Manufacturing Payroll Automation (Ultimate Guide)

Tired of old payroll software and manual processes? Ready to drop the spreadsheets and manual processes?

With complex requirements, various worker types and high turnover, managing payroll for manufacturing businesses can be tricky...

So, whether you're a seasoned payroll specialist looking to optimise your process or just surveying the payroll software landscape, below we'll break down the benefits of payroll automation, the options out there and their pros/cons as well as some specific considerations for manufacturing businesses.

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How automated payroll software works

In short, automated payroll software manages and streamlines your payroll process - automating everyday tasks like calculating wages and paying employees.

Payroll software is mostly used by HR/People, Payroll and Finance departments to cut down on manual admin, reduce errors and take the stress out of HMRC compliance.

On-premises vs cloud-based solutions 

There are two broad categories of payroll software:

On-premises solutions: You're probably familiar with (or even using) this kind of solution already. This software would be installed on your company's local servers and computers - so it stays within your physical premises.

Cloud-based solutions: These are hosted on remote servers - so it can be accessed on any computer via the internet. This means you can manage your payroll process from anywhere with an internet connection.

Although traditional on-premises software is seen as marginally safer than uploading data to the cloud, it usually requires regular maintenance and updates to keep on top of compliance and calculations - and generally just more manual legwork overall.  

Here in the UK, cloud-based payroll solutions are becoming increasingly popular since they're more flexible, automated and scalable than on-premises software.

Here are the benefits your manufacturing business can expect from using modern payroll software

Significantly reduced manual admin

Automating admin tasks will have an instant impact on the amount of time you need to allocate to running payroll. Teams using Pento, for example, tend to cut time spent on payroll by around 80%.

Improved accuracy and error reduction

Using automation software will take most of the stress out of staying HMRC compliant. Could-based software should automatically update to adhere to the latest legislation and help make sure you submit reports on time.

Automatic HMRC + employee payments

Most solutions will completely automate payments to both employees and HMRC. This means your employees will get paid on time and you'll avoid the risk of any HMRC penalties.

Scale your payroll alongside your business

Increasing payroll complexity usually goes hand-in-hand with business growth. The more people you have joining each month the more flexible your payroll process will need to be.

Whilst not all payroll solutions are created equal, software like Pento was built to manage any level of complexity so that payroll never becomes a blocker for growth.

Streamlined year-end reporting

Modern, automated payroll software will simplify year-end reporting tasks, like generating P60s and submitting annual returns to HMRC.

Integrate with the software you're already using

If you've already got things like time\attendance tracking software or a specific system for accounting, modern payroll solutions should integrate with them to save you copying data over.

*Pento integrates with whatever software is in your stack

Before you make a decision - a few things to consider 🚨

Which calculations do you need to automate? How complex are they?

Calculations are probably one of the first parts of the payroll process you'll want to automate, if you're not using any software already.

Working out things like tax deductions, auto-enrolment and holiday pay, especially for a large and diverse workforce, can get tricky. 

It's worth taking stock of all the calculations you'll need to automate and making sure a potential provider can handle them.

Here are a few common calculations you might require:

• Overtime pay
• Shift differentials
• Bonuses and incentives
• Sick pay + holiday pay
• Apprenticeship Levy
• Benefit-in-Kind (BIK)

Do you need to support diverse worker types and working patterns?

Are you managing payroll for multiple types of workers? Do you need to run payroll weekly?

Managing these different pay structures can be complex and time-consuming and so you'll need to find a solution that can handle this level of complexity.

Dealing with various types of workers and pay frequency is not something all payroll solutions will be able to do... so be sure to shop around for a solution that can meet these requirements.

 How high is your employee turnover?

More turnover generally means more joiners/leavers each month...

And the more changes, the more flexibility you're going to need if you don't want to make changes mid-month and avoid deadlines.

It may also be worth evaluating how much manual work is currently involved in on/off-boarding employees and how much time any solution you're looking at might save you.

Is your business split across multiple countries?

Manufacturing businesses with a very distributed workforce may require an EOR (Employer of Record) which will take on the responsibility of being the employer for you - managing all of the country-specific laws and regulations.

However, since these solutions are usually not flexible, you may want to look at using a specific solution for your workers in the country and an EOR for those in other regions (we'll cover EORs in more detail below👇).

Do you have software you need to integrate with?

If you're currently using HR, time tracking, or accounting software, you may need a payroll solution that can integrate with these to avoid manually copying over data.

How advanced are your employee benefits?

If you offer enhanced benefits to workers (health insurance, retirement plans etc) this  means you'll need to find a solution that can deal with this added layer of payroll complexity - which may be challenging, especially for larger manufacturing businesses.

Whilst traditional on-premises software may be able to handle some of the issues above... many businesses are now using modern payroll systems that can address the specific needs of the manufacturing sector.

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Types of services available

When it comes to the payroll landscape, there are a few different options for you to choose from... although some are better suited to manufacturing industries than others.

P.S. We broke down all of the use cases and drawbacks of various types of payroll management here solutions

Modern, cloud-based payroll software

These are tech-heavy, automated platforms (this is what we do here at Pento)

✅ Fast, automated process

✅ Lower risk of errors than other solutions

✅ Integrates with other tools

❌ Levels of support will vary depending on provider

❌ You may still need an EOR if you have a very distributed team

❌ May not be necessary for very small teams

All-in-one systems

All-in-one's are essentially the HRIS systems that have recently started adding a basic solution features

✅ An easier way to manage payroll for small teams

✅ Tend to be fairly cost effective

✅ Saves you having to shop around for a separate payroll solution

❌ Usually pretty inflexible and rigid

❌ Best suited for small teams with simple requirements 

❌ Little to no support/guidance 

Employers of Record (EORs)

An Employer of Record are payroll services that takes on the responsibility of being the official employer for employees - usually favoured by businesses with very distributed teams

✅ No need for physical offices or legal entities in another countries.

✅ Will handle different tax systems, currency conversions, and country-specific payroll requirements

✅ If your manufacturing business needs to establish a presence abroad quickly, an EOR can help you start operations without the need to set up a legal entity.

❌ Very tight deadlines - any pay changes will be slow

❌ You'll lose control over your payroll 

❌ Not immune to human error

Legacy enterprise resource planning (ERPs)

ERPs are the big, well-known platforms - they work like a software and services hybrid

✅ Generally stable and reliable

✅ Better support than many other solutions

✅ Lower initial costs (typically purchased with a one-time, upfront cost)

❌ Not very scalable - can be complex and costly

❌ Not tech heavy, you'll just get a basic dashboard

❌ Outdated software that often has a clunky interface

The problem with legacy software 

Legacy ERP software was once the go-to choice for many UK manufacturing businesses.

But whilst they may be more established than other solutions out there, lots of businesses are now switching to more modern solutions that offer better flexibility, scalability and integrations.

Outdated tech

Legacy systems are typically built on outdated technology. This means you'll be dealing with unwieldily dashboards and lacking integrations with any newer tech.

Not scalable

As your manufacturing business grows, your payroll is going to need to scale to accommodate the increases in data and  complexity. More often than not, you'll tend to find that legacy systems will struggle to adapt.

Lack of flexibility 

Legacy systems often lack the flexibility to adjust to changing business needs, especially in industries like manufacturing with more complex payroll requirements.

If you need to adjust someone's pay last minute, for example, a legacy ERP is unlikely to enable you to make changes.

Some manual work still required

Although a legacy ERP will allow you to automate parts of your process, you'll still be required to do some manual admin - like data entry and duplicating data input.

Limited support

Finding support for legacy systems can be challenging since software providers sometimes discontinue support and updates for older versions. 

The 'best' manufacturing payroll software will depend on your specific needs and growth plans. However, unless you're a small team with straightforward requirements we'd recommend steering clear of legacy ERPs in favour of a more modern solution that can scale alongside you. 

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Pento - modern payroll software for manufacturing businesses

Pento was designed to make UK payroll smooth, compliant and error-free - automate repetitive manual tasks, remove deadlines and get best-in-class expert support.

Get full control and flexibility: Edit pay until payday, no deadlines or extra fees

Stay on top of joiners/leavers - Pento will do final pro-rata calculation for you and generate P45s, holiday entitlement and P60s.

Easily set up The Apprenticeship Levy: Pento will take care of reporting and payments.

Take the hassle out of compliance: Never worry about being HMRC compliant. Pento always ensures you're adhering to the latest legislation.

Support from CIPP experts: Our Customer Success team acts as an extension of your Payroll Teams, sharing expert guidance whenever you need it.

Be it weekly payroll, part-time workers, zero hours or more, Pento supports all pay schedules and all types of workers in the UK.

Below you can see exactly how to run weekly payroll using Pento 👇