Once upon a time, payroll systems were deployed solely to automate the process of paying employees in a timely and efficient manner. However in the wake of initiatives like employee self-service and salary sacrifice schemes, and legislative changes such as RTI and Auto Enrolment, payroll has a much greater role in adding value to employees and employers alike. 

But when selecting a new system, what is the best approach? To buy a new payroll system which sits alongside HR and other business systems; attempt to integrate a standalone system with existing systems; or to adopt a fully integrated solution from the outset?

One Size Does Not Fit All

The first point to make is that one size does not fit all. The size, activities and resources available within an organisation will influence the decision as to whether standalone or integrated systems represent the best fit. The key is to find a provider who understands your business and can advise on which approach is likely to be the most efficient and productive. Through working with an expert in this field, you can jointly evaluate the benefits and downfalls, and reach a solution which fits your requirement and budget.

The Case For Separate Systems

For larger organisations which already have established HR and business systems in place, it may be difficult to justify the cost ripping out and replacing these in order to deploy one fully integrated system. However, there are a number of downfalls to running a separate payroll system, as data has to be entered onto different systems, resulting in data duplication and the risk of inaccuracies – neither of which are conducive to efficient business operations.

A compromise might be to consider integrating payroll with existing systems. It is important to work closely with your supplier to ascertain whether the cost of an integration project outweighs the cost of maintaining disparate systems. Another point to consider is that some smaller organisations simply may not require a dedicated HR system. Where a payroll package can support their needs exclusively – covering payslips, HRMC deductions and pensions – there is little point in investing in functionality which will lay dormant.

The Value Of Integration

Against an evolving legislative landscape and drive for more efficient operations, most organisations would opt to have an integrated payroll and HR system. There is a huge overlap across the two types of system with both holding data on an employee’s name and number; date of birth; address; ID; employment record; gender; sickness and absenteeism; maternity; paternity; pension; holiday entitlement and overtime. Having one integrated system to manage all business functions and processes deploying can maximise return on investment (ROI) and deliver economies of scale.

RTI and Auto-Enrolment mean that data must be accurate and updated in real-time, and if HR and payroll systems are disparate, it can result in data duplication, and inaccuracies and inefficiencies. Additionally initiatives such as employee self-service, which can save an organisation with 500 employees £7000 in administration, postage and stationery costs over three years, require integrated HR and payroll data if they are to add maximum value.

With one integrated system there is only one set of data to enter and maintain, freeing up time and resources. The business can focus on more value-added activities and opportunities, as well as reducing inaccuracies which can lead to poor customer service and inefficiencies. Another key benefit is that reporting can become much quicker and easier. Information is more easily accessible on one screen, and fewer resources and skills are required to maintain the system, resulting in reduced training and overheads.

Flexibility Is Key

For some organisations there may be a business case for adopting standalone systems, but for the majority, integrated payroll and HR opens the door to realising much greater benefits through facilitating value added initiatives such as employee self-service, and minimising the cost of new legislation such as Auto Enrolment.

However budgetary constraints can often stand in the way of selecting the best system, in which case working with a provider which can offer both standalone and integrated payroll for an unlimited number of employees represents the most flexible and least risky approach. In doing this, payroll can be integrated with HR as the organisation deems there is a business case to do so, keeping costs under control, but opening the door to tangible benefits and ROI as circumstances allow.