Siloed systems are relics of the early 2000s; today, integrated HR and payroll systems are the wave of a more efficient future. HR and payroll integration means a more robust onboarding process, fewer errors, greater transparency, and enhanced compliance, among other benefits.
As payroll and HR systems grow increasingly complex, integrating the two systems only makes sense from efficiency and security standpoints. It's only a bonus that this integration also eliminates many cumbersome manual processes.
Here's why more organizations are integrating their payroll and HR systems, as well as the best practices for doing so.
How Integrated HR and Payroll Systems Work
There are three principal types of integrated HR and payroll systems:
HRIS (Human Resource Information Systems) are designed to handle basic HR needs such as benefits administration, storage of employee data, employee leave management, and payroll processing. Employee information is stored in individual digital files, which allows time, attendance, and benefits records to flow seamlessly to payroll records. This ensures more accurate payroll records, as it automates calculations and tallies paid and unpaid leave. This makes HRIS ideal for small businesses that do not have a dedicated HR department.
HRMS (Human Resource Management Systems) can work with both small and mid-size businesses, as they offer more features than an HRIS. They are centralized systems for HR, payroll, and employee data. In addition to core HR functions, HRMS can also support performance management tools, learning and development, employee onboarding, and other advanced functions to synchronize data across different aspects of employee productivity.
HCM (Human Capital Management) systems are used by large enterprises, as they are the most comprehensive type of integrated HR and payroll system. They encompass both the core and advanced functions of HRMS, but are also scaled for workforce management and optimization of very large staffs. Succession planning, business intelligence, and other advanced aspects of people management are the main draws of using a HCM over the two types of systems.
Benefits of HR and Payroll Integration
There are innumerable benefits to HR and payroll integration. No matter which type of system your organization picks, unifying the two functions streamlines processes. Here are some of the benefits in doing so:
Fewer Errors
Manual data entry creates errors, and legacy payroll and HR systems that are siloed are very prone to errors. Because integrated systems integrate employee data in real-time, such as attendance rates, benefits deductions, and other information related to compensation and performance, these inaccuracies are vastly reduced because they no longer require human input to process.
Increased Productivity
Integrated HR and payroll systems are major time savers. By eliminating tedious, time-consuming tasks related to manual data entry and checking between two siloed systems, HR staff can focus on more pressing and meaningful matters, like creating a better workplace culture.
Data-Driven Decision-Making
When payroll and HR data are viewed in tandem, they provide a more holistic view of the entire workforce. This enables managers to make better decisions regarding staffing needs and overall business strategy when they can see productivity, retention rates, and other data points in real time.
Increased Employee Morale
Self-service options with integrated payroll systems make employees feel more empowered about their personal finances. When employees feel more in control regarding things like leave requests, changing their payroll information, and finding out more about their benefits without needing to constantly contact an HR manager, it saves teams time and empowers them.
Enhanced Compliance
Payroll and HR regulations are constantly becoming more complex. Having a holistic view of both data sets at all times makes it easier to see if compliance requirements regarding wage and hour regulations, conditions for grant funding and tax credits, and other mandated and optional constraints are met.
Scalability
Integrated systems allow organizations to add or subtract features as needed. As many businesses face uncertain economic times and look to scale back, integrated systems allow them to do so. When growth is evident, the features can be added back. These enable teams to stay agile while retaining core functionality with greater transparency than when the systems were siloed.
Data Security
The cloud-based systems behind integrated payroll and HR systems have more built-in security features than legacy systems. Payroll data security is more important than ever when data breaches are a constant threat to employees and customers, as the sensitive data in payroll records is highly desirable to bad actors. Cloud systems must be compliant with privacy regulations, and they can provide a record of attempts at unauthorized access before unwanted cyber visitors become a serious problem.
The Challenges of Siloed Payroll and HR Systems
What happens when HR and payroll functions are not integrated? After all, these two functions have had to be separate for a long time, and organizations have still thrived.
Data discrepancies across the two systems are a given. Without integration, the consequences of these errors waste time and resources that could be put to better use. Integration eliminates time-consuming manual processes that waste employees' time, such as checking whether the employee has already used allotted leave time.
Best Practices for Integrating HR and Payroll Systems
When evaluating an integrated HR and payroll system, consider the features your organization needs the most versus ones that would be nice to have. Implementing the system will have some growing pains, so make sure to do this during a slow period when operations can handle being temporarily disrupted. Working with a partner like Affiliated HR & Payroll can also provide the guidance necessary for selecting the right system that best fits your organization's needs and priorities.
Streamline your HR and payroll processes with Affiliated HR & Payroll’s integrated systems. Contact us today for a demo and see how we can help your business thrive.