Integrating your HRMS with an outsourced payroll solution

Outsourced payroll tasks can provide time and cost savings but integration with your HRMS is still needed to complete employee picture. Are you ready for the challenge? Many companies struggle to create the perfect balance, so here are some key items to consider.

Analyze integration costs and benefits

An HRMS integration has hard dollar costs, often from the receiving payroll vendor to accommodate data, as well as the soft costs of internal resources to define, build, test and maintain an integration long term. Sometimes companies decide not to integrate but rather to manually keep HRMS and corresponding outsourced payroll(s) in sync. There may be some savings from not building an integration, but there will be corresponding long term costs in dual entry as well as continuous auditing to ensure systems continuity.

There are other integrations to consider when outsourcing payroll. Will your absence, time and attendance data be housed in your core HRMS for interfacing to the downstream payroll? Will the payroll vendor then integrate to other systems? At a minimum, these systems feed financial applications such as a general ledger system. It is highly recommended that you build a data and applications landscape that describes the source system for each data element and where each will be sent.

Use this guide to payroll management to learn how to manage payroll effectively with your HRMS

Define the employee experience for peak usability

Outsourced payroll systems can cause a data dilemma, in particular when processes overlap among multiple systems. As you define your payroll data landscape, a key consideration should be employee self-service or direct access. For example, will an employee change a W2 election in your core HRMS or an outsourced payroll product? Should the W2 transaction be grouped with other core HR data changes such as adding a new dependent? If so, it can then be integrated into the payroll system.

An employee should not need to go to two systems to make the same change; it’s more of a question of where the transaction should occur. Technical limits may come into the discussion, for example, can the payroll vendor ‘unbundle’ that W2 transaction from the payroll system options?

An employee may still need to go to two separate systems, such as the core HRMS for an address change but to the payroll system to view a paycheck online. The aim is to make the employee experience as ‘technology agnostic’ as possible. You can work toward that goal through putting all of your self-service links in one place on your portal and through using company branding consistently throughout your systems.

While outsourcing payroll can involve additional complexities, it is important to remember the business drivers of such a decision: a total lower cost of ownership, vendor expertise in tax and labor, and lower staffing needs. These advantages are strong reasons to consider outsourcing payroll.