Over the years, there has been an ongoing debate on the best approach to managing payroll. Should HR opt for a unified platform with its own homegrown integrated payroll system, or is a blended approach that incorporates best-of-breed payroll solutions a better choice?
The misconception of an integrated HR and payroll system
It is widely believed that integrated HRIS systems – where a HR software has its own internal payroll function – are the epitome of accuracy and efficiency. There is a misconception that it allows a seamless data flow, resulting in fewer errors and less administrative burden. That you can simply set up the system and then that’s it – all else is done.
But is this really true?
Probing the perceived efficiency
While it’s true that integrated systems can cut down on manual interventions (aka less contract signing), it does not automatically translate to a utopia of payroll ease and accuracy.
For example, in complex businesses, where HR systems must accommodate varied workforce types across multiple locations, integrated solutions may fall short of their grand promises. They often result in a one-size-fits-all approach that may not cater to the specific needs of different employee types and locations. As a result, it may lack the flexibility to customise payroll processes for different jurisdictions and compliance requirements.
A deeper look at system reliability
It’s a well-known fact that any IT system is only as strong as its weakest link. If the HR data obtained from an integrated HR and payroll system is incomplete, incorrect or outdated, then the subsequent payroll calculations are compromised.
Additionally, the reliance on a single entity for both HR and payroll strips businesses of the independent checks essential in mitigating risks and ensuring the accuracy of payroll disbursements.
As an example, let’s consider a scenario where the HR system fails to capture an employee’s updated tax information. In this case, the payroll calculations will result in over or under-withholding of taxes, resulting in compliance issues and potential legal consequences for the company.
So, is an integrated approach really the best option for ensuring payroll accuracy? Or is there a better alternative?
The case for the blended approach
Enter the blended approach – where businesses can choose from a range of specialised payroll solutions and combine them with their core HR and Workforce Management system. Whether it’s through an in-house payroll team, an external payroll provider, or a chosen best-of-breed payroll software that integrates with your existing HRIS platform, a blended approach allows companies to select best-in-class payroll products that align with their unique requirements, while still maintaining the benefits of an integrated system.
A blended strategy advocates a tiered approach where payroll data is processed and managed at multiple levels. This is to prevent one system’s failure from cascading down on the entire payroll process, thereby de-risking and ensuring compliance while maintaining control over their data.
In the case of 23.5 Degrees, Starbucks’ first UK-franchised business partner with over 1,600 employees, adopting a blended payroll approach proved to be a game-changer. Partnering with elemensuite as its HRIS provider along with a fully managed payroll provider, the 23.5 degrees was able to streamline its HR processes and ensure accurate and timely payroll disbursements for its diverse workforce.
By implementing a customised HRIS that addresses the complexities of managing a diverse workforce, along with a dedicated payroll provider well-versed in UK legislation and tax regulations, 23.5 Degrees achieved optimal efficiency and compliance.
Enhanced data accuracy
Implementing a blended payroll approach offers the advantage of decentralisation, which in turn facilitates a thorough data validation process. By investing in an HRIS system equipped with a cutting edge Workforce Management and Time & Attendance solutions, in addition to utilising a dedicated payroll software or payroll service, you can ensure the accuracy and compliance of your data.
For instance, one fully managed payroll provider, found that with elementsuite, they retrieved 99.75% of payroll data accurately. The remaining 0.25% of cases presented minor discrepancies, which were quickly identified and resolved without any impact on the payroll process.
Customisation with flexibility
Utilising a blended approach not only allows businesses to choose the right payroll solution for their unique needs but also enables them to customise and adjust it as needed.
They can craft their own payroll narratives instead of adhering to a predesigned script that doesn’t match their needs, crucial for enterprise organisations with diverse employee types and locations. As such, with multiple payroll solutions at their disposal, businesses can easily configure different payroll processes based on the requirements of each region.
Independent verification and error detection
Automating payroll data alone — no matter how sophisticated — is insufficient. There needs to be a secondary set of eyes and robust verification processes. By segregating payroll processes, businesses can ensure an independent verification of payroll data that reduces the chances of errors slipping through the cracks.
It’s the redundancy principle at play, providing businesses with peace of mind that their employees will be rightly compensated, and their organisation’s reputation remains untarnished.
Amplifying employee satisfaction
Payroll is personal. It is about livelihoods and dignity, and inaccuracies or delays are not merely a hiccup in the system – they can unravel the very fabric of trust.
Employees have come to expect personalisation in all aspects of their lives, including how they are paid. By adopting a blended payroll approach and selecting specialised solutions that cater to the unique needs of your workforce, businesses can offer a personalised experience to their employees while maintaining control over their data.
They can rest assured that their payroll process is efficient, accurate and compliant. In fact, one fully managed payroll provider found a 70% reduction in payroll queries since partnering with elementsuite – showcasing how a blended approach can result in timely payslips, and accurate calculations.
Strategic decision-making freedom
A final but crucial consideration is the impact of data accessibility and reporting capabilities. With a blended approach, businesses are not limited by a single system’s constraints. Instead, they can tap into specialised software or services to pull granular reports on workforce insights tailored to specific business units or departments. This allows for more informed decision-making and better strategic planning.
What’s the best blended approach for your organisation?
When deciding on a payroll accuracy processing strategy, there is no one-size-fits-all formula. Whether in-house or external payroll services, each approach has its pros and cons, and it is crucial for businesses to weigh the scales according to their unique contexts.
Analysing the in-house option
Opting for an in-house solution may be enticing due to the sense of control and personal connection it offers. However, businesses should also take into account the required resource allocations, expertise demands, and potential compromises in scalability that often come with such an approach.
The benefits of external expertise
An external fully managed payroll provider offers the advantage of dedicated expertise. They bring a wealth of industry knowledge, compliance savviness, and an extensive track record in payroll excellence. However, there’s a trade-off regarding system access and the opportunity cost of relinquishing complete process control.
The overarching vision of a blended payroll system
The traditional integrated payroll systems that emphasised rigid control are being replaced by the more nuanced and strategic landscapes of a blended model.
The blended payroll system is more than just an alternative – it is the new norm. It offers a counter-narrative to the one-size-fits-all approach, opting instead for specialised solutions that can be woven in unison to create a masterpiece of operational prowess.
So, as you define or refine your payroll processing approach, embrace the freedom of blending with a keen eye on what will best serve your unique organisational requirement.
Contact us today to learn more about how elementsuite’s blended approach can revolutionise your payroll processing. Our team of experts are ready to discuss your specific needs and partner with you on the journey towards payroll excellence.
