A brief system overview

While countless systems are available for any organization choose from, some of the most common include:

Enterprise resource planning (ERP) system: An ERP system is broad in scope and integrates core business areas across an organization, including payroll, human resources and finance, into one centralized system.

Human resources information system (HRIS): An HRIS system is used to manage and store employee data, including personal information, work history, payroll and benefits.

Human capital management (HCM) system: An HCM system manages employee information (similar to an HRIS) but focuses on talent management and development for the purpose of building a workforce tailored to advance the strategic goals of an organization.

While each system has its pros and cons, all organizations should conduct a thorough needs assessment before adopting any of these systems. Given the sheer number of available HRIS, HCM and ERP systems, answering some overarching questions can help narrow down these options.

Understanding organizational needs

To begin a needs assessment, organizations should ask themselves a series of questions to help narrow down their options. Getting input from multiple departments is important, especially if the expectation is that the system(s) will become mandatory moving forward. Kevin Seeto, a finance and global process leader in the healthcare industry, manages this type of work on a daily basis and says, “Effective organizations are always learning about their systems and looking at ways for them to perform better. This work is complex and requires ongoing collaboration to be effective.”

Some common questions to consider as part of a needs assessment include:

What are your (shared) goals and challenges?

Understanding the main problems that an organization wants to solve is the best way to start. This includes engaging employees across all departments to identify their specific problem areas and goals for the future. The decision of which tool to select will depend on whether issues such as payroll accuracy, quality financial reporting or employee engagement are at the top of a priority list.

What is your budget?

An organization needs to have a clear understanding of their budget, both now and in the future, to select a system that can support their work on a long-term basis. Different systems vary significantly in price based on the features they offer, potential to customize and ongoing operating expenses. If budget planning doesn’t occur across departments, there is significant risk that the system’s shelf-life may be limited.

What is the size of your organization?

Closely connected to budgeting is understanding how the current and future size of the organization plays into systems planning. For smaller organizations, systems like an HRIS that are cost-effective and easy to learn, with simple, built-in features, may be all that is needed. Seeto explains, “For a larger organization, or an organization expecting growth in the medium to long term, more advanced HCM or ERP systems could be the solution, given their ability to better support customization, scalability, expanding operations, in-depth data analysis and more complicated workflows between departments.”

Does the system need to integrate with current or legacy systems?

Many organizations may explore upgrading their current systems or integrating a combination of systems being used across payroll, human resources and finance departments. Migrating data from existing or legacy systems, such as accounting or payroll software, to new platforms can be a complex undertaking, so organizations need to feel confident that all required data can be accurately transferred and integrated. Organizations that underestimate the importance of this work may find themselves struggling to close out their current systems or navigating multiple systems during an overly complex transition period. Seeto continues, “You may find yourself inheriting systems from the past that were never migrated and will need to decide whether it is worth the time and resources to include them in the scope of your work.”

Is the system easy to use? Is employee training and support available if required?

Sometimes organizations focus so heavily on technical questions when analyzing their needs that they can forget to consider the employees who are responsible for managing the systems. Consider the current skillsets of employees in affected departments and how much training and development is needed to adapt to a new way of working. If an organization is currently operating with a simple system structure, moving into a complex ERP system that requires extensive training and knowledge building may be an overreach and a recipe for failure. The capacity of an organization to train and upskill employees may also vary, with some smaller organizations preferring more interactive, in-person opportunities and larger organizations with multiple locations relying on self-directed learning with strong customer support available from the provider.

Common pitfalls when adopting new systems

When organizations make the commitment to using new systems or other cross-functional tools, there are a few common issues that can make the difference between a seamless or painful transition. By doing their best to understand and plan for these issues, organizations can increase the probability that they are setting themselves up for success as best as possible.

Some common issues include:

Underestimating customization needs: Some organizations select systems that meet most of their needs but fall short in a few key areas, such as financial reporting capabilities or managing unique payroll or human resources scenarios. Organizations then settle for adapting their processes to fit the system rather than the other way around.

Neglecting quality control: Organizations that migrate poor-quality data (e.g., incomplete employee records, inaccurate financial reports) or fail to integrate quality control processes, especially during the early stages of adoption, may find themselves disappointed with the performance of their system. Many new systems offer opportunities for automating work processes, but without proper oversight, organizations can expect ongoing errors in unique scenarios that require manual intervention.

Managing compliance issues: A system cannot operate effectively without full commitment and compliance from employees. There are many reasons why compliance can be an issue, such as a lack of training (including a commitment to ongoing learning) or resistance from employees who may disagree with the integration of a new platform or become frustrated with reduced output as they adapt to something new. Whatever the reason, organizations need to ensure that they’ve taken all steps possible to prepare their workforce, as well as provide two-way communication channels to discuss and address challenges along the way.

Deciding on a new system to align and integrate payroll, human resources and finance operations is no small task. However, organizations that commit to asking themselves the right planning questions and avoiding common pitfalls can significantly enhance the potential for collaboration, alignment and efficiency across departments. While it might be tempting to quickly jump on board with the latest system being marketed, organizations that invest proper time and resources upfront to understand their unique needs can count on increased productivity and performance sooner than later.

Enter some text…

4. Budget and ROI

While more advanced software might be appealing, it also needs to make financial sense. Consider not only the upfront costs but also for long-term ROI.

Planning the Switch

5. Timeline

The end of the year is often an optimal time to make the change. This aligns with annual tax cycles, making it easier to reconcile records.

6. Contract Obligations with Current Provider

Review the contract with your current provider. Are there any exit fees or conditions that you should be aware of?

7. Data Migration Plan

Data migration can be a significant pain point in switching systems. Prepare a comprehensive plan detailing what data needs to be transferred and in what format.

8. Running a Parallel System

Before fully committing to the new system, it’s wise to run both your old and new payroll software side-by-side for at least one payroll cycle. This allows you to catch any discrepancies.

Execution

9. Staff Training

Once the software is selected, prepare your team with the required training. This should ideally be done during the parallel run phase so employees have a hands-on understanding of the new software.

10. Final Reconciliation and Reporting

At the end of the year, complete your final payroll reconciliation and tax reporting on the old system before transitioning completely to the new system. This ensures that all data is up-to-date, compliant, and aligned with the Canadian tax year.

11. ‘Go Live’ and Support

Once you go live with your new system, make sure to keep a direct line to your new provider’s support team for any bumps along the way.

12. Post-Switch Evaluation

After you’ve run a few payroll cycles on the new software, evaluate the switch based on your original criteria for making the change. Are you experiencing the benefits you’d hoped for? Make adjustments as needed.

Switching payroll software providers is not merely a technological shift but a strategic business decision. For Canadian payroll professionals, the additional layer of federal and provincial regulations makes this all the more critical.

For more expert insights, watch this webinar where Mélanie Crépeault from Paie Guru shares great tips on how to smoothly and efficiently implement an HCM system aligning your payroll practices for a successful 2024.