THE human resource function of any organisation is responsible for many different tasks. A key responsibility includes managing employee benefits and handling payroll. As the organisation grows, so do the number of variables and the possibility of errors in calculating payroll across different functions and managerial levels.

Detailed records need to be kept in order to keep track of employee details - attendance, overtime, performance- linked incentives, leave, expense reimbursements as well as various deductions mandated by government labour and income tax laws.

The entire process can become extremely cumbersome and errors can have serious implications. These come in the form of penalties for delayed statutory compliance as well as reduction in employee satisfaction and morale.

By automating HR and payroll functions, businesses not only save time and money, and improve job satisfaction, they also reduce the risk of being uncompliant.

Here are three reasons why automating HR functions may reduce risk for small and medium sized enterprises (SMEs) in Singapore:

Ensure compliance with government regulations

Labour laws offer protection to both the employee and employer against unfair employment practices. Compliance with these laws is essential for a fair and equitable workplace.

For example, from April 2016 onwards, the Ministry of Manpower has mandated that employers must issue itemised payslips to all employees covered by the Employment Act. Non-compliance will result in S$100-S$200 in penalty per occurrence after the grace period ends on March 31, 2017. Payslips must include details such as name of the employer and employee, overtime hours and pay, the date of payment and salary quantum, including allowances and deductions as well as details of all payments made since the previous slip. The salary quantum must not only include overtime hours - which can become challenging to calculate manually - as well as the rate at which they are calculated and the breakdown accurately represented.

A cloud-based payroll Software-as-a-Service (SaaS) application takes the manual work off the entire process while ensuring compliance with the latest regulations. Updates are also automatically pushed over the cloud whenever there is a change in policy.

Reduce calculation errors

As employers, businesses in Singapore must comply with the Employment Act which has detailed requirements for Central Provident Fund (CPF) contributions, Overtime Time (OT) and leave allocations for employees.

CPF contributions, both for the employee and employer, are calculated based on the employee's wages. That's not all. Contributions are also dependent on the employee's age, the contribution rates during the fiscal year, the Ordinary Wage (OW) ceiling, citizenship status and many other factors.

The task can be further complicated as rounding up salary numbers is unique for each component: employer CPF, employee CPF, and total CPF.

The Employment Act provides for rest days, hours of work and other conditions of service applicable only to workmen (for example, construction workers, drivers and cleaners) and employees with basic monthly salaries not exceeding S$4,500 and S$2,500 respectively. Calculation of any work done in excess of 44 hours per week is considered overtime work and SMEs in Singapore need to calculate OT accordingly. Detailed records of employee attendance and time spent at work are needed in order to ensure accurate calculations.

The Employment Act also covers annual, maternity, paternity, sick and child care leave to name a few. There may also be additional types of leave organisations give to their employees as benefits. Leave allocations also differ across managerial levels, length of employment as well as citizenship factors.

Manually calculating or using Microsoft Excel to calculate CPF contributions, OT pay, and leave allocations can be a tedious task and can lead to careless mistakes.

Any errors in these calculations can result in penalties as well as serve to lower employee confidence in the organisation. Automating these calculations can prevent errors as well as reduce regulatory and compliance risk for businesses in Singapore.

Preserve institutional knowledge

Today, many professionals change jobs to further their careers. With a cloud-based HR SaaS application, important company information is stored securely in the cloud and senior management and any designated HR staff are able to access the information anywhere, anytime. This means that businesses do not need to rely on the knowledge of just one or two key employees.

Relying on key employees to process pay, manage OT policies and calculations, handle all the leave entitlements and track balances manually exposes the business to risk if the employees leave the company. Having these HR processes automated with a cloud-based solution will not only enable organisations to preserve institutional knowledge but also have a transparent equitable system.

SMEs in Singapore found not complying with the Employment Act can face severe penalties. Automating HR functions can not only help reduce errors, improve employee confidence and morale, but also improve regulatory compliance.

The writer is founder & chief executive officer of Justlogin Pte Ltd.

* This article first appeared in "The Business Times"  on 4 April 2017.