For very small firms, manually typing and printing or using mail-merge for a few letters is not a big deal. However for medium to large organisations, manual letter generation makes the HR team, a BPO (no wonder, many firms outsourced letter generation).
There is a simple solution with a small investment. If you have HR Information System running, request the team to make an add on feature to generate letters. If still not automated, recommend to try simple and comprehensive solution like greytHR https://www.youtube.com/watch?v=qLRy9mSCpPI
Formats are certainly critical. At the same time information to be used is much more critical, right.
If you have enough time and resources, and not many letters are required on a day to day basis, manual preparation and printing will work for you. Otherwise automation or outsourcing are the only two options.
As far as automation is concerned, without an HR information system, HR letters can not be generated. If you have the capital to run an in-house IT team and servers, you can build your own solution, in-house. If not, subscribe software solution, which is ready to use like how you use facebook or linkedin.