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The Ultimate Guide to Buying Enterprise Payroll Software

Payroll overview

When you are spending every minute of your day excelling at your job, why should your payroll software act as an impediment? One of the most critical and essential functions of Human Resources - the payroll is also one of the most complex. Being the biggest cost centre, one mistake could lead to a range of repercussions varying from an unhappy employee to heavy losses, to tarnished brand reputations.

A great payroll system should be 100% compliant with all the state and local laws, should be easily configurable, be error-free and automate most of the payroll processes so that you can focus on what matters the most - which is employee success.

Before we delve into how you can buy a payroll system that empowers you to excel, let’s take a quick look at what it involves.

According to Investopedia, payroll is “The sum total of all compensation that a business must pay to its employees for a set period of time or on a given date,” which includes salaries, wages, deductions, bonus, and net pay. As a business function, it involves:

  • Structuring the organisation’s pay policy including leave encashment policy, overtimes,
  • Designing flexi payment options, allowances, tax saving components etc.
  • Defining payslip components like basic, HRA and LTA
  • Calculating the gross salary and net amount to be paid after the deductions
  • Processing and releasing employees’ salaries every month including annual bonuses if any
  • Filing tax returns and depositing dues like EPF, TDS etc. with the appropriate authority

Having said that, payroll is more than just processing paychecks. It is a complex process that involves tight collaboration between multiple departments like HR, finance, compensation and benefits and HR Ops. But all the payroll complexities can be handled easily if you have the right software built on advanced technology that is intuitive, user friendly and integrates easily with your other systems.

3 Stages of Payroll Processing

Payroll Management

While the pre payroll stage is about gathering all the inputs from different departments and validating them, the post payroll stage takes care of adhering to statutory compliances and paying out to the employees and the concerned authorities like EPFO, IT Department and ESI etc, plus reporting.

payroll software

Payroll softwares, or better still, an HRMS that provides a payroll module is the best solution. It integrates well with other departments, hence makes payroll input gathering easy; accurately calculates payroll for thousands of employees; makes payout easy because of seamless integration and creates insightful reports.

Most common challenges of payroll processing

The need to stay statutory compliant

An absolute must and also a challenge that is almost always on top of every HR’s mind - is the organisation up to date with all the statutory compliances? Non-adherence to the statutory laws leads to levying of heavy fines on the organisation.

Dependence on inputs from multiple systems

Ask any HR and they will agree to the massive pain involved in gathering all the necessary inputs like attendance, leaves, reimbursements, overtime, etc. With this data scattered across systems and teams, payroll often suffers loss of data, inaccuracies in processing, and a lot of back and forth.

Chances of making errors

In the absence of an intelligent payroll system, most HRs resort to using excel sheets that may seem deceptively simple but are fraught with dangers if handled inexpertly. Even a simple error in processing salaries often brings down the trust and morale of the employees significantly.

Lack of effective data management and reporting

Traditionally, the flow of data between various facets of HR vis-a-vis payroll have not been smooth and seamless. There are often delays in data transmission, which is inaccurate or outdated. Similarly, the inability to pull up accurate reports at the right time renders any analysis futile leaving the leadership blind to gaps in what is the biggest cost to the company.

Solution, you ask? A cloud-based, well integrated payroll software that mitigates all the above challenges and more. Let’s take a look.

How can a cloud solution simplify your payroll?

An intuitive and smart cloud-based payroll software eliminates dependency on excel sheets, automates the mundane tasks and simplifies the complex activities. Here is what it does for your business:

payroll processing
  • Enhances efficiency of payroll related tasks
  • Improves accuracy to almost zero errors
  • Comes with in-built statutory compliances
  • Is effortlessly scalable as your business grows
  • Offers employee self-serviceability
  • Reduces effort of input gathering
  • Lowers risk of liabilities
  • Offers powerful security

So, what are the critical choices that you need to make before choosing a cloud-based payroll system?

Critical choices in payroll processing software

Integrated vs independent payroll systems

There are several situations in which the choice between opting for an end-to-end HRMS or best-of-breed solution arises. When your HRs are swamped with manual payroll processing and are looking for some relief. When your organisation has grown to a stage where you need to automate your payroll functions. Or when your existing technology just isn’t cutting it anymore.

While both choices have their pros and cons, statistics show that most organisations are veering towards adopting the unified solution.

As written in a Bersin by Deloitte article, Ten Disruptions in HR Technology in 2015, 33% of companies have 10 or more HR systems for their employees to use. But many want to ditch the best- of-breed solution model to make tasks easier on users.

The same article stated that 47% of companies will replace their multiple HR systems for one unified solution to consolidate vendors. It also mentioned that 67% of software buyers will select a system based on its ease of use rather than the quality of its features.

Let’s take a look at both types:

Features Integrated Payroll System Independent Payroll System
User Experience
  • Central Control Center with a consistent UX
  • Disparate admin panels
Reporting and Analytics Single reporting with common database Multiple reporting tools and requires data aggregation from various sources
Data Integration
  • Single platform
  • Limited integrations required
  • Improved data accuracy
  • Multiple platforms
  • Complex integrations
  • Data loss and prone to errors
  • Single sign on
  • Single architecture
  • Single security management
  • Reduced IT training and maintenance costs
  • Multiple logins
  • Complex architecture
  • Requires intensive IT training
  • Added maintenance costs
  • Less secure and vulnerable to attacks
  • Single team handling
  • One point of contact
  • Longer implementation
  • Integrated project timelines
  • Lower cost of implementation overall
  • Multiple vendors to handle
  • Multiple points of contact
  • Disintegrated timelines to monitor
  • Faster implementation
  • Higher cost of implementation overall
  • Single vendor
  • Well managed training process
  • Multiple vendors
  • Unconnected training processes

In-house vs outsourced

Are you sitting on the fence about outsourcing or doing the payroll in-house? There are several factors you need to consider before deciding.

  • Size of the organisation - Generally, smaller companies tend to outsource their payroll function because it is easier and cheaper to give it to an expert than hire and train one in-house. However, for large enterprises, because of the number of employees and the complexity involved, it is advisable to go for an in-house payroll software.
  • Tax laws and statutory compliances - It is hard to keep track of all the changing laws and regulations around taxation and other compliances. Outsourcing helps shift this burden to an expert.
  • Last minute paychecks - Sometimes, the last minute paychecks are inevitable. With in-house payroll, the license fee payment is done based on the number of employees, hence last minute paychecks and off cycle payments can be done at no extra cost. However, if you outsource your payroll, the last minute pay may be difficult to process and may also cost extra.
  • Complexity of the payroll - In large enterprises, with a high number of employees, varied pay scales and benefits, multiple locations and having both full time and contractual workforce, means a complex payroll. In such situations, having an in-house payroll system makes more business sense. Because this would require doing most of the calculations yourself before handing it over to the third party. Moreover, you can generate reports and have detailed analytics with an in-house system.

If you have decided on what type of payroll system to choose, the next question to look at would be - what should you look for in a payroll software?

5 Must-have features in your payroll system

  1. Local Payroll Understanding This is an obvious yet a crucial factor while selecting the best payroll system for your business. Does it process payroll accurately based on the local norms and employees’ preferred method of payment? Large organizations can have multiple CTC and taxation structures depending on the pay bracket, designation, and grade. A smart payroll system should allow users to configure for local requirements. . This configurability also allows the user to prepare for the constantly amended laws and regulations.
  2. Compliance and Audit-readiness The number one priority while processing payroll is staying compliant; From employee’s fair treatment of labor to protecting the company from unreasonable wage or benefit demands from trade unions or aggressive employees, every company faces a worrying number of potential legal issues relating to compliance. Your payroll system needs to arm you with the ability to prepare for this. It needs to stay updated with the latest compliances. Moreover, it should be able to generate clear audit trails for audit preparedness.
  3. Integration Capability With multiple inputs to be considered before processing payroll, the system should be capable of seamlessly integrating with all your existing systems and also have the ability to gather all necessary data like time, attendance, leaves etc. as effortlessly as possible.
  4. Employee Self-Serviceability An employee-friendly payroll system puts important employee data on their fingertips. This allows them to generate their payslips, declare investments for income tax purposes, request and track loan advances and much more.
  5. Ability to Extend Outsourcing Services An important feature of a good payroll system is its ability to extend as both a product and a service. As an outsourced service provider, apart from the mandatory payroll engine, employee and admin self service functions, it should also provide reporting and analytics options.

Now that you know the top 5 features your payroll must have and are considering buying a payroll software, here is our ready-to-use RFP template.

About Darwinbox Payroll System

Simplify your payroll process with Darwinbox’s integrated, accurate, scalable and secure payroll management system. With an option to choose between payroll as a product and as a managed service, you can perform all your payroll related functions in a few simple steps. Get automated inputs, generate statutory reports and analytics, file returns, do salary structure configuration, compliance management and much more without worrying about data leak. With a central locking system, clear audit trails and a highly configurable platform, businesses are leveraging our end-to-end payroll management system for efficiently running one of the most critical functions of their organisation.

payroll processing

Impact Stories

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