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Running Payroll – Excel versus Software. Which is better?

By: | December 29, 2020 10 min read

Excel/Spreadsheets are incredible tools when utilized for the correct purpose. Be that as it may, organizations face many issues when they expand the utilization of excel/spreadsheets far beyond its capacity, for example, managing the complete payroll processing software. Payroll is not just computing pay-cheques, and spreadsheets aren’t the best tool for the entire payroll cycle.

Excel sheets/spreadsheets are amazing tools for complex calculations, maintaining charts and recovering numerical data, but did you know they aren’t the best for processing payroll? Excel surely has the capacity to do complex calculations, but payroll processing is a lot more than that. Is it okay for your business to trust excel to handle your payroll processing? Let’s check out;

If you are using excel to manage your payroll, here’s what you are risking:

  • A huge waste of time in battling with formulas: People using excel for payroll related work tend to invest a tremendous amount of time in adding rows and for rules and formulas. Just one misplaced click and everything goes away. It gives nothing but repeated work.
  • Inaccurate figures and human errors: Lot of excel sheets contain errors because the data is very much vulnerable to everyone. Formula and formatting errors are the most common one. Errors in excel sheets can lead to miscalculations and which can ultimately cost the organization. Keeping accuracy in calculating and processing payroll is non-negotiable in any business.
  • No one knows A-Z of excel: Excel is a very vast tool and it needs an excel expert to understand complete functionalities. Most of the organizations who use excel for their daily official tasks especially payroll processing tasks, they use only 50% of the entire excel. Yet, it is not developed for payroll activities; it is a generic platform that has a collection of cells to organize your data.
  • Not having a consistent payslip process: As a company grows, the number of employees also increases and the number of payslips too. This gets exceptionally perplexing and tedious to generate and distribute payslips from different documents. Payslips are very important for employees as this is the proof in document form for the services they provide to the company.

Recommended Read: Payroll processing in India- A complete step by step guideline

Why is HRMS/Payroll Software better than Excel?

Using excel for payroll has been a long-standing practice in the HR world. The modus operandi starts with preparing a template and entering the employee’s details. These include;

  • One-time entries related to the employee as well as the periodic data necessary for processing payroll.
  • Creating the necessary formulas to calculate salaries.
  • Gathering required data from multiple sources (generally available in multiple formats) to calculate salaries.
  • The collected data has to be entered manually into the excel template. (If there is no HRMS or Payroll Software implemented)

This time consuming and cumbersome exercise has to be repeated every month. Given that payroll is a dynamic process, any minor errors in any of the above steps will invariably lead to errors in processing payroll.  It’s no wonder that HR personnel are on tenterhooks while processing payroll.

There is no doubt that excel is a very useful tool to create charts, carry out complex calculations and succinctly store and present data. However, gathering data and processing payroll is a different ballgame. This is where an integrated payroll software system will eliminate the hassles and ensure error-free payroll. Let us understand where excel falters and software scores in payroll.

Data collection

Gathering the required data and entering into excel is one of the most time-consuming activities of the process. The spreadsheet has to be updated multiple times, as and when data is collected from different departments. On the other hand, an integrated software system can automatically get the required data from the concerned departments every month, thus simplifying the process. There will be no hassles of requesting information and waiting for it to be given.

Data Validation

With excel, checking the correctness of the entered data involves manual verification of the spreadsheets against one another, again a very tedious and stressful process. The final verification of processed payroll also has to be done manually. Using software will eliminate this activity as checks can be incorporated at every stage and the errors can be very easily spotted.

Risk of errors

Processing payroll through excel, involves handling huge amounts of data manually. Thus, increasing the chances of errors, not to mention the risk of fraud. An automated process is practically error-free and keeps a check on unscrupulous manipulation of data.

Updating changes

Payroll is a dynamic process. Every month data changes occur as a result of employees leaving, retiring, new employees joining etc. Incorporating these changes results in high-volume and low-value activities for the HR department. Changes in tax slabs or other statutory requirements also need to be factored in from time to time. This also leads to payroll errors, especially in large organizations. An integrated software system will automatically update these changes without any errors.

Level of expertise involved

Working with spreadsheets requires personnel proficient in spreadsheets and formulae. Agreed that an organization needs specialists to handle payroll, but the software will definitely make the job easier as it is designed for ease of use and convenience.

Data security and backup

Employees’ payroll details, which include financial, personal and tax information, is sensitive in nature and needs to be protected. At the same time, any loss of such information is also a setback for the organization. With payroll software, unauthorized access to employee payroll records can be prevented. As data storage options such as cloud can be employed, the chance of loss of any information is zilch. The security and backup of data is always an issue with excel spreadsheets.

Time consumed

Obviously, time-saving is one of the key advantages of using payroll software. The efficiency achieved in the payroll process will save both time and effort. This in turn will relieve the HR personnel from the repetitive and time-consuming process, allowing them to focus on strategy and tasks which will add value to the organization. Using payroll software thus results in resource allocation efficiency.


As the organization grows in size, gathering data and managing employees’ payroll records on excel becomes cumbersome. Gathering, organizing and storing payroll data becomes easy with software, even for large numbers. Not to mention the added benefits of safety and backup of information.

Recommended Read: How to choose Best Payroll Software for your company? A buyer’s guide.

Difference between Excel and Payroll Software

Sr No.HRMS/Payroll SoftwareExcel/Spreadsheets
1.Cloud Based Platform- Dynamic in nature-everyone can see live changesEvery sheet is to be updated on cloud if needs to be shared
2.Single Centralized Hub for all activities-Dashboards for every user; Centralized Data ManagementNo Dashboard feature
3.Automated report generationReports are to be manually created- no automation
4.Guaranteed Accuracy as it is process orientedChances of errors as it is people oriented
5.Automatic compliance: Payroll software brings accuracy to tax calculation and ensures that your business stays on legal compliances.Compliances to be managed and updated manually
6.Classified access controls-hierarchy can be implementedNo hierarchy; if a document is shared, entire information is shared
7.Easy to integrate and configure as per company’s payroll processStandard features for all type of industries
8.Security: Scheduled daily backups Consolidated and systematic data managementNo automated backup facility, scattered data

Table of Contents

    Meet the author

    Keka Editorial Team

    A bunch of inspired, creative and ambitious youngsters- that’s Keka’s editorial team for you. We have a thirst to learn new subjects and curate diverse pieces for our readers. Our deep understanding and knowledge of Human Resources has enabled us to answer almost every question pertaining to this department. If not seen finding ways to simplify the HR world, they can be found striking conversations with anyone and everyone , petting dogs, obsessing over gadgets, or baking cakes.


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