Procuring payroll software

If you're in the market for payroll software, good advice could save you a packet. Will Mann sums up some of the key information on offer.

On this page:
Implementing your new payroll software - keeping costs down
HR and payroll software advice - the value of integrated systems
Efficiency savings of integrated systems
Arguments for separation
Buying payroll software: 10 questions to answer.

Implementing your new payroll software - keeping costs down

Most organisations could reduce software spend by as much as 20% without changing suppliers, says Andy Kyte, a research fellow with technology research organisation Gartner Group. "We're spending more than ever on technology, but we're not paying attention to where that money goes," he says.

Here are four steps to help you avoid overspending:

• Only pay for what you need: Pay for minimum functionality. "Have a list of what you need the payroll package to do, and don't be dazzled in demonstrations," advises Brian Bennyworth, group HR director at housing association LHA-ASRA.
• Work out what you already have: When looking for any payroll software solution, conduct a thorough audit of what's already owned. For example, does another department have software licences that are not being used? Or you might find the new payroll package will make an existing application redundant, in which case you can save money by not renewing those licences.
• Try your existing supplier: Buying payroll software from an existing supplier may generate substantial savings in some cases, adds David Bradshaw, an analyst with technology research organisation IDC. "If it means one less service level agreement, one less set of due diligence, and one less relationship to manage, it might be worth looking at paying slightly more for software, to get that saving," he says.
• Embrace the new: Kyte advises creating policies that will prevent what Gartner terms "software hugging" - users keeping familiar systems when there are newer alternatives available.

HR and payroll software advice - the value of integrated systems

Choosing between integrated or separate HR and payroll software is one of the most crucial decisions in the procurement process. Is it better to buy a new, integrated HR and payroll system, or use different systems? Or, use different systems, but try to integrate one with the other?

On the one hand, a single integrated system means only having to maintain one set of data, which cuts duplication and inaccuracies. On the other, there may be cost considerations and legacy issues around existing systems, which make a standalone payroll package more attractive.

Efficiency savings of integrated systems

Greater efficiency is seen as the main advantage of integrated HR and payroll software. The overlap in data used by both HR and payroll is substantial, says Frontier Software managing director Michael Howard. This includes: employee name and number, employment record, date of birth, gender, address, sickness record, maternity pay, pension information, and much more.

"Integration means relevant data is entered only once, and from a database management aspect, it should be stored only once," says Howard. "Where this is not achieved, duplication and inaccuracies occur. This will also be the case when the data needs to be changed and updated."

Integrated HR and payroll software makes reporting and management easier for HR professionals, says Jonathan Legdon, business development director at NorthgateArinso.

He explains: "All employee data, such as pay, conditions, cost centre, organisation, position and personal information can be simultaneously available.

"This has several advantages in terms of processes and flowchart. For example, a new employee can be set up in the system by an HR administrator, the employee can add personal data through self-service, and pay details can be added by a payroll administrator using the same core data. There is no need for cross-referencing or waiting for data to flow through the system."

The use of just one system can mean fewer overheads. "If you opt for separate HR and payroll software, users will have to be trained across the different systems," says Frontier's Howard.

Arguments for separation

But some companies may choose not to integrate HR and payroll software. Among bigger organisations, there may be a global commitment to another system, such as SAP or Oracle, says NorthgateArinso's Legdon. "If a company has an existing payroll software solution that works fine in conjunction with this system, it may decide to simply upgrade its existing payroll package."

Familiarity is another consideration. "If people are paid the right amount every week or month and the system is broadly fit for purpose, a company may think that if it's not broken, don't fix it," says Legdon.

He adds: "When the same payroll package has been running for some time, it will probably have reached a point of maturity where the team responsible for it feels comfortable, knows it thoroughly and is reluctant to change. Staying with the same system means there is no need to set up new software, and its operation will not require staff to be retrained."

At the SME end of the market, not every company may have an HR need, says Neilson Watts, product manager at Sage. "Our Instant Payroll package, aimed at firms with up to 10 employees, covers all the payroll essentials - payslips, HMRC deductions, pensions - but does not offer wider HR functionality," he says.

But while many small firms think they do not require HR functionality, there are certain features, such as absence management, which cut across both HR and payroll, that they invariably find useful, says Legdon.