Payroll is arguably the most important aspect of HCM, and a critical component in a smooth running business. Payroll has historically been considered a siloed data source; disconnected from other operations, and offering limited management visibility.
As companies move to the cloud, its time to consider the benefits of bringing payroll onto the business platform, and explore how accessible payroll data can contribute to informed decision-making and a streamlined business practice.
What is On Platform Payroll?
An on-platform payroll system is an integral part of your ERP, either as a core module or a customization that behaves as one. Its key characteristic is the payroll function and more importantly payroll data resides within the same application, and works cohesively with other parts of the system. For example:
- Employee payroll configuration is stored on the ERP employee record.
- Employee pay slips and details are associated to the ERP employee record.
- Payroll can use Employee Timesheet information.
- Employee’s self service includes payroll features; obtaining past pay slips and requesting leave is accessible using ERP credentials.
- Processing and payment of pay runs is a function within the ERP and utilizes standard messaging and audit trails.
This differs from an integration approach, where the payroll system is external and data must be synchronized or replicated. Typically the synchronised data would be limited to:
- ERP to External Payroll: Basic employee data pulled into the external payroll or manually re-keyed.
- External payroll to ERP: Push summary journal to represent general ledger impact of pay slips.
Before examining the benefits of on-platform payroll we must first acknowledge the primary concern of holding sensitive payroll data within the ERP. This has in the past been an argument for keeping data on an external system. As with all sensitive data appropriate access controls must be applied, restricting access based on role.
Whilst there are many potential areas that can benefit from on Platform Payroll, this articles explores the following:
- Reporting and analytics
- Leave Management and Liability Accrual
- Employee Time And Project Expense
Reporting And Analytics
In the past the ability to report on payroll data has been limited, with a high request-to-report delay; often restricted to pre-defined reports and a basic summary journal extracts generally reflecting only one segmentation (either location, class or department).
In contrast; with the data residing directly in the ERP it is immediately available (based on role) using standard search and reporting, and can be combined with other HR and ERP data. For example;
- The payroll officer has the ability to customize and report on payroll data; applying filtering based on subsidiary, department or location provides granularity rarely available without external consolidation or BI software.
- The CFO – all payroll activities automatically impact the general ledger without import, and can reflect department, class and location segmentation.
- The CEO – having real-time visibility into top level payroll data, with key performance indicators visible on their dashboard.
Leave Management and Liability Accrual
Leave Management is often managed and processed in an entirely different system to payroll. This separation often results in processing delays, incorrect leave balances and reporting anomalies.
Having a leave management system that works in combination with payroll and the general ledger ensures that the associated leave liability is easily reported and managed appropriately by HR departments & managers.
Other benefits include:
- Company wide visibility of leave calendar to assist with resourcing
- Leave Requests can be created well in advance of payroll
- Adjustments / Corrections are easier to complete & automatically update both payroll and available balances.
- Payroll officer can review employee absences and easily identify trends
Employee Time and Project Expense
Waged employees are paid based on the hours they work. Historically the data was logged externally to payroll and the employee hours and pay rates imported or manually rekeyed. The on platform approach enables payroll to source the employees’ timesheet data directly; summarize and apply pay rates for use in the payrun process. By using the timesheet data directly the payroll process is streamlined, ensuring time approval workflow is enforced prior to inclusion, and avoids duplication or error.
For many service based companies the timesheet data is also logged against projects and tasks. This data is generally used for project based reporting, however combined with payroll can be used as a basis to more accurately reflect payroll expense.
A typical payroll setup will post an employee’s payroll expense to their “home” department, class and location. By leveraging the available timesheet data the expense can be re-allocated to multiple locations, with different customers and/or projects.
A popular alternative to in-house payroll is to outsource the activity to an individual or company. Using an on platform approach the data remains available and reportable in your system, and the outsourcer is given appropriate access to your data. This approach limits the interchange of emails / paperwork, and can also segment payroll activity; outsourcing the processing of pay, but approve pay slips internally.
This can benefit in other ways:
- This can be more cost effective for companies who don’t require a full time payroll officer
- Ensures regulatory compliance with experienced payroll professionals
For any business, having all of the company data accessible and reportable in one place provides enhanced visibility and accountability. This combined with the operational efficiencies of a single system, and the flexibility offered by on platform payroll are compelling reasons to investigate further.