Friday, 04 December 2009, 10:47

While it is beneficial to share information between HR and payroll software systems, good arguments exist for having separate payroll and HR systems and creating an interface between the two systems to link and share information, rather than integrating the two.

This is according to executive chairman of payroll software company NuQ, Ron Warren, who says that integrated systems tend to lean towards one thing or the other, for example providing excellent payroll functionality, but poor HR functionality, or vice versa.  “Therefore it makes sense to get the best payroll system and interface it with the best HR system, rather than using an integrated system where either the payroll or the HR portion is deficient,” he says. “By selecting the best payroll system and the best HR system available, individual superior facilities from each system can be utilised.”  
Warren points out that it is easy to pass ‘shared data’ from the HR system to the payroll system and vice versa especially if both are running on the same type of database. “Information is shared by passing it from one computer system to the other and automatic procedures can be set up to pass changes between the systems as they occur, or at logical intervals, or a mixture of both,” he says.

However, he stresses that if separate systems are used, the responsibility for the interfacing must be clearly defined and agreed to by all parties and ultimate responsibility must rest with one party only, to avoid the passing of the buck if a problem arises.  There are different system procedures required for payroll and HR systems. Warren cites some examples: 

·                     Payroll systems to be locked for a period of days shortly before final payslips are printed to enable payroll staff to check that everything is correct, whereas an HR system needs to be accessed all the time.

·                     Once a payroll period is finally closed, no alterations to numeric data or codes may be made – ever, while data held in the HR system can be changed at any time.

·                     Employee self service is desirable on an HR system for changes to personal information, but giving employees access to payroll systems is dangerous, even though their access is theoretically limited.

Payroll systems should be easy to customise, as changes happen frequently and at short notice, for legislative purposes as well as for new or changed calculations, including simple things like interest rates, tax rates, union contributions, new earnings and deductions, and changes from simple salaries to total packages.  The system design emphasis should be on making it easy to change such things, without compromising system integrity.  In HR, changes tend to be infrequent and to take a lot of discussion and explanation before they take place.  The necessary program changes are then made by computer professionals, which can take a bit of time.

An integrated system will lean towards the requirements of either HR or payroll, depending on the experience of the person(s) in charge.  The result would be a system which performs both functions poorly; or a payroll system that has excellent features, with indifferent HR facilities; or an excellent HR system, with mediocre payroll facilities.

Another issue is that to develop a payroll system requires a different skills set to developing an HR system and it is unusual to find someone that understands both disciplines.

Warren says that a further consideration is cost.  “It is probable that the cost of two separate systems will be less than the cost of a combined system, as the basis on which the systems are charged for tends to be different,” says Warren.  “The customisation cost of a combined system will also tend to be higher, as the payroll portion, which will probably require the most customisation, will almost certainly not be as flexible as a separate payroll system.”