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How Three Companies Merged HR and Payroll

The decision to integrate HRMS and payroll into a single system is a no-brainer. Integration isn't, however, a flawless solution.

June 20, 2002
Related Topics: Human Resources Management Systems (HRMS/HRIS)
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The decision to integrate HRMS and payroll into a single system is a no-brainer, says Mike Hanson, general manager of Ceridian, an HR information services company in Minneapolis. To begin with, HRMS and payroll have a lot of duplicate data, such as employment status, compensation rates, benefits, and earnings history. "The two databases are never in sync and are error-prone," he says. "It doesn't take long for things to get out of whack."

An integrated system dramatically reduces errors because it streamlines employee information into a single database. That means that once a piece of information is in the system, it flows to all the relevant fields. If, for example, you update an employee's address in his personnel file, it is automatically updated in payroll.
Integrating HRMS and payroll also reduces the number of hours spent on administrative tasks. With two systems, there are two people entering the same information, Hanson says. In an integrated system, you can design the workflow process so that a single person manages all the data.

Integration isn't, however, a flawless solution. It can create new problems, says George Eckhert, principal of Consulting Dimensions Inc., an HR consulting firm in Ontario, Canada. "Compared to an integrated HRIS, separate payroll and HR systems are simpler, use less computer capacity, and are easier to administer."

Even though payroll and HR systems have much common data, their business characteristics are quite different, he adds. The primary goal of payroll is to accurately and economically pay employees. The HRMS's purpose is to manage the workforce and increase the return on HR expenditures.

"Management's objective should be to make the HR system as effective, powerful, and easy-to-use as is justifiable," he says, "but there's no benefit to investing in a flashy payroll application." He also warns that because payroll is such a critical function, the bulk of the integration resources often gets funneled to the payroll application, leaving HR with meager funding.

But even Eckhert admits that if it's done correctly and for the right reasons, integration can be the right solution. If you do decide to physically blend the two systems, first make sure the processes are compatible, he says. "Someone must understand and document how payroll and HR applications interact conceptually in order for them to be implemented as one information system." That means that data elements such as job codes and employee numbers have to be the same in both systems.

You also have to determine the accuracy of your existing history, Hanson adds. If your data is error ridden, you may want to leave the legacy system and build a new database from scratch. And don't just replicate the old processes, he says. Build new ones that are tailored to your needs. "This is a perfect chance to build a better system."

Workforce, January 2002, pp. 64-67 -- Subscribe Now!

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