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The Benefits of Paperless Payroll

The Benefits of Paperless Payroll
Credit: One Photo/Shutterstock

No longer does running payroll require you to print out and maintain mountains of paperwork. Today's online payroll systems help small business make the process completely paperless.

Rather than having to print out payroll reports, pay employees with paper checks, and record time and attendance via a paper time sheet, online payroll programs let you handle all of these tasks electronically.

"Paperless payroll is a term that describes how an entire payroll can be processed without generating any paper," Eric Wade, a paperless payroll expert for payroll system provider Paychex, told Business News Daily. 

"There are multiple components of a paperless payroll, including recording employees' time electronically, employees being paid via electronic payment methods (versus a negotiable paper check), delivering pay stubs to employees electronically, payroll reports being generated electronically and delivering W-2s to employees electronically," he said.

Editor's Note: Looking for information on payroll systems? Fill in the questionnaire below, and you will be contacted by payroll providers ready to discuss your payroll needs.  

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While having all of these tasks completed online might make some small business owners nervous, there are a variety of benefits to running a paperless payroll. Most notably, it is an extremely green practice, Wade said.

"Switching to paperless payroll is environmentally friendly, requiring less paper and printing resources," he said.

The benefits, however, are far from limited to environmental advantages. There are also tremendous cost savings.  Wade said research from the Electronics Payments Association and the American Payroll Association (APA) found that businesses save between $2.87 and $3.15 per pay run by paying employees electronically, such as via direct deposit, instead of via paper check. Businesses save another $1.20 by providing pay stubs online, the research found.

"In addition, the APA indicates that if a check is lost and needs to be replaced, there can be an additional cost savings of $8 to $10 per replacement check," Wade said.

Paperless payroll systems also help ensure small business owners are paying and filing their taxes on time, said Tomer London, co-founder and chief product officer for the payroll system provider Gusto. Paperless payroll programs file all local, state and federal taxes automatically, so business owners no longer have to remember to send in forms or make payments, London said.

"Running payroll manually is a time-consuming, complicated and error-prone process," London said. "As a result, one-third of small business owners get fined every year for filing or paying their payroll taxes incorrectly."

Wade pointed to several other benefits of paperless payroll:

  • It saves time – Employers save the time they would have spent preparing checks, delivering checks to employees, resolving lost and undelivered checks, fixing check-cashing problems, and dealing with fraud issues. Businesses also save the time they would have spent answering employee questions that the employees could resolve by viewing their information online.
  • Reliability – Employers are able to pay employees on time regardless of holidays or unexpected events, such as bad weather or natural disasters. Employees know they will be paid on time and will not need to come into work to pick up their checks or wait for their checks to be delivered. 
  • Accessibility – Employers have convenient access to their payroll data online or via a mobile device. Employees also have convenient access to their payroll data, which often includes personal information, direct-deposit information, paystubs and W-2s.

London said paper-based payroll is also inherently manual and compartmentalized while paperless systems allow for numerous integrations with popular accounting software, like QuickBooks and Xero.

"People no longer need to manually record payroll entries," London said.

Before going completely paperless, however, businesses should first make sure that their states allow for it. Wade said certain states require employers to offer paper checks as a payment option, while other states mandate that employees be able to opt out of online paystub delivery.

In addition, the Internal Revenue Service requires that all employees consent to receiving their W-2 forms online. Employees who don't consent must receive a paper copy.

If you are interested in learning more about what to look for in a payroll system, check out our payroll system buyer's guide. If you know what you want, we would encourage you to read about what we recommend as the best payroll systems for a range of business types.  

Editor's Note: Looking for information on payroll systems? Fill in the questionnaire below, and you will be contacted by payroll providers ready to discuss your payroll needs.  

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Chad  Brooks
Chad Brooks

Chad Brooks is a Chicago-based freelance writer who has nearly 15 years experience in the media business. A graduate of Indiana University, he spent nearly a decade as a staff reporter for the Daily Herald in suburban Chicago, covering a wide array of topics including, local and state government, crime, the legal system and education. Following his years at the newspaper Chad worked in public relations, helping promote small businesses throughout the U.S. Follow him on Twitter.