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5 Signs It’s Time To Upgrade Your Business’s Payroll System

Your employees depend on the efficiency and accuracy of your payroll system. When things go wrong, it gives them a reason to leave. Research shows that 49% of workers will start a new job search after two payroll mistakes. It’s only one of the reasons you should keep on top of your payroll system and ensure it can meet your organization’s needs.

Human capital management, or HCM, and enterprise resource planning, or ERP, go hand in hand with payroll systems. HCM and ERP mean you have the proper systems and tech to support your human resources. Let’s review some of the more obvious signs it’s time for your business to upgrade its payroll system. 

1. Your Company Is Growing

Have you added more than a few new staff members lately? And is your payroll software just not keeping up? It’s probably time for better systems to support your HCM and ERP strategies. A payroll system built for small businesses and startups might work great when you only have 20 to 50 employees. However, as you grow, your systems need more bells and whistles.

For example, maybe you need web-based software your HR and payroll team can access from anywhere. Plus, your systems should be able to process paychecks for staff who may work various jobs. Some might be hourly, some on salary, and others work under commission agreements.

Regardless, you want payroll software that can handle processing hundreds of paychecks and benefits each pay period. A tech stack that’s made for immediate staffing needs and one that can also scale is best. It will help you avoid delays and inconveniences your employees won’t appreciate.

2. The Software Doesn’t Track Compliance Accurately

Part of running payroll means complying with federal, state, and municipal laws. Everything from payroll taxes to worker classification regulations fits under the compliance category. If your HR staff runs ragged trying to keep everything straight, it’s time for a payroll system upgrade.

Yes, some aspects of payroll compliance will require human oversight and intervention. But the best payroll systems automate most of the details, including changes in payroll tax deductions. Say your state’s income tax brackets change, or you employ workers in more than one state. Payroll systems should track and automate these differences for you.

Another crucial part of compliance is worker classification laws. In many countries, including the United States, there are criteria that determine whether you can hire someone as an employee or an independent contractor. The IRS outlines some common law rules for organizations and businesses to follow.

Generally speaking, businesses cannot dictate or control how independent contractors perform their work. Yet, freelancers still need compensation. While some businesses will only hire employees, many use the talents of in-house staff and freelancers. Payroll systems that don’t accommodate contractor agreements and payments clearly indicate it’s time to switch. 

3. More Employees Are Complaining About Mistakes

Payroll systems are only as good as the processes and the humans behind them. That said, some tools and systems are past their prime. Think about a startup that’s accelerating its growth. But the owner still expects payroll to go off without a hitch with a system that relies on manual entries and spreadsheets.

This is a recipe for disaster as the business keeps growing and adding more employees. The HR department just won’t be able to keep processing payroll using antiquated methods. More mistakes and oversights are bound to happen. And that doesn’t bode well for employee morale, engagement, or commitment.

After all, 63% of workers in the U.S. live paycheck to paycheck. They literally cannot afford for their direct deposits to be incorrect or late. In most cases, your employees’ paychecks are the main reason they come to work. They feel frustrated and betrayed when they don’t receive promised rewards in exchange for their time and efforts.

Payroll systems that sync and automate workflows can cut down on mistakes. There may be an occasional deduction error or glitch. Most employees will overlook or even expect this. But systems that let workers see, control, and change their tax exemptions and benefit deductions will go a long way toward preventing misunderstandings.

4. You Have Too Many Systems

Sometimes owners and leaders implement various pieces of software and databases as businesses grow. That’s because one application does one function well but isn’t capable of another. For example, you might have one payroll system keeping track of employees’ taxes while another handles direct deposits.

But as time goes on, you end up with scattered data and decentralized systems. These applications may not sync well with each other. And your HR department has to work twice as hard to enter duplicate data in various databases and software programs. When payroll data becomes decentralized, it’s a sure sign you need to upgrade to an all-in-one solution.

Doing this doesn’t just make your payroll staff’s jobs easier. Centralizing and consolidating your business’s payroll is smart HCM and ERP planning. Instead of paying to maintain several pieces of software, you can streamline your payroll expenses. In addition, you’ll be mitigating the chance that errors will happen. 

5. There’s a Lack of Custom Options

Some businesses operate in niche industries. Run-of-the-mill payroll systems won’t work for them; at least not completely. If this sounds like it applies to your company, it’s probably time to upgrade your payroll software.

More sophisticated applications allow for industry or organization-specific customizations. These include everything from custom reporting to mobile app features. Other customizations integrate with employee discounts at community or partner businesses. Custom options are also good things to have as your company grows and scales.

Final Thoughts

Your business’s payroll system may not be glamorous to think about. However, it’s one of the backbones of your operations. You won’t pay your employees accurately or on time without good systems. And that will spell trouble for your company in the present and future. It’s better to evaluate your business needs and invest in the payroll systems that can accommodate them. 


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