Is one of the business decisions you need to make this year whether or not to upgrade your current payroll system? If so, you’re not alone. In an increasing number of companies, payroll systems are outdated and lack the capabilities needed to keep pace with changing business and compliance needs.
In a recent survey by the American Payroll Association, nearly 30 percent of 1,000 payroll professionals noted their systems were more than 10 years old – which makes them virtual dinosaurs when you consider the pace of change in HR and other business technologies.
To Update or Not to Update?
As you make the determination when to replace your payroll system, do your homework. When all is said and done, consider the unique needs of your company. Keep the following facts in mind:
- The timing. Many companies feel they must start on 1/1 or the first of a quarter. This isn’t always necessary though. Payroll vendors can import YTD and QTD data, so your payroll can go live anytime in the year. Consider the additional workload a payroll person may already have at quarter-end and year-end. Add the shortened work weeks over the holidays, and 1/1 can be the most stressful time to try to go live. Check with the payroll vendor and see if they are able to accommodate a mid-quarter implementation and then choose a time that works best for you based on workload and staff vacations.
- Implementation process. Take time to understand your current pain points and ask how the new system and changes to your internal process can address these. Be leery of vendors who say you can be implemented and go live within 4-6 weeks. This type of implementation does not allow you the opportunity to make the necessary changes to gain efficiencies and leads to a continuation of the same challenges you have today but on a new, unfamiliar platform. Allow time to take training, update processes, and review data prior to going live. We recommend two successful test runs in parallel with your current payroll to ensure the data, calculations, and processes are ready.
- System requirements. Will your IT department need to upgrade or purchase any additional tools to support your new payroll solution? Is it able to integrate with your finance and HR systems already in place? Although most payroll systems are now SaaS and reside in the ‘cloud,’ there are other system requirements that you need to address to ensure the new payroll system performs properly. These requirements may include using the correct browser, operating system, screen resolution, or even installing supporting software like a pdf reader or media player. Testing should be done at multiple points during the installation stage to work out any bugs before you go live.
- Data transfer and conversion. How will your existing data be entered into your new system? Your new vendor should be able to manage your data conversion including historical data. You, however, need to verify that the data transfer is correct. Reports should be run on both the old and the new systems, and results compared for any discrepancies. This step is often overlooked in the rush to process that first live payroll. It is more important that the data be correct than the initial target date is met. Incorrect data can result in extra work and amendments later, and a loss in confidence with employees and management. Another consideration is how much history should you bring into the new database? Review your reporting needs and ensure you have enough history imported to avoid merging together multiple sources later.
- Legal compliance. Last but far from least, when you change payroll systems, you must confirm that you stay in compliance with all state and federal requirements. Choose a product that clearly shows not only how much your employees are earning, but also when they’re on break or working overtime, so everyone is paid fairly and accurately. For starters, the U.S. Department of Labor mandates compliance with FLSA guidelines. And, data privacy laws similar to the General Data Protection Regulation (GDPR) may well be introduced in the coming years.
What Happens if You Fail to Modernize?
An updated payroll system will help you to provide better, more strategic HR support for your company.
- Most new platforms offer expanded employee self-service options and other fully-integrated HR solutions. These help to boost engagement and provide seamless integration with time and labor-management systems. By contrast, outdated payroll systems often require costly resources to adapt to rapidly changing end-user demands.
Making the determination and preparations and ultimately transitioning to a new payroll system can be challenging. As you take this step, consider partnering with HR Works. We offer 28 years of experience in designing customized approaches to payroll and HR implementations for businesses of all sizes and industries. Contact us today to learn more.
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