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WHAT IS AN INTEGRATED HR/PAYROLL SYSTEM? Before we can answer that we had better ask: WHAT IS A PAYROLL SYSTEM? Most people would say that the three aspects of a payroll system, in order of importance, are:
Tax & NI Calculations Most people assume that this is the important and complicated part of running a payroll. Well, it has to be done correctly but it isn't all that complicated. The process of converting gross pay to net pay by calculating the amount of tax and NI due is one that can be carried out by hand - thousands of small companies do it that way every week. The process is well-defined and documented by the Inland Revenue and, although there are quite a lot of rules (which change from time to time), it isn't particularly difficult to perform. Admittedly, some of the information is ambiguous and getting a ruling on what it means from the Inland Revenue can be time consuming but, at the end of the day, it's mainly a matter of arithmetic. Any Inland Revenue accredited payroll system ought to be capable of following the rules and getting its sums right! Payroll Processing Assuming that the payroll system can convert gross pay to net pay correctly, we have to consider how the user goes about telling it to do so. Obviously, the basic principle here is to process all the employees on the payroll and produce a set of payslips and a BACS file but this has to be seen as a less than minimum requirement. Some of the issues surrounding payroll processing are:
Calculating Gross Pay This is the bit that most people ignore - because they take it for granted. Most payroll systems don't help very much here. They work on the principle that "if you want a payment to be made, type in the amount and we'll pay it". At a pinch, you might be able to set up a repeated payment, like a monthly salary, or even a decreasing-balance loan but, by and large, working out what an employee is to be paid is the user's problem not the payroll's. In general, the payroll system doesn't have any option about behaving like this because it doesn't have sufficient data stored within it to do any better. Information about:
So, the process of working out what an employee should be paid and/or have deducted from the mass of information that exists within an HR system or on a lot of pieces of paper is usually down to the user - doing it manually or using separate computer programs to work it out and then feed it into the payroll system. For an organisation with a very simple payment structure this might be acceptable but when you add in such factors as:
SO WHAT DOES INTEGRATION MEAN? Fundamentally, it means that if the HR part of the system knows something about an employee (and it should know just about everything about the employee), that something should automatically be available to the payroll part of the system without any intervention from anybody. To put it another way, since all the reasons why an employee gets paid and the amounts for each reason should be in the HR system, the payroll system should be able, each period, to deduce what to pay an employee without any further data being entered by the user. Look at it like this. The HR system knows the employee's salary and all his or her benefits. It knows what bonuses the employee should get for extra qualifications or fluency in languages and it knows when the start and when they finish. It knows the employee's working pattern and whether the employee was off sick. It knows whether the employee is paid by salary or according to a timesheet or a bit of both. It knows whether the employee has submitted an expense claim and whether it has been approved yet. It knows whether the employee has a loan (because someone had to authorise it) and what the repayment terms were. It knows whether the employee has a company car and whether he or she has to contribute to the cost of it. All this is information that would naturally come into the HR system because it is all directly associated with the employee or the employee's job/contract/grade. So when it cones to working out what an employee should be paid, the HR system has all the information needed to do it. Why should that information have to be extracted from the HR system, calculations be made and other information entered to the payroll system? Surely the payroll system should fetch all the information from wherever it is on the database and perform these calculations itself. What are computers for if you have to do it yourself? Download our leaflet on "Evaluating Integrated HR & Payroll Systems". You might find it helpful.   Back |
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