Roger Moore, General Manager, Bond Teamspirit, explains the benefits associated with having an integrated HR and payroll system and reveals the unexpected and often overlooked benefit of integration which can provide businesses with valuable information in order to achieve significant savings.
Payroll and HR are two of the closest departments in an organisation. HR looks after the organisation’s people and payroll makes sure they are paid accurately and on time. Neither could do their job properly without the other. Yet despite sharing considerable common ground, the systems dedicated to carrying out the respective tasks by the two functions often remain entirely separate.
There are a host of benefits of having an integrated HR and payroll system and the majority are well documented: there is one definitive system where data is entered and stored; administrative processes between the two sides are streamlined and reduced; in the case of self-service HR, employees can also see their payroll information; and it means there is only one system to upgrade and maintain. Far less talked about though is the importance of gaining an accurate and up-to-date picture of workforce activity and the ability to drill down to the costs associated with it.
For instance, one of the hidden cost benefits of a single system is the ability to accurately attribute the costs of people who work across multiple departments or locations. The increasing pressure placed on managers means that many often do not have time to analyse their salary spend to a granular level so costs can be unfairly apportioned. An individual may undertake work across both the customer service and marketing departments but it is perhaps the former that is picking up the whole tab rather than the salary costs being split.
In sectors such as retail, where there can be high levels of absenteeism and staff turnover, this can pose a particular problem: staff are moved across to a store at short notice to provide cover or to meet increased customer demand, but they may remain on the payroll of the original outlet. It can also be an issue for organisations which are undertaking increasing amounts of project management work since the lines can be similarly blurred as staff are seconded to a different department or brought together from different functions as part of the project team. Whatever the set of circumstances, the situation can be further complicated given the split is likely to change from month to month.
If HR is integrated with payroll systems and timesheets, however, it is much easier to see where the work has been carried out and precisely proportion the cost of it. As long as individuals fill out the timesheet accurately and this data is input into a single system, there can be no grey areas as to who should pay for the work undertaken. Moreover, if timesheets are integrated into the payroll system, the calculation will be done automatically.
Clearly, this less expected benefit of integration not only has major advantages for the individual managers and departments that it affects, but also for the organisation in the wider context. The importance of accurate management data has been rising up the agenda for several years but without the right systems in place it is difficult to derive tangible benefits from such information. The payroll bill accounts for one of, if not, the biggest areas of financial outlay for any organisation so being able to drill down and analyse it more deeply is increasingly important.
Furthermore, in today’s cost-conscious and difficult economic climate, it becomes even more business-critical. Accurate payroll and workforce data could make the difference between business success and failure, especially in this era of reduced margins. For instance, if a retail outlet is basing its future projections on a salary bill that isn’t accurately reflecting the needs of the business, it is likely to run into serious problems. Every organisation needs to know the what, where and how of the costs it incurs across every department or function and without this visibility, a struggling business will be unable to take the actions required to get itself back on course.
When asking an HR and payroll department in an organisation with different systems how many people they employ you will almost certainly get different figures, but invariably it will be the one from payroll that is correct. Employees will soon speak out if they are not paid on time, or if their salary amount is incorrect, meaning that an error in the payroll data will come to light far more quickly than it would in any HR data held. That said, the data in the HR system relating to issues such as absenteeism, sickness or disciplinary is equally as important when it comes to building an overall picture of the issues affecting areas such as workforce planning. Consequently, it makes no sense to hold these crucial sets of data separately.
While the information and insight that an integrated HR and payroll system can provide may not be a cure-all for an organisation’s problems, the benefits of running a single system go beyond some of its most well documented ones. Crucially, it goes a long way to providing organisations with the necessary information to make adjustments in one of its biggest cost centres by more accurately apportioning payroll costs.