While it might seem like a minor operational concern, poor HR and Payroll integration can have far-reaching consequences. According to Strada’s recent research report, Bridging the Gap: From Good to Great in Payroll, poor integration is one of the major obstacles preventing businesses from getting the most value out of their payroll systems. It can also lead to unnecessary time and energy expenditures, increased errors, and erosion of employee trust.
Perhaps most concerningly, many of these consequences can remain hidden until they start impacting a company’s bottom line. It’s important, then, to be able to identify not only the consequences of poor integration, but also the causes and how they can be addressed or prevented.
What are the consequences of poor integration?
1. Time-consuming manual processes
One of the most visible consequences of poor integration is unnecessary time and energy being spent on manual processes.
When a company invests in an HR to payroll integration that isn’t fully unified, their systems can’t communicate effectively. Employees often end up supplementing pay data from other sources, such as spreadsheets and they can lose hours double-checking records in an effort to ensure accuracy.
This time-consuming reliance on manual processes can result in:
- Duplication of effort, as HR and payroll teams must reconcile the same data sets in different systems, essentially using the same information in different ways to arrive at the same results.
- Reduced productivity and increased labour costs.
2. Inconsistencies and errors
When HR and payroll systems aren’t fully integrated, the likelihood of errors increases. In addition to the increased potential for human error resulting from the reliance on manual processes, in a poorly integrated system, HR and payroll data are often out of sync. Data inconsistency can lead to discrepancies related to tax withholdings, benefits contributions, overtime payments, and more, that not only result in payment errors, but can also create serious problems including:
- Costly corrections and legal liabilities stemming from tax and compliance violations.
- Lack of confidence in payroll data negatively impacting strategic decision-making and resource planning.
3. Erosion of employee trust
Employees expect to be paid accurately and on-time. When HR and payroll systems are fragmented, the resulting inconsistencies and potential for error can result in delayed or inaccurate payments, or in the worst-case scenario, an employee not being paid at all. This impacts the employee experience in a variety of ways, all of which can adversely affect productivity and retention:
- Potential harm to employee livelihood and well-being.
- Decreased employee morale resulting from lack of confidence in company systems and processes.
- Increased workload and reduced productivity among payroll teams burdened with ad hoc payroll reruns and making corrections.
- Resistance to change and reluctance to adopt new systems.
How to ensure your system is fully integrated
Understanding the consequences of poor integration can help businesses uncover hidden problems and areas of concern. But it’s also important to understand the root causes of poor integration so businesses can embrace strategies to help avoid these problems altogether:
1. End-to-end vision
By far the most important strategy for ensuring a fully integrated HR and payroll system is maintaining an end-to-end vision of your operations and processes throughout the transformation process. Lack of proper planning and siloed perspectives can lead to fragmentation and data inconsistency down the road.
Whether you’re in the planning stages of a transformation or trying to fix an existing integration problem, a comprehensive understanding is crucial. Workflows must be well-defined, with an understanding of how each step in the process links together. Similarly, clear and open communication between all departments is essential.
Before committing to a particular design or optimisation plan, the ability to consider its impact at every operational stage will help ensure a full and fully functional integration and avoid potential problems.
2. Keep it simple
It’s also important to remember that the purpose of an integration is simply to connect your departments, allowing them to share data. The interface connecting them should be as clean and simple as possible. Making things more complicated than they need to be only creates more opportunities for problems.
3. Scope and budget
No transformation project can move forward without a defined scope and budget. A certain amount of flexibility is key as businesses encounter new information throughout the project. However, attempting to scale down budgets after contracting is agreed will unavoidably impact the original scope.
Cutting back on integrations and comprehensive data flows will only necessitate manual interventions and data uploads. To avoid these complications, businesses need to take the long view, keeping their end-to-end vision and considering the short-term vs. the long-term costs.
4. Clear governance
As noted in Strada’s Bridging the Gap: From Good to Great in Payroll report, the absence of clear and effective governance is a major barrier to unlocking your payroll’s full potential. It is also one of the primary causes of poor integrations.
It is essential to make sure that the solution partner, the vendor and the client have clearly defined roles and responsibilities. Similarly, it’s important to ensure that the right people are aligned—from technical, operational and financial perspectives—at every point.
Poor HR and payroll integration may seem like a minor inconvenience, but the hidden costs add up quickly. From fines resulting from errors and inconsistencies to erosion of employee trust, the impact on your business can be significant.
The solution lies in adopting a robust, well-integrated HR and payroll solution that centralises data, reduces errors, improves the employee experience and ultimately saves costs.
The time to act is now—ensure your HR and payroll systems work together seamlessly to support your business’s growth and success.
