Today, I'll outline the basic process of how to run payroll manually. Please consider this informational only and not professional advice.

To help demonstrate, let's say you have one employee who's rate is $20/hour and has worked exactly 40 hours for the week.

Calculating gross wages (wages before taxes) is simple.

Multiply the hourly rate times the number of hours. Gross pay = 20 x 40, or $800.00 toward their weekly paycheck.

So far so good.

The next step is to determine what taxes should be withheld from $800.00.

You can do this for free at PaycheckCity.

Here are their four basic steps:

• Enter your company name and address
• Add an employee’s name, home address, and wage info
• Run a payroll and see the tax results
• Print the employee’s check or earnings record

Simple enough?

As further help, you run payroll manually by knowing where someone works, where they live, how often they are paid, what they entered on their W-2, and the cumulative amount of taxes they have paid since January 1st.

Tax tables are ever-changing and must always be updated to stay compliant with the US, state, and local governments. Please keep in mind that PaycheckCity's tables are good, but their free service is for general information only as well.

Then, once a paper paycheck is handed to the employee you are still not done. Your next steps are to pay those withheld deductions plus your employer payroll taxes to each agency in full and on time.

In other words, payroll is only done when employees are fully paid and the agencies are fully paid.

To do it yourself, you have to be detail oriented, and strictly follow the current US, state, and local payroll tax laws.

But if you use modern software, the whole process reduces to one click of a button.

As we move forward in time, we learn more about what AI can do and what it cannot do.

The first fundamental is knowing AI is software.

As a contrast, traditional software runs using code written in a programming language, while AI runs using human readable instructions.

That's really the difference.

Although it is easy to write, AI will error if you are not careful with the instructions.

Inc. magazine recently published An AI Tool Withheld an Employee’s Paycheck. That’s Really a Human Error, which is a perfect example.

And if curious, the article started from this Reddit post... My company’s new AI payroll bot decided I don’t deserve a paycheck this month

In this story, an employee was not paid a monthly check because an AI system found an error with a time card.

When confronted, the employer responded with "this isn’t a bug but just a part of the learning process" and "it should self-correct next pay cycle". The end result was the employee was told to wait until the next monthly pay cycle to get paid.

This employee did not get paid because of a human mistake, not an AI mistake, AI did what it was programmed to. All the employer had to do was write a paper check.

Back to the point.

Can AI be used to handle administrative tasks? Yes, as long as you program it correctly.

But like any software, it has to be tested, retested, and maintained by a human. As only a human can decide if it is correct.

Here are the final words from the article's author:

"You cannot let AI make decisions for your business. You need a real human. Every time."

I couldn't agree more.

What does outsourcing payroll mean exactly?

In the not so distant past, it meant having a payroll provider do all the manual work for you. Payroll used to be handled by a staff, so having the work done outside your business made a lot of sense.

But those days are gone, at least for those of us who have kept up.

Payroll is now almost completely automated.

Same thing with bookkeeping, if you use QuickBooks, does that mean you are outsourcing? No, not at all, unless you hire a freelance bookkeeper or firm to maintain it for you.

Here are a few reasons you should keep payroll in-house:

• Greater control
• Time saving
• Increased transparency
• Improved efficiency
• Lower costs
• Reduced errors
• Greater accruacy

All you need is modern software (like ours) using a web browser.

Currently one of the biggest challenges to adopting AI is not the technology itself, it's not knowing what to do with it.

In a recent study by Gallup, Manager Support Drives Employee AI Adoption, the question was asked... What Prevents AI Adoption?

In a nutshell, 75% of respondents found barriers against it, while only 25% did not. The number one reason being unclear of the value.

• 16% - Unclear use case or value proposition
• 15% - Legal, compliance or privacy concerns
• 11% - Lack of training or the right knowledge/skills
• 8% - Other
• 6% - Cost of investment
• 5% - Lack of leadership alignment or strategic direction
• 4% - Resistance among employees
• 4% - Limited organizational capacity for change
• 3% - Lack of materials, resources or tools
• 3% - Lack of access to high-quality or usable data
• 25% - None of the above (No barriers)

In the opening paragraph, Gallup also mentions "only a small fraction of firms have applied it in ways that have meaningfully affected their business"... "just 5% of organizations report measurable ROI from their investment in generative AI".

Only 5%?

So if AI is not making a real dent in ROI, and folks dont know what to do with it, where do things go from here? According to Gallup, it is up to management to lead the push towards adoption... "managers are uniquely positioned to champion AI by modeling its use, answering questions and showing how it connects to employees' daily work."

Hold on a second...

First, wouldn't it be better to assure employees they won't be replaced by AI?

Then wouldn't it be better not to push employees who are resistant to it? Because it might scare them?

And before you do all that, wouldn't it be better to know exactly why you are using it in the first place? To do what exactly? Certainly not to write a blog post, this one is totally human :)

For now at least, payroll and time tracking are handled by software, not AI. However there have been examples of AI being used for data entry, fraud detection, chatbots, and data analysis.

So it makes sense most small businesses with employees have at least one hourly employee on payroll.

If that describes you, then tracking employee hours is probably a good idea. Not just for calculating payroll, but for compliance too.

The Fair Labor Standards Act (FLSA) requires employers to accurately track all hours worked by non-exempt employees (hourly) to ensure proper overtime pay, and to keep them for at least three years. However it does not specify how.

If curious, the FLSA published Fact Sheet #21: Recordkeeping Requirements under the Fair Labor Standards Act (FLSA).

You could keep records with pen and paper if you wanted, but it may not be the best choice, especially if you are trying to speed up your administrative process.

To make things speedy, accurate, and easy to report, your best bet is using time clock software available online.

Whether AI will be used for this is anyone's guess, but not yet.