HRMS, ERP, payroll, and you

Once upon a time, HRMS, ERP, and payroll systems operated independently; HRMS focused on people-related processes like recruitment, onboarding, and performance management. Payroll systems streamline salary calculations, taxes, and compliance. ERP systems, however, offered a broader scope, managing resources like finance, inventory, and human resources. Today, these systems often integrate, blurring lines to meet diverse business needs.

This article explores:

• The differences between integrated HRMS modules in ERP and standalone HRMS systems.
• Payroll management options: ERP vs. HRMS.
• How to choose the right system for your business needs.
• Recommended vendors for ERP and HRMS payroll systems

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Integrated HRMS module in ERP vs Standalone HRMS

As with any system, both standalone HRMS and HRMS integrated ERPs have their advantages and disadvantages.

The advantages of an integrated HRMS module in ERP vs Standalone HRMS

The disadvantages of an integrated HRMS module in ERP vs Standalone HRMS

Functionality overview

ERP systems cover a wide range of business functions, including:

• Finance and accounting
• Supply chain management
• CRM
• Basic HR processes

From the HR point of view though, an ERP’s functions may seem restricted, perhaps including the creation of job descriptions for recruitment, timesheet management, basic tracking of the stages of the performance management process, registering training requests, and standard analytics or reporting.

On the other hand, an HRMS may offer the following features:

• Recruitment management – including the creation of job descriptions, resume parsing, candidate sifting, automated communications with candidates, and multi-channel job advertisements. 
• Employee onboarding
• Time and attendance management
• Workforce scheduling
• Performance management processes, including automatic tracking of annual reviews
• Learning management
• Talent management, including succession planning
• Payroll, including processing expenses and claims
• Benefits management
• Predictive analytics

Most ERP systems include an HR module. If your HR requirements are straightforward and unlikely to change for a few years, an ERP will probably be sufficient. That said, remember that ERPs are not designed primarily with people processes in mind – they tend to be a ‘jack-of-all-trades’ solution, master of none.

When deciding between an ERP HR module and a standalone HRMS, assess your organization's size, complexity, and future needs. ERP HR modules often suit large enterprises that need an all-encompassing solution, while standalone HRMS excels in organizations that prioritize deep HR functionalities.

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Payroll management: ERP or HRMS?

Payroll is crucial to your HR function; every employee wants to be paid accurately and on time. Payroll errors result in costs to both employers and employees, and those expand beyond simple financial costs, including damaging employee satisfaction and morale. It’s reported that 54% of American workers have experienced problems with their paychecks, impacting roughly 152 million workers. Payroll becomes even more complex when you take into account regulatory compliance and routine changes to regulations.

The benefits of automating your payroll

 Payroll automation is vital for efficiency, compliance, and employee satisfaction. Key benefits include:

• Fewer payroll errors (and nothing has the potential to enrage an employee quite like a payroll error) – regardless of other benefits, salary is the primary element of the employer’s side of the deal; get it wrong and there’s now a crack in the very foundation of the employer-employee relationship.
• Greater efficiency – quite simply, automation saves time and effort, freeing up members of your payroll (or HR) team to tackle less repetitive work.
• Better security – in comparison to a paper system, your payroll data is more secure by being encrypted and protected by a password.
• Improved compliance – this is especially true if you’re a multi-territory operation, subject to different legislative and taxation regimes. Once set up, an automated system will keep track of the must-dos and milestones, keeping you on the right side of the applicable employment and financial laws.

Payroll can be a complex topic, and the right automation solution can greatly simplify the process. The question is, what kind of system should you use? Your options are an HRMS or ERP with payroll functionality, standalone payroll & accounting automation software, or just outsourcing to a third-party payroll provider and letting them worry about the technology. The answer depends on the needs of your organization, of course, though two broad issues may help with a decision:

Choosing ERP payroll

• Advantages: Integration with financial data simplifies payroll operations, particularly for global organizations.
• Challenges: Customizing or updating payroll-specific features can be slower.

An ERP effectively works from a single database, one that goes much further than just ‘people data’. This broader access means that all necessary data sources for payroll are available. For example, a request for training may trigger other tasks or issues, like removing the employee from the work schedule on the day of training or allocating relevant supplements to their rate of pay.

Choosing HRMS payroll

• Advantages: User-friendly and HR-centric. Updates for compliance changes are faster.
• Challenges: May require additional integration efforts for cross-departmental data sharing.

These systems are often implemented from a user-centric point of view as they are exclusively focused on the HR user base, rather than an ERP which needs to please users from various disciplines such as manufacturing, financials, etc.

That said, the advantage of ERP payroll is that financial data (e.g., account codes, project codes, or currency conversions) is usually easily and quickly accessed from within the system, making the payroll process simpler to run.

Payroll can utilize the data from the ERP in the HR module without extra effort, however, this can be a drawback: as neither HR nor payroll ‘owns’ the data, depending on your policies and procedures, it may require additional efforts or time to get a new data element such as a new cost center established and available compared to HRMS, since HR usually owns the data entry and it will be more streamlined.

Standalone payroll solutions like QuickBooks or CloudPay also offer specialized options for businesses seeking a simpler, dedicated approach.

Essential payroll features

Whatever your chosen option, your automated payroll system should incorporate the following functions:

• Tax filing in line with your territory(-ies) of operation.
• Employee data tracking.
• Time and attendance tracking (or, if time and attendance are covered by another system, integration with that system).
• Employee self-service functions (at least, access to online paychecks and the capability to update personal details).
• Management of any wider reward or reimbursement package (e.g., handling annual bonuses).
• Reporting options.

When choosing a system, it’s important to remember to make processes easier for those using it, including regular employees, which means looking for systems that offer employee self-service, mobile access, notifications and alerts, and more.

Employees should easily understand a payroll system, including how to access and read their pay stubs. An HRMS can manage benefits and tax deductions, giving employees better insight into their take-home pay. This is especially helpful since 45% of workers feel more engaged when employers help them understand taxes and deductions.

The question is: do you need payroll automation? The answer is likely yes. Small organizations with limited staff may manage payroll manually using spreadsheets, but as your workforce grows, software or services can save time and reduce hassle. If your business plans to grow, implementing a scalable payroll system early on is a smart move.

Recommended vendors

Though your requirements will, of course, vary, the following is a short list of well-established vendor options:

NetSuite: originally an accounts system, NetSuite (part of Oracle) now offers a full range of ERP functions with CRM and HR features.

APS: APS (or Automatic Payroll Systems) has a predictably strong focus on payroll management. This human capital management software includes streamlined payroll functionality fully integrated with everyday HR processes.

BambooHR: fully integrated with their open-source HRMS, BambooHR seeks to simplify the payroll process without undermining its accuracy or efficiency.

WorkWise: an on-premises ERP aimed at mid-sized businesses, WorkWise offers ERP functionality without HR.

Infor HCM: a full HR module that can be seamlessly integrated with Infor’s ERP.

QuickBooks: Established in 1983, the longstanding QuickBooks is a pure payroll platform focused on the needs of small to medium-sized businesses. Available in both on-premises and cloud versions, QuickBooks offers versions for different English-speaking territories: the US, UK, Canada, and Australia.

CloudPay: As the name suggests, CloudPay is a dedicated payroll system and is firmly cloud-based, seeking to offer high-quality payroll management services to global businesses from its offices in the US, Europe, and Asia.

Conclusion

Choosing between ERP payroll, HRMS payroll, or standalone solutions depends on your organization's size, complexity, and goals. While ERP offers holistic integration, HRMS provides deeper HR specialization. Evaluate your requirements carefully to determine the best fit.

_{This article was originally written by Heather Batyski.}