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Dave Foxall 6 Key Questions Your Payroll Software Vendor Doesn't Want You to Ask

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 By Kazim Ladimeji

What Your Payroll Software Vendor Doesn't Want You to Ask

With 6-8% annual growth in the US payroll software market (according to DataMonitor Group's Black Book of Outsourcing), it's clear that payroll vendor selection is happening at a small but unfailingly steady pace. In fact, chances are good that many readers of this article may well be faced with the selection of a payroll software solution within the next year. Curiously enough however, though organizations are noticeably increasing their adoption of payroll software, few independent resources exist that highlight the "dos and don'ts" of selecting this type of software technology. Along with making sure you take the right payroll software selection steps, when selecting a payroll software solution, what questions should an organization make sure to ask? This article highlights 6 questions that should be a part of your payroll vendor assessment checklist. They shed light on possible shortcomings which many vendors won't be proactive in disclosing before a software contract is signed—and which payroll software buyers typically don't uncover until after the the contract has been signed and funds budgeted.

1) Can the payroll software be on my own schedule?

If the vendor's payroll software operates within a fixed set of schedules or cycles for payment you may find you have to modify the payment cycles of your existing business to meet these constraints. This could negatively affect both the business' and employee's cash-flow. It could also indicate that you need to reduce the frequency of employee payment, or delay the payment dates which will not please your workforce. This limitation has been eliminated in many newer technology and SaaS payroll systems, but still remains in many more less current payroll applications. Some HR software vendors allow you to have a custom payment schedule and increased flexibility but also charge additional fees for the flexibility. Either way, it's better to find out early.

2) What services are offered beyond payroll software provision?

As your business grows, you will need to enhance and develop your business management systems. In particular, you may look to add broader human capital management functions and to add or enhance your CRM, sales or production management systems. If you are able to acquire these services from your existing payroll provider, you will most likely be able to negotiate better deals and it is much more likely there will be a much smoother integration between systems. Further, with the increase in systems that are capable of handling both "core" HRMS functions (like payroll) and broader talent management functions, best-of-breed functionality for an end-to-end solution is not as far out of reach as it once was.

3) Can the payroll system be deployed in the Software-as-a-Service (SaaS) cloud model?

Today's businesses require the flexibility to access and interface with their payroll system from multiple locations, while on the move, and at any time of the day or night. SaaS is the most efficient way to achieve this flexibility may therefore be a vital component of a payroll system. SaaS payroll can provide the payroll team with a web based payroll solution providing end-to-end payroll processing capacity. It can give your payroll team more convenient access and it can be deployed with little or no involvement from the IT team, providing increased governance and management for the HR and payroll team.

Aside from the actual SaaS offering, you'll also want to validate the software vendor's track record for delivering payroll software over the Internet in a secure and continuously available environment. Questions that can help this process include:

  • How long have they been providing SaaS payroll solutions?
  • What is their average up-time - and how much downtime has been incurred over the last 3 years?
  • What service level agreements (SLAs) are offered - and are those SLAs financially guaranteed?
  • Do they retain independent hosting audits and certifications (such as SAS 70 or ISO 27001)? and
  • What data privacy and information security measures do they have in place?

4) What Business Intelligence (BI) is embedded in the payroll software?

Because the reporting feature of any payroll software has ties to (and implications for) everything from compliance to cost control measures, the BI functionality should be solid enough that payroll users can quickly and efficiently generate reports that range from a high level back down to granular detail. Questioning a vendor about these features will put you in good company too, as it seems executives in the above mentioned Nelson Hall report identified "improved quality of data" and "improved reporting tools" as top necessary payroll software features. Analytics often provide the final step in a closed loop process that delivers metrics and learning—and supports continuous process improvement. However, even though HR and business analytics are seemingly obvious tools, most vendors don't offer more than reports and dashboards. Only a minority of HR and payroll software leading vendors actually include data warehousing, data mining, online analytical processing (OLAP), predictive analytics and other forms of more advanced business intelligence.

5) Does the payroll system support multiple countries?

With the pace of globalization showing no sign of abating, most companies find themselves operating across territorial boundaries which brings to the fore the need to manage their workforce as part of a central HR system. Many large multinational corporations have been doing just this for well over a decade now and have a global HR system of record for all their employees from which they send the relevant data to other HR systems such as learning, time management, benefits, and payroll.

Large enterprises aren't the only ones in need of global functionality though. Indeed, as a recent market analysis report (User Requirements from Payroll Services) revealed: "multi-country support" is one of the top three sought-after features in a payroll system—and a flat-out requirement of over 50% of software buyers. Even if you don't currently operate in another location, you may need to be ready to exploit an international market opportunity if it arrives. Interestingly enough though, the majority of payroll vendors only provide support through 3rd-party solutions, meaning that single solution payroll wasn't practically possible. As such, it's important to find out early what capabilities are provided and compare them closely with organizational planning.

6) How well does the payroll system integrate with other business systems?

90% of businesses in recent research from HRO Today indicated it was "very important for their payroll platform to be integrated with their ERP platform". Indeed, your business may be currently running sales, accounting, project management, and production systems that should all ideally integrate into a payroll system seamlessly. This integration functionality alone is one of the most salient reasons for payroll software, and will save your business time and money by not only decreasing deployment efforts, but also decreasing the amount of resources needed to bring users up to speed. Production benefits will be realized in reducing the rekeying of data and shortening business process cycles.

Aside from the necessary integrations that may be required from an ERP perspective, 66% of businesses in the Nelson Hall Report "place an emphasis on improved integration between payroll and the HR platform", when choosing a new payroll vendor. Your existing HR system is likely to be handling holiday, leave and sickness data along with compensation and bonus data, all of which will need to be communicated to payroll on a periodic basis. This has typically been carried out by the HR team; preparing the monthly "HR Bundle" and providing this to the payroll department. However, this process can be time consuming, inefficient and prone to errors; a problem that few organizations want to continue. With the advances that payroll technology has undergone over the past decade, finding a system that can seamlessly integrate with HR is not only possible, but also highly advised.

Concluding Remarks

These payroll software selection questions should be used as just one part of your efforts to ensure that the payroll vendor puts all their cards on the table before you decide to enter into a long term relationship. Although the bulk of upcoming HR-technology projects deal with the various components of talent management, by far the largest number of current HR systems still deal with payroll. Such a focus makes sense since you may decide to eschew adequately compensating your workforce, or recruiting them effectively, or training them in line with your company's objectives but there is no way you can avoid paying them. End

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Aside from the necessary integrations that may be required from an ERP perspective, 66% of businesses in the Nelson Hall Report "place an emphasis on improved integration between payroll and the HR platform", when choosing a new payroll vendor.


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