Payroll software can be customised to meet employers' specific needs, but organisations must decide whether to operate it in-house, or partially or fully outsourced, says Nick Martindale
Payroll software lies at the heart of any employer's administration and record-keeping system, recording and processing all pay information and the figures needed for end-of-year accounts, as well as details of starters and leavers.
Jamie Colville, business alliance manager at MidlandHR, says: "It is like a giant automatic brain which helps minimise time-consuming administrative tasks and, unlike humans, will not get tired, stressed or make silly mistakes that could leave the organisation or employee out of pocket. It can also be integrated with time and attendance software, further reducing the time taken to produce the payroll because data for the number of hours worked per employee is already calculated and pulled into the payroll software."
It can give further value by ensuring the employer operates a tax-efficient system that maximises benefits associated with reward strategies, such as salary sacrifice schemes, which could run into millions of pounds a year for large organisations, says David Woodward, chief information officer at Ceridian UK.
Employers looking to invest in payroll software will need to decide whether it is something they want to operate in-house, possibly using a bespoke platform built for their particular requirements, or whether they are better off outsourcing it.
Paul Tooth, general manager of Sage's HR and payroll division, says: "Creating a bespoke platform offers certain guarantees that [employers] will get the core functionality they want, but it can be a very costly approach that needs careful consideration.
"Organisations considering this should first discuss it with colleagues who will be directly affected, especially the HR and finance teams which rely on the software to provide specific information, such as salary details."Many organisations will go at least some way down the outsourcing route. They can choose between a fully managed set-up where every aspect is operated by an external provider, or a part-managed service where the business retains access to the software and can share the data with its HR and finance teams, but does not have to process the data each month. Another alternative is a bureau service, where organisations can pick and choose particular aspects to outsource.
Software as a service
Employers looking to retain at least some elements in-house will also need to decide whether to buy the software and operate it in-house, or to rent it using a software-as-a-service model.
The cost of payroll software will vary according to the number of users, the level of service and the functionality required, says Colville. "Payroll software is enormously varied. Some is better suited to smaller organisations, while other systems are better suited for large enterprises.
"[Employers] will need to consider if they need a payroll system that is fully integrated to the HR function, which can then drive end-to-end automation and single data entry for all new starters through to leavers."
Employers should also make sure the software has HM Revenue and Custom's payroll standard mark, which means it has met minimum standards in the range of payroll functions it offers and can conduct online filing of employer annual returns (P35 and P14s) and make electronic payments.
Before deciding which package to choose, employers should provide users of the system with a hands-on session, says Tooth. "Involve all relevant employees who will be using the software and give them the opportunity to ask relevant questions or identify areas of weakness that may need to be addressed," he advises.
Key facts
What is payroll software?
This is software that is used to record and process all pay information, as well as the figures needed for end-of-year accounts. It can also be integrated with time and attendance software.
Who has more information?
Employers can find more information at the Business Link website or on HM Revenue and Customs' website.
Main providers include:
ADP, Advanced Business Solutions, Bond TeamSpirit, Ceridian (payroll outsourcing), MidlandHR, Moneysoft, NorthgateArinso, Oracle, Sage, SAP, Softworks, TAS Software.
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