accounting and HR systems
   As mentioned, most payroll systems integrate with general accounting ledgers and HR platforms, ensuring that payroll data flows seamlessly across the business. This integration reduces duplicate work and improves financial reporting accuracy.

By automating these steps, your payroll team spends less time on repetitive tasks and more time on strategic work, while employees gain faster access to accurate pay information.

How to automate your payroll

Moving from a manual payroll system to an automated one doesn’t have to be complicated. By following a structured process, you can transition smoothly while minimizing disruption to your team.

Here’s a step-by-step guide:

1. Assess your current payroll process

Start by mapping out how you currently run payroll. Identify bottlenecks, repetitive tasks, and areas where errors frequently occur, such as payroll calculations, tax filing, or managing pay stubs. This will help you understand where automation can have the biggest impact.

2. Choose the right payroll software

Before you select a provider, be sure to do your due diligence and choose one that is trusted, reliable, and meets your business size, budget, and needs.

Here are the top payroll automation features to look for when choosing a vendor:

• Automated tax updates and filing
• Direct deposit and pay stub generation
• An employee self-service portal
• Integrations with general accounting ledgers and HR tools
• Strong data security measures (such as encryption and access controls)

Your payroll software provider should also be scalable, cost-efficient, and have a robust support system of experts in place whenever you need them.

And if you have (or plan to have) employees in different locations, global expertise is a must.

3. Migrate your employee and company data

Input your employee payroll records, salary details, tax information, and benefits into your new payroll system. How does Remote make switching easy?

4. Integrate with your HR and accounting software

Ensure your payroll software connects with your existing HRIS and accounting platforms. This integration eliminates duplicate data entry and improves the accuracy of financial reporting.

Note that with Remote, you can manage all your hiring, payroll, and HR needs in one centralized system, regardless of where you hire. Learn more.

5. Let the payroll software handle compliance and tax filing features

The software will handle tax filing and calculate, withhold, and file payroll taxes on time, reducing compliance risks and helping you avoid penalties.

6. Train your payroll team and employees

Even with automation, human oversight is essential. Train your payroll team on how to manage the system, run reports, and handle exceptions.

Then, show your employees how to download pay stubs, update their personal details, and access tax forms without contacting HR. This improves efficiency, saves on resources, and boosts employee satisfaction.

8. Monitor and optimize

Finally, run a few payroll cycles and monitor the results. Check for discrepancies, review the time saved, and gather feedback from your employees. You can then use these insights to fine-tune your payroll system over time.

How can Remote help?

Remote Payroll is designed with all of this in mind. Our proprietary payroll engine and centralized platform take on all the heavy lifting for you, regardless of where you hire (or plan to hire), saving you time, resources, and money.

To learn more about how you can benefit from global payroll automation, speak with one of our friendly experts and discover how exactly we can transform your business today.