HRMS vs ERP: The Payroll Tug of War
Payroll is a complex topic and many vendors try to make our lives easier by providing automated systems that simplify the work. In comparing the options of managing payroll in HRMS software or ERP software, which is better? The answer to this question unfortunately is . . . it depends.
An ERP system that manages payroll also integrates many different types of data into one system, so it will often do a better job of ‘feeding’ the payroll with these data elements. For example, I’ve seen an ERP that allowed the employee to request training via the system and once approved, it triggered other data and tasks, such as sending the coding to the payroll system for training pay for those days, blocking the employee from being placed on the shop floor schedule, as well as recognizing that the employee was eligible to receive an additional 10 cents an hour once the training was completed. In a non-ERP environment those would be separate tasks and dependent on manual intervention.
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Compared to ERP, HRMS is often seen as more user friendly and specialized in functionality, especially among the smaller systems. When new tax updates are released, for example, it’s often a faster effort to test these changes as the HRMS is more self-contained. As well, these systems are often able to implement from a user-centric point of view as they are exclusively focused on the HR user base, rather than an ERP which needs to please users from various disciplines such as manufacturing, financials, etc.
ERP payroll has an advantage where financial data elements such as account codes, project codes, or currency conversions are needed. Often these data elements already exist in the financials module and therefore can be utilized by payroll in the HR module without extra effort. With an HRMS it may require additional effort such as manual data entry or the definition of an interface from a financial system to be able to utilize this data in payroll. These data connections in an ERP can be a double-edged sword, however, as neither HR nor payroll is ‘owning’ the data, depending on your policies and procedures, it may require additional efforts or time to get a new data element such as a new cost center established and available compared to HRMS, since HR usually owns the data entry and it will be more streamlined.
There are many ERP and HRMS vendors with payroll products on the market, it’s only a matter to define your payroll requirements in order to choose the best product for your needs.
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