What you will face when automating your HRMS payroll software

One of the major benefits of automating your HRMS payroll processes is not having to worry about legal and legislative requirements. Whatever territory or country you’re in, the appropriate payroll software should take much of the burden of compliance from your organizational shoulders.

Some common payroll compliance issues include:

Inaccurate time and attendance records

Starting at the beginning of the process, accurate payroll and payment of salaries depends on accurate records of the time worked by each employee. Any error will result in an over- or underpayment (the latter may occasion a quicker complaint). Ideally, your payroll software will draw the data directly from your HRMS’s time and attendance module and any errors will be down to incorrect clocking in and out, etc.

Recommended reading: make sure your HRMS implementation goes as well as possible with our nine steps to HRMS implementation success.

Managing overtime

Different rates for hours worked over and above an employee’s contract are often determined by legislation - for example, in the US, this is covered by the Fair Labor Standards Act. As above, any errors affect payment and cause administrative headaches, especially in the event of an audit, but the appropriate software integrated with your time and attendance data will go a long way to preventing problems.

Multi-country (or state) payroll

Perhaps your organization employs people in several countries or states. If so, they will be subject to differing employment legislation and labor law, including minimum wage rates, tax withholding requirements, and so on. You may have separate HRMS payroll software for each country, or you may opt for a global payroll system that is sophisticated enough to manage the whole workforce.

On an individual level, there are other issues, including misclassified employees and garnishment or attachment of earnings. Depending on the status of an individual providing services to your organization, that individual may not legally be an employee – independent contractors, temporary employees, freelancers, all are treated differently for purposes of benefits, and tax withholding. and have different requirements for compliance reporting. Garnishment or attachment is a very specific issue that arises when a court directs an employee to deduct a regular amount from an employee’s paycheck (usually to pay off a court order or debt). This requires additional administrative time which can be minimized using the right technology.

Finally, as part of your research prior to selecting and implementing HRMS payroll software, you should ensure you are fully aware of all legislation that impacts on your payroll and/or requires you to report on associated matters. For example, in the US, the key federal legislation is:

  • Fair Labor Standards Act (FLSA)

  • Equal Pay Act

  • Federal Insurance Contributions Act (FICA)

  • Federal Unemployment Tax Act (FUTA)

Every country will have a similar list. Hopefully, you already have this knowledge in-house because you are already administering your payroll. However, it’s worth bearing in mind that the law changes regularly and new software is an opportunity to review and renew your knowledge of the legislation.

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Dave Foxall

About the author…

Dave has worked as HR Manager for the Ministry of Justice for a number of years, he now writes on a broad range of topics including jazz music, and, of course, the HRMS software market.

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Dave Foxall