The Hidden Costs of Manual HR Management
- Human Resources
6 min. Read
Last Updated: 07/16/2021
Table of Contents
Organizations cannot easily manage what cannot be easily measured — and the ability to measure workforce data is crucial for your business to be able to measure business trends, forecast, or quickly drill into the root cause of an issue, such as increased overtime costs or absenteeism. And, the value of having insight into what is in store for your business as a result of clear, historical workforce trends cannot be understated.
Unfortunately, manual HR processes can make it difficult to measure and analyze your workforce data in an efficient and timely manner, and can put you at an increased risk of human error. Instead, your HR department may be forced to spend an inordinate amount of time performing tasks that could be completed automatically, and in a fraction of the time.
If you're ready to better manage HR productivity — and improve your company's bottom line — it might be time to ditch your manual HR processes for an automated HR solution. Automated HR software can make it easy to spot trends and minimize inefficiencies, and can help you track important information such as demographics, labor costs, turnover rates, and more. Also known as human capital management (HCM) systems, these solutions can ultimately save you both time and money, making them worthy of consideration.
4 Hidden Costs of Manual HR Processes
The role of human resources goes far beyond hiring, onboarding, and tracking employee time and attendance. HR professionals must also make informed business decisions, uncover trends, and develop HR policies, all while ensuring compliance with OSHA, COBRA, and state unemployment insurance (SUI) regulations, as well as federal, state, and local employment laws and regulations (or risk steep penalties for non-compliance). At some businesses, HR professionals may also be tasked with managing payroll, which includes entering time worked, paying employees, and handling tax reporting and remittance.
And, as important as it is to complete these tasks, it's even more important to complete them accurately. Inaccurate paychecks can result in disgruntled employees, and tax reports filed late or with erroneous information can result in costly penalties. OSHA violations can also be costly, and violating employment laws and regulations can lead to civil and criminal penalties. Unfortunately, no company is immune to human error, and an HR department completing these tasks manually makes them even more prone to error.
Let's take a closer look at some of the ways your manual HR processes may be costing you time, money, and good employees.
According to the Paychex Pulse of HR Survey, HR leaders report that they spend four full weeks per year on manual tasks. It's no secret that lost productivity can directly impact your bottom line by reducing net profits, and increasing your expenses. And, if your HR department spends the majority of their time on tedious tasks, they'll have little time to focus on the overall business strategy.
Repetitive tasks like onboarding, handling time-off requests, and managing payroll can take a lot of time when completed manually. The good news is that these repetitive tasks are also easy to automate with the right HCM solution in place. And, by offering self-service options, HCM technology grants employees the ability to handle many of these tasks independently, freeing up time for your HR team.
Proper and accurate payroll management ensures that your employees are paid on time and that your business has met its various legal obligations. Running payroll, however, involves multiple steps, including reviewing work schedules and time entries, calculating overtime, determining tax and benefits deductions, and calculating net pay.
Because you must complete multiple steps to process payroll — in addition to handling confidential financial information, like bank account numbers — completing payroll manually not only can slow your HR team down, but leaves your business open to costly human errors.
Fixing those errors can be another time-consuming process, and frequent payroll mistakes can leave employees unhappy. Payroll errors can directly impact employment taxes, as well, and can lead to inaccurate reporting and tax payments, potentially carrying a hefty fine.
Time Tracking Mistakes
In addition to payroll errors, manual time and expense tracking can also expose you to mistakes and, potentially, state or federal fines. For example, under the Fair Labor Standards Act (FLSA), employers are required to keep accurate records on "certain identifying information about the employee and data about the hours worked and the wages earned." Some information that must be accurately maintained for non-exempt workers under the FLSA includes:
- Daily hours worked
- Weekly hours worked
- Regular hourly pay rate
- Overtime earnings for the week
- Any additions to and deductions from the employee's wages per pay period
- The total amount of wages paid each pay period
Manual HR processes related to the FLSA's time tracking requirements can potentially expose you to federal fines and penalties.
As an employer, it's your responsibility to remain compliant with state and federal employment laws and regulations and to comply with all state and federal taxes, including accurate employee withholding. This is not always an easy task; being compliant requires you to be up-to-date on many different business laws, including federal and state minimum wage and overtime regulations. And, it is especially important that you fill out all required forms correctly, and by their due date (think: remit tax payments) to avoid incurring costly penalties or fines.
Benefits of Investing in Digital HR Tools
If you're only managing a few employees, you may be able to get away with doing HR tasks manually as a short-term solution, but even small businesses can benefit immensely from digital HR tools.
Investing in HCM software can result in a more efficient system for managing human capital, decreasing errors, and increasing productivity. As a result, HR professionals can spend more time shaping business strategy, and less time performing administrative tasks.
Whether you have 20 or 2,000 employees, some HCM software systems can be tailored to fit your unique business. These are just a few of the areas where your business can benefit from digital HR processes:
- Payroll — Using HCM software can save you time and improve the accuracy of your payroll. With multiple payment options available, as well as easy integration with electronic timekeeping, your employees can be paid accurately and on time. Combining timekeeping with payroll also may result in fewer input errors and more accurate employee paychecks, while built-in safeguards alert you to possible payroll issues before they happen.
- Compliance — Using HCM software can also help you remain compliant with tax and regulatory agencies. For example, an automated payroll system can drastically reduce input errors which, in turn, can help ensure that tax reporting and payment remittance is accurate.
- Reporting — HCM software provides improved reporting for critical and core workforce data, like Payroll. It also offers HR analytics that can tell you a lot about your business, by making it easy to identify trends and do simple forecasting, which normally requires spending hours buried deep within spreadsheets or lost in individual payroll runs. With all of your HR and payroll data in one place, HCM software can also make it easy to access analytics for disparate data such as hiring, turnover and labor costs, as it is already integrated. This data then be used to quantify time to full productivity for news hires or, inversely, lost productivity due to increased turnover and high volumes of newly hired workers. Add to that the ability to easily download data, construct reports, and view the data that you need — including cash requirements, tax deposit notices, and job costing information — and HCM technology becomes a must-have.
- Professional Development — Your employees are your most valuable asset, and should be treated as such. Professional development tools and easy access to a catalog of online courses and online training options, can keep your employees engaged and feeling valued.
- Onboarding — HCM software can make it easier to add newly hired employees to the system and get needed information entered. Not only that — some HCM software offers an employee self-service option, which allows your employees to take greater ownership over the onboarding process, as well as other administrative tasks. Using a system like this, new employees can securely provide or update their personal information, fill out and adjust direct deposit authorization forms, make benefits selections, and more, which can improve the accuracy of this data and save your HR team time. It can also make it easier to track key metrics such as employee demographics, labor costs, and employee turnover.
In addition, HCM software can provide complete benefits management, which may include group health insurance, individual health insurance, dental and vision insurance, health savings accounts, and retirement services. It can also make it easier to manage tax savings plans such as section 125 cafeteria plans, including a flexible spending account (FSA) or a premium-only plan (POP).
Ready to Automate Your HR tasks?
Cost considerations are often paramount for any business owner or financial decision-maker before deciding to invest in new technology. Although it may require an additional cost upfront, HCM software is a crucial investment for any business and can reduce the costs of manual HR processes in the long term by helping to streamline HR operations, improve data accuracy, and increase productivity.
Get Help From a Dedicated HR Professional
With Paychex HR Services, you get the benefits of an entire HR department, without the expense of having to build one in-house. Let our team of dedicated HR professionals provide benefits administration, payroll, and compliance support, so you can spend more time focusing on growing your business.
And, Paychex PEO, our most complete HR outsourcing solution, offers an even greater range of HR services — including group health insurance, 401(k), and liability insurance. Our PEO services allow your business to leverage economies of scale, making these top-tier benefits more affordable, and more attractive to potential employees.
If you're ready to improve the efficiency and accuracy of your HR processes, it may be time to consider investing in an automated HCM solution from Paychex.