Edu BlogAugust 22, 2022

Why payroll systems are important

Why payroll systems are important


Before the development of payroll software, businesses were forced to process their payrolls manually, a time-consuming, laborious process that often resulted in errors. Today, payroll systems are no longer considered a luxury, but are acknowledged throughout the world as a business necessity.

This is borne out by research done by the American Payroll Association, which reveals that an automated payroll system reduces payroll processing costs by as much as 80 per cent, mostly owing to the reduction in errors.

Payroll processing is certainly not the most exciting part of running a business, but without it the company is doomed to fail. Whether you employ one employee or many thousands, and whether they are paid on a salaried, hourly or contingent basis, having a payroll system in place that manages the entire lifecycle of payroll operations is critical to ensuring that their salaries and taxes are managed accurately and efficiently, and in compliance with legislation.

What does a payroll system do?

Today’s companies rely on payroll software to automate their payroll process and manage all the functions and tasks associated with employee compensation and tax. This includes tracking time and attendance, calculating salaries and tax deductions, as well as medical aid and pension or provident fund contributions.

A good payroll system is automatically updated when payroll legislation changes and notifies the employer when certain tax forms need to be filed.

Features of a payroll system

Payroll software can be used by any organisation, regardless of its size and the industry in which it operates. It’s important to note, however, that not all payroll systems are the same and many business owners make the mistake of choosing a payroll platform based on cost alone, only to discover down the line that it lacks certain critical functionality and consequently fails to meet the needs of the business.

Because payroll is the lifeblood of running a successful company, the payroll platform you choose should first and foremost enhance the accuracy of your company’s payroll.

The following features are also key to reducing errors and streamlining payroll processes:

Time and attendance tracking

A payroll system must be able to accurately calculate how much you owe your employees, based on how much time they worked and their hourly/weekly/monthly salaries. The system should also keep track of any holiday, sick or other leave taken, as well as overtime worked. Taxes and contributions to medical aid and pension or provident funds should also be factored in. All this information must be seamlessly processed to pay employees accurately and on time when payday comes around.

Legislative compliance

Payroll and employment legislation is not only complex, but changes frequently. Staying on top of this changing legislation is difficult, to say the least, and calculating company taxes and filing returns and reports on time is challenging. Miss a deadline and your company could be slapped with a hefty penalty.

Payroll platforms provide information and reminders about compliance requirements and regular updates ensure that the organisation always has the latest tax and other relevant information on hand. Some systems are programmed to automatically generate reports and returns, which means all the employer has to do is give their approval before submitting.

Employee self-service

Employee self-service (ESS) capabilities are incorporated into many of today’s payroll systems and enable employees to view and download their salary slips on any internet-connected device, from any location.

Read our article to find out more about how ESS can enhance your business.


Robust security features are a must-have feature in the payroll platform you choose. The correct safeguards must be in place to ensure that data integrity is never compromised. This includes leveraging the best benefits of hybrid cloud computing.


It is important that your payroll system not only integrates seamlessly with other software systems your company uses, such as a human resources information system, but that it can also grow with your business.


The ability to view historical information and generate reports is essential in your payroll system. Your chosen platform must be able to generate the general and customised reports you need quickly and easily, while delivering the assurance that the reports are accurate and up to date.

These articles on choosing and investing in a payroll system are also helpful.

Why is a payroll system important for your business?

Employees are the backbone of any business and deserve to be paid accurately and on time, every time. Employees who are paid late and inaccurately will soon begin to question the financial stability of the company. This could lead to a decline in employee morale and overall productivity, resulting in a high staff turnover, which is costly to the business.

Investing in a payroll system that automates the payroll process will mitigate errors, ensure compliance and save valuable time, thereby creating space for other essential business projects that generate revenue.

Additionally, a positive work environment will be created which will positively impact the company as a whole – establishing the organisation as a reputable and stable employer and ultimately enable it to attract and retain a solid talent pool.

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