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Automation only works on tasks you can simulate, not ones that require pathing. You can harvest crops, water mills, flame furnaces, or chop wood from a lumber yard, but you cannot harvest actual ore nodes or real trees without physically being present (the server will just stop running those tasks after a while).
I dont know how it works on private/official servers.
Im playing single player and I can say that isnt strictly true. Things keep "working" but transporting completely stops. If I go out, when I come back, everything produced from the farm, or mined, etc, is all just lying on the floor. Worse, all the pals are bugged standing over something that needs transportation doing nothing until I pick it up myself.
Progress on work benches seems to still happen.
What stops, and can even bring production to a halt, is transportation doesn't happen, and any natural nodes will not be harvested (e.g. trees, ore nodes, etc...).
The reason some functions seem to still work while you aren't there is because the time for it to finish is set by the beginning of the process, so say for example you put an egg in and it says 72 hours and you change the server time to 80 hours forward in days/time the egg will show as ready, it's not that 72 hours passed, it's that the servers clock registers that marker as passed. Things like Ranchs and Breeding pens have timer checkpoints on a recurring, so it'll show the eggs, but the pals themselves would not have theoretically have moved in that time and the game simply would have used predictive pathing to place the mob in whatever position it is in when you get back, which is also why they sometimes appear in walls, or stuck in base borders (IE: the blue line indicating your base edges).
Different dev teams will call these functions different things and they don't always work the same way depending on how they code it, but the basic premise is the same.
I rent a dedi server, no issues been offline the whole night, now i got 6k lumber 5k stone and 2.5k berries.
Official servers suck! rent a dedi for 5 bucks.
It'll take time but this will very likely be fixed in the future alongside content updates.
They actually have a budget now.
Official servers are likely overloaded atm, Way too many people playing this game for something that had 10,000$ Budget. Some triple A games have worse servers and they have millions of dollars in budget. I'd say official is doing it's job just fine given the environment, Give it half a year they'll probably fix the servers.
Player hosted dedis can have persistent worlds more readily then only by chunk loaded, it's extremely unreasonable to expect Palworld to have persistent full worlds loaded on officials. Or any game for that matter.