Assuming that you are here after understanding payroll stuff I shared in the first part, today I will take you through various payroll processing methods and benefits of using cloud-based payroll software. Depending on the size of the team and budget, an organization can use one of the following methods for payroll processing:

  • Payroll software
  • Payroll outsourcing
  • MS Excel for payroll management

Using MS Excel for payroll processing

There are several features making MS Excel ideal for the human resource department of small-scale and medium-sized businesses. There is no need to spend money on payroll software if there are only a handful of employees in the organization. Outsourcing payroll processing also makes no sense in case it is a small team. When you are using MS Excel for payroll management, you will use mathematical formulas for doing payroll computation. An organization needs not to spend anything on MS Excel based payroll management. However, there are some limitations of using MS Excel for payroll processing.

  • Data is entered manually which increases the chances of errors.
  • It is difficult to add and remove employees and related payroll data.
  • Chances of omission and data duplication are high.
  • Tax and labor laws keep on changing. You will have to monitor these updates for accurate statutory deductions such as EPF, ESI etc and TDS.

Outsourcing Payroll Management

There is someone else taking care of payroll management, a third party agency. The organization provides salary, leaves, attendance and other details of every employee to the third party and now it is the third party agency’s job to calculate payroll and handle statutory compliance. With payroll being a crucial undertaking, organizations are reluctant to outsourcing payroll. Privacy and transparency are other concerns making payroll outsourcing not in the good books of an organization.

Payroll software

This an option utilized by big companies. Unlike spreadsheet, it is easy to collect data from multiple sources, analyze and process data and calculate payroll. This software comes with different modules to serve different needs of the human resource management department. For example, it has one module for leave and attendance management, one module for HR management and one module for employee self-service portal. It all depends on the size and needs of your business. You can find software that is for payroll management only.

Features of a payroll software

Automating payroll management means faster and accurate payroll management plus compliance with rules and regulations. This is possible because of the following features payroll software must have:

Easy to use

You are investing in a payroll management system to avoid dealing with cumbersome payroll functions. If that software demands some sort of training then spending money on the software makes no sense. Therefore, the payroll software should be comprehensive and straightforward. HR managers should be able to use the software without any training and guidance. The software should come with documentation.


Software should be able to accommodate the increasing needs of a business. As the size of the organization increases, the amount of data also increases and you need more processing power. Make sure that you can upgrade the software at a reasonable price.

Time, attendance and leave management module

The human resource management department needs to track employee arrival and departure time. If the organization is using a biometric scanner then it should be integrated with the payroll software. This module of the payroll management software tracks the working hours of individual employees. Then there are paid and unpaid leaves which include sick leave, annual leaves, casual leaves and other holidays. Leave management integrated with the payroll management software helps HR in crediting leaves to the accounts of employees and employees can use this module to apply for leave.

Accounting module

In addition to payroll information, the system records all financial transactions such as individual employee’s payroll components such as tax dues, reimbursements and other costs. In case this module is not available, the accounting department will have to resign to doing accounts management manually or need separate accounting software.

Why Cloud-based Payroll Management Software

Data accessible round the clock

Opting for a cloud-based payroll management system allows you to access your data anytime and from anywhere. Simply login and you are good to go. You can access cloud-based payroll systems on your computer, tablet and smartphone as well.

No limitations of an on-premise system

The biggest advantage of the cloud-based system is that you need not to worry about data loss due to flood, fire or any human error. On the other hand, when you are opting for an on-premise payroll system, you will have to bear initial set up cost and maintenance cost. You will also have to bear the cost of upgrading hardware and software with the increasing size of your organization. In case of a cloud-based system, you are purchasing plans. If the size of your organization is increased, you just have to upgrade your plan.

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