Ready for payroll system upgrade?

Start by identifying objectives and then move on to features and functions
By John Cummings
|Canadian HR Reporter|Last Updated: 06/02/2009

Asking what’s important when upgrading a payroll system is like asking, “What car should I buy?” What’s important to one company could be very different from what’s important to another. So instead of deciding which features and functions are best when it comes to picking a system and a provider, a better strategy is to first identify and measure payroll objectives.

Identify business objectives: Ask why it is important for the organization to make such a move. Don’t worry about features and functions. Focus, instead, on the business benefits. Measure a provider against its ability to deliver current and anticipated needs.

Identify pain points: These include things that are not getting done, tasks that are taking too long to complete or poor-quality tasks. Pain points can have an impact on a department’s reputation so make sure the payroll solution will resolve most of them.

Identify the user community: Understand each audience and its requirements. Employees, managers, finance, HR and the executive team each have different needs. Employees may want online pay stubs and a company directory. Managers may want to view departmental rosters and make salary changes. Timekeepers simply may want fast data entry.

Take the opportunity to empower users: Each organization has a different comfort level in giving employees and managers access to update their records. For example, some are OK if an employee or manager enters certain information and then HR approves the change before the update occurs. Others prefer read-only access. Employers should know their limit and stay within it.

Identify the level of outsourcing being considered: Make sure the provider being considered allows for a flexible business model — one that meets the company’s needs. This can mean outsourcing benefits administration and recruiting while keeping payroll in-house. Decide how to share data with the outsourcer — will it access the human resource management system (HRMS) to retrieve information or host the HRMS/payroll system?

Responsiveness: There are times when a business needs to move on a dime, with acquisitions or divestitures, recruiting or downsizing, so it needs help immediately, not in two months. Check the provider’s track record.

Flexibility: Each organization has its own footprint, its own culture. Can the provider be adaptive to those needs so the culture can be reflected in the payroll solution? For example, can each business unit’s logo appear on employee self-service? Can business rules be easily configured to the HRMS without customization?

Aligning HR vision: Does the provider have a vision similar to the company, and the payroll department, on future innovations? How does payroll influence that innovation so its needs are considered when the provider decides how to build solutions?

Customer service: There are so many options when it comes to the level of service. Will the provider guarantee a service level?

Keep it simple: Whether reviewing the objectives above or the software features below, it’s important not to over-think and instead focus on the major impacts of the provider’s solution. If an employer is asking 300 questions about tax calculations, it won’t know how to compare potential providers.

Features to look for in a new system

Once it’s clear how the provider can meet payroll objectives, there are certain features available in HRMS/payroll software that can significantly improve operational efficiency while providing users with the tools they value.

Assuming all providers have strong core payroll calculations for income tax, health tax, workers’ compensation and other statutory processing, the following features are the value-add over core payroll:

Entitlement bank processing: Vacation, sick leave, banked overtime and special leaves should be easily automated and expensed every pay period.

Benefits administration: When an employee’s salary changes, the software should automatically recalculate coverage amounts and premiums. Annual premium renewals should automatically change employee rates on the new effective date. And business rules for waiting periods and minimum coverages should be automated.

Talent management: HRMS systems can track the skills and performance objectives to the job or position, with the ability to give reminders when training and licenses are coming up for renewal.

Compensation management: Managers are often asked to recommend salary increases within departmental budgets. HRMS systems can provide managers with online tools that recommend specific increases based on individual performance. Managers then enter recommended salary increases while managing within departmental budgets. Once the manager is done, the recommendations are forwarded to HR for approval. This can work for bonuses, too.

Collective agreements: Whether automating union dues, step-scales, time and attendance rules (such as thresholds for overtime or shift premiums) or tracking grievances, HRMS systems can relieve the administrative burden of managing collective agreements.

Reporting: While an end-user reporting tool is always important, HRMS systems should come with standard reports that can run in a variety of formats, such as PDF, Excel, XML or HTML. Being able to run a wide range of standard reports and delivering them in the format of choice will save significant time over an end-user reporting tool.

Workflow and approvals: HRMS systems should allow users to enter information directly into the system as “pending.” Workflow will route the information to an approver, at which time she will accept or reject the changes. This allows for exceptional efficiency with a “one-and-done” approach to HR changes.

Chances are, when upgrading the payroll solution, an organization will keep the solution for eight years or more so it’s important to take the time to weigh all the options. HRMS features and functions are nice but quickly become outdated. Understand the provider and the value it brings to the organization, and how it supports project and business objectives. Then ensure top functional needs are met in their entirety.

John Cummings is the Burlington, Ont.-based president and CEO of Peopledge HR Services, an outsourcing firm providing HR, benefits and payroll solutions. For more information, visit or call (888) 331-8527.

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