Why Payroll System must Collaborate with Human Resource System and Finance

The payroll system and human resource system are two main pillars in any organization’s management. They must be maintained appropriately along with finance to execute a company’s accounts and HR smoothly together. Finance ad human resource systems have several common functions and they need to collaborate closely to avoid conflicts. Same is the case between HR and payroll system which share similar grounds to handle employee data, salary classification and leave management. The gap between two sections should also be minimized for better organization of the departments to reduce costs and efficiency of resources. Instead of the obvious needs of integration between the sections, many companies cannot succeed to bring the two parts closer due to differences in cultures and thinking. There could be more issue that should be addressed to achieve collaboration of all the management sections of the company.

Distinction between professionals

The basic clash arises in separate departments due to the difference in the breeding of people working in them. Finance people are purely “number people” who can work on predefined rules and resolute limitations of accountings. They follow local and international legal regulations and organizational working policies. Whereas a human resource system holds individuals with “people people” vision, whose work is to make strategies and policies to hire resources, retain proficiency in the company and empower employees to polish their skills further. But payroll system people are destined to work on both employee related issues and accounts to estimate salaries and reimbursements. For that reason all three parts should be connected strongly to improve efficiency and lessen the overhead.

Acknowledging each other’s role

Another problem that holds people of three departments to work together is the lack of appreciation of each other’s role in the organization. Carrying out complex processes of management can be simplified with proper interaction and communication between the sections of HR, finance and payroll. The level of accuracy can be increased and average of errors can be eliminated with help of integrated efforts by professionals of related departments.

Mutual coordination

All the sides in the company management should perform their duties along with mutual coordination with other counterparts. Hard work of one section can be ruined with negligence of another department that can also negate the spirit of collaboration between them. Working in two opposite directions can create multifaceted problems that will make the management difficult for all sections.

Better integration

All the aspects of labor and payments relate directly to the payroll system, but it also includes the policies of HR and financial matter to maintain the accounts. It shows the need of closely coupled integration between the parts of the management. All systems should be technically connected to keep the data centralized and systematic. In the same way the work force of the departments should be in constant connection to handle the system proficiently. They can run the whole setup strategically for business process improvement as well as better work environmnt. 

Important Consideration for Payroll System Implementation

While selecting the in-house or outsource payroll system, business management should consider a few key points that are eminent to establish dependable payroll and human resource system departments. Keeping in mind the specific considerations of your business matters, pick the payroll that can fulfill your expectations to the maximum as well as provide credibility through various features. It will not just impact your daily routine payroll process, but also contributes to the success level of your company. At the time of implementation, you need to analyze following factors.  factors. 

Time of conversion

Thinking of the conversion to latest payroll system needs proper planning and timing to be implemented. Certain kinds of organizations find a particular time of year, more easy to convert their manual payroll system to an automated system. Most of the enterprises find it easy to transfer to new human resource systems and payroll process at the end of the year to make a new beginning for the new year with fresh management. For a quick change, you can also implement the system at the start of the new quarter, but it will still need a conversion of internal details once again at the start of the calendar year.

Resources required

The amount of data to be transferred from one payroll system to another would be sizeable that needs considerable resources and manpower. Plan and arrange the resources before you start implementing the new system. The same criteria will apply while converting to a new human resource system in any organization. Dedicate yourself, staff members or hire new resources for accurate and reliable data entry to avoid any discrepancies. 

Transferring data

Another important factor that can settle or damage your management system is data transfer step. Make sure that transition of data from one payroll system to another is done precisely without any gap or inconsistency. Find out the way of transferring data whether you need to enter all the data manually or it can be transferred automatically to the other side through easy-customizable link? After convenient and smooth transition of data, run reports on both system to ensure the accuracy of data.

Running systems side by side

For large organizations, it’s recommended to run old and new systems side by side from one to three months to check the accuracy of data and operations done through the system. The discrepancies can be identified and eliminated by running operations and reports to cross reference the payroll system history, earnings, deductions, tax calculations, etc. A slight difference can affect the whole management of payroll and human resource system process. 

Integration capability

Before taking the service of any management system vendor, make it clear that how much the payroll is capable of integrating with human resource system or accounting system in the organization. It would be highly beneficial if payroll, HR and ledger system is well integrated. The advantages would be threesome by eliminating duplicate entries from diverse systems in the management section to reduce errors, lessening the paper work and an extra load of managing the manual files plus appropriately integrated reporting.

Critical attributes of payroll system any business needs

Being an employer, you need to manage and run multiple departments of the business concurrently. Finance and accounts require more consideration in comparison with other sections of management. In addition, human resource system and payroll system should also be intermingled to handle data synchronously and calculate payroll accurately. The function of payroll is estimation of employee salaries by deducting all the leaves while including reimbursement and benefits. Any payroll system you use, must fulfill all the basic to advanced features that are crucial for the smooth processing of payroll management. Automated payroll systems give you the opportunity to customize them according to the explicit necessities of the organization. If you are planning to purchase or exploit outsource payroll system, you must demand for following critical elements that will assist you in optimizing business management.

Employee information

Along with basic information about employee designation title, personal data, probationary time-frame and the holiday entitlement, payroll system should also be able to hold extensive human resource system details dynamically. Confirmation of personal details and identity card should also be accommodated by the payroll system, whereas training, courses and career information of employee must also be maintained in split sections. Reporting of leaves, long vacations and multi-pension modules must also be a part of fully functional payroll system facility.

Payroll leaves

The section of payroll system that hold the absence records, reasoning, history and analysis reporting should also be provided separately in order to categorize and filter the leaves on an hourly basis along with the duration and nature of the leaves. Employee working profiles, performance details and certifications should be maintained by recording and reporting modules. It will boost payroll along with procedures of human resource system in profound environment.

Attendance monitoring

The module that contains the attendance records of each employee for creating time-sheet is another core element of payroll system of any business. Keeping daily attendance record, data of overtime along with the details of the work and its priority level, Instructions and details of work attached to each task assigned to worker in given time, calculations and deductions of basic salary counting on the work hour record, all important tasks should be carried out with precision.

Payroll Run and Update

The section of run and update payroll system manages payroll acquisition based on departments, divisions, payment levels and frequencies including extra benefits agreed upon by the employer. It also facilitates you with employee pay assessments and reporting to keep the system up to date. Payslip generation with diverse settings and designs can also be availed through this section.

Payroll history maintenance

With all the extensive processes and complex data-calculations, its eminent to maintain all the logs, records and history of work done till the date. This part of payroll system should provide options in selecting which the features that you want to keep in history for viewing and reporting. Effective record reporting with filtration facility, analysis and formatting should also be an essential part of the system.

Issues in Human Resource System & Payroll System Integration

To manage a progressing business human resource and financial setup, it takes professionally well equipped human resource system in accordance with the payroll system. There is a lot of information that both systems need to share with each other to keep the data concurrent along with payment calculations and other relevant financial requirements. But the problem occurs when there are multiple entries against single employee record and it create confusions that leads to inconsistent database. Data should be entered and saved once to build a reliable database which can return optimized results. In general, human resource system and payroll system share data about employee name, employment number, employment date, date of birth, date of leaving job, employee department and designation, holiday, sickness or long term vacation data, benefits/allowances and the list goes on. It shows the need of integration between two systems to manage the business smoothly. But it takes extensive efforts and also needs you to pay some serious returns.

Diverse kind of Database

If you are using two separate database systems to manage HR and payroll and both belong to different vendors, it would be quite complex to integrate them for centralizing the whole setup. For example a SQL server database for HR and Oracle for payroll will not give you facility of accurate reporting due to diverse interfaces and privileges. Even if you transfer your data on a single source, e.g. ODBC it will also make duplicate entries because usage of two separate interfaces for entries and updates.

Security clashes

There are many expected security issues that will arise when you will try to integrate two existing systems. If you transfer files between systems, there will be no security protocol that will transfer the file with full security. In the same way you will face protection issues while delivering or receiving confidential files to outer source. That’s why maintaining two systems within a company together will result in data duplication.

Data manipulation and conversion

Combining stand alone payroll and HR solutions will also irritate while making data conversions and integrating existing records. Both systems hold distinct format of storing and displaying data, which will never allow them to merge the employee records appropriately. Payment estimations will also be devastating when extracting data from two different systems as it needs another interface solution.

Access privileges

As multiple staff members will use the two integrated systems simultaneously, it will require extra privilege control and monitoring of data. With the merger of the two systems it will require more interfaces to access, enter and update records that will need training of all the relevant employees. It will cost high amounts to the business, but gives no surety of accuracy of system flow.

Guideline to set up Payroll System for Fresh Company

To take fresh and motivated steps for new company needs several efforts in diverse directions to establish the business with appropriate management and organization set up. In most initial things to furnish for a business is coherent payroll system that can handle all your employee payments and associated worries in smooth way. Follow these steps to setup payroll system at your office.

.    

1.      Apply for Employer Identification number

The first thing to do even before hiring employees is to request IRS to allot you an employer identification number. EIN is also called Employer Tax ID to be referred for all tax related activities. It’s important to report taxes to IRS and employee record to state agencies. The ID can be requested online or directly from IRS office.

2.      Check out Local regulations

Local tax regulation information and procedure to deal with them should also be checked. Whether you need local tax ID to handle state tax issues or not? All the info should be acquired from tax professional.

3.      Distinguish between employees & contractors

It’s imperative to put a clear line between regular employees or independent contractors as their status can highly affect the level of different taxes you have to pay. Categories and follow the payroll accordingly as it will change the amount of taxes you pay in terms of medical care, social security, unemployment and income taxes.

4.      Emphasize on staff paperwork

As you hire new people in company, start keeping all their credentials and information in records. Each employee is obligated to fill up income tax form to refer for annual tax imposed on your company. Maintain these forms and reserve accurate amount of federal tax from their salary.

5.      Determine pay period

Another important aspect is to determine the pay period choosing from multiple options such as monthly or bi-monthly etc. Occasionally it is decided by state laws that which kind of pay period you should follow. Take care of their benefits and flaws that can create problems for you later.

6.      Compensations terms documentation

Setting up a payroll system will also require you to take all paid time off into account for each employee, working hours tracking approach along with overtime payment issues. With these business work payments you also need to tackle compensations and deductibles that you have to pay later such as retirement contributions, health plan percentage and other inducements.

7.      Acquire automated payroll system

After considering all required details for payroll system, you should contemplate about acquiring finest automated payroll management system that can handle all the burden of business payroll. Take reviews of other corporate fellows about reliability and usability features. Choose outsource or internal service options depending upon budget utilize most supportive system for inspirational start.