hr tech

HR Tech for Small Businesses in Dire need of Affordable Payroll Management

Business owners need to be practical and assess what are the low value activities that can be handled by technology
HR Tech for Small Businesses in Dire need of Affordable Payroll Management
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Co-founder & CTO, HReasily
4 min read
Opinions expressed by Entrepreneur contributors are their own.

The first priority of entrepreneurs is to scale their business, and unfortunately that leaves them with little or no time or even the budget to manage staff payroll effectively, and ensure that they are complying with manpower regulations at the same time.

To complicate things, small businesses, especially those in retail or F&B, face continuous manpower shortages. This means most of their staff are part-time, which makes calculating their hour-based pay a highly tedious and manual process.

As most of their funds are channeled into aggressive growth, business owners will typically manage payroll themselves, or delegate these tasks to an in-house or an outsourced accountant. It is rare that a small enterprise will hire a payroll manager to do this.

With most staff working on a part-time basis, a high turnover is inevitable. Keeping employee records up-to-date and accurate is a challenge, as many business owners still use paper-based methods to keep track of time-based payroll. 

Even if they invest in time attendance systems or software to record payable hours, there is no integration into the payroll calculation process. Businesses still end up managing two separate and disparate systems. 

As such, mistakes often occur. Employees can be underpaid or overpaid, and companies risk fines or blacklists by regulators if they fail to keep accurate records.

The concern for most business owners is the accuracy of payroll calculations, benefits, deductions and tax implications. But manpower regulations change frequently and companies struggle to stay on top of them. 

For example, in 2016, Singapore’s Ministry of Manpower made it compulsory for all companies to draft employment contracts for every single employee. Many of them auto-file taxes for their employees, while all of them are required by law to make pension deductions for full-time staff.

Changing regulations impose extra workload on small businesses, who are already stretched for time and resources. And if mistakes are made, it will be a long and drawn out task to sift through endless paperwork or spreadsheets to fix errors.

An option for businesses to manage these tasks is to outsource payroll to accounting firms, but this can be an expensive investment. If they attempt to do it themselves, they open themselves to room for error.  

It also makes no sense for small businesses to obtain licenses for human resource (HR) software, which can run into thousands of dollars each year. Such licenses typically have lifetime contracts, which is too much of a commitment for the dynamism of entrepreneurship.

Manpower regulations differ from country to country, and as companies expand overseas, they need to consider how their payroll software can be tweaked accordingly. There is no one-size-fits-all approach, and businesses need flexibility in this regard.

In Indonesia, for instance, 99 per cent of all businesses are micro or small setups, and where cash is the preferred mode of funds disbursement according to SME Law 20/2008, Ministry of Cooperatives and SMEs. To make things more complex, there is no single national minimum wage and statutory minimum wage rates are set at provincial and local levels. 
 

HR tech an Important Tool for Small Businesses

The concerns for most small businesses are the accuracy of payroll calculations, benefits, deductions and tax implications. Human resource technology, or HR tech, can help small business owners in payroll management, and is available as a software-as-a-subscription (SaaS).

SaaS payroll solutions are designed to incorporate various statutory rules to the payment of wages. They are usually charged per employee and on a monthly basis in non-binding contracts. SaaS also runs on mobile devices, which makes SaaS a more affordable and convenient solution compared with licensed HR software.

Technology is transforming the way HR is being carried out. Analytics are now being used to pinpoint better performers in the company, as part of staff retention efforts. Facial recognition software can assist in time-based payroll calculations as workers don’t need to clock-in and out manually with punch cards. 

It is a real possibility that technology can replace all manual HR processes and automation will be available as a one-stop solution. But, for now, business owners need to be practical and assess what are the low value activities that can be handled by technology.

Staff engagement, for instance, cannot be replaced by technology, and staff retention is essential in a time where many companies face acute manpower shortages. 

Immediate issues such as payroll, leave, claims management, and attendance tracking need to be addressed first, and applying HR tech to these areas can free up precious time for entrepreneurs to focus on more urgent matters.

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