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Payroll Integration: Benefits of Integrating Payroll and HR Systems

  • HCM
  • Article
  • 6 min. Read
  • Last Updated: 05/05/2023

a small business owner using an integrated payroll and hr system

Table of Contents

Integrated payroll and HR systems are becoming increasingly popular among small-business owners. They find adopting this approach can save money and increase efficiencies, while helping to eliminate duplicate work and decrease the chance for errors.

What Is Integrated Payroll?

Integrating an HR system with payroll software can have a dramatic (and favorable!) impact on your company's budget and level of employee management. Please note that payroll can be integrated with various types of systems, but the example below highlights time and attendance.

For example, for many businesses managing employee time and attendance is a labor-intensive and time-consuming task. Businesses relying on separate, non-integrated systems for payroll and time tracking administration are likely to experience costly inefficiencies that may be alleviated by using an integrated system.

When a company's time and attendance tracking system depends on manual entry and functions separate from payroll administration, there is considerable potential for errors and inaccuracies. For example, employees using paper-based time and attendance systems may not always complete their time sheets by the deadline and may make mistakes when rushing to submit their hours worked. They might not recall precisely what time they began working, the length of their lunch breaks, or the exact time they stopped working. These potential issues pave the way for either not compensating employees for all the time they worked or over-paying them.

Integrating payroll into your HR systems—along with other systems like accounting—can save everyone time and headaches.

5 Benefits of Integrated Payroll and HR Systems

Combining HR and payroll can generate an array of "business-friendly" benefits. Here are some key benefits:

1. Less Administrative Work

Integrating payroll and HR technology can help maximize productivity and value by enabling your HR staff to focus more on high-value activities and less on administrative tasks. Instead of spending time on paperwork, as well as compiling and inputting employee data, HR staff only need to enter information once, into a single interface — from payroll and tax forms to benefits data and staff reviews.

2. Easier Access to Data

When payroll and HR information are available together through a single interface, self-service features are much more effective. Employees can log into the system and quickly access data on:

  • Payroll
  • Available vacation and sick time,
  • Current tax deductions
  • Benefits

When employees can access this information themselves, they may better understand how the process works. They can also update personal data, as needed. Integrating HR and payroll helps to simplify otherwise time-consuming tasks for both individual employees and your HR team.

3. Increased Accuracy and Improved Security

Streamlining data entry can also enhance the accuracy of your payroll and HR information across different platforms. When fewer people enter information, there's a greater likelihood for fewer (and costly, time-consuming) errors.

An integrated interface can also help improve data security; payroll and HR benefits systems contain highly sensitive company and employee data, from salary information to social security numbers. With integrated payroll and HR systems, you may also significantly reduce the chances of unwanted data breaches.

4. A Higher Level of Regulatory Compliance

Businesses must continually keep up to date on certain HR-related regulations. If errors occur while complying with local, state, and federal laws, the consequences can be expensive and damaging to a business' reputation and bottom line. With integrated HR and payroll software, meeting mandatory payroll tax requirements is a simpler, more transparent process.

An automated time and attendance system can help your company comply with certain wage and hour laws. Time and attendance software may help you to maintain compliance by enabling managers to set notifications and to be immediately alerted of scheduling conflicts. It's also possible to manage overtime parameters and help your business remain within government, contractual, and company guidelines regarding scheduling and compensation.

5. Greater Employee Satisfaction and Potential for Retention

Efficient scheduling and handling of time-off requests are key components of a satisfied workforce. As employee satisfaction increases, there's less potential for costly turnover. With automated systems, it becomes much easier to quickly review, approve, or address such requests and manage planned absences to minimize their effect on your company.

Timely employee reviews and pay increases can also have a significant impact on employee satisfaction. Automated alerts within the system can notify HR staff of upcoming employee anniversaries, benefits eligibility dates, and other important milestones. Once reviews or pay increases are entered into the employee's file, an integrated system can update the employee's pay rate, enabling the raise to go into effect at the appropriate time. When HR has the tools to act quickly on these actions, employees may feel valued and more satisfied at work.

What Are the Main Features of a Good Integrated Payroll and HR System?

Once the benefits of an integrated payroll and HR system become clear, the next step is evaluating available resources and selecting a solution that works best for your business. To assess the quality of these systems, make sure the system's features include most, if not all, of the following:

  • Easy-to-navigate dashboard to facilitate more informed decision-making
  • Employee self-service and access to cloud-based data
  • Accurate pricing without hidden fees
  • Automated functions, including employee scheduling and time and attendance tracking
  • Data reports for compliance purposes

Look closely at different options to ensure that your integrated payroll and HR system is best equipped to address the specific needs of your business.

Benefit Your Business by Combining HR and Payroll Systems

You don't have to be an IT specialist to see that integrating HR and payroll systems saves time and money, while also better serving your employees and HR team. When you factor in additional benefits like greater accuracy with time and attendance, as well as improved results with compliance, it's clear that combining HR services and payroll makes good business sense.


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* This content is for educational purposes only, is not intended to provide specific legal advice, and should not be used as a substitute for the legal advice of a qualified attorney or other professional. The information may not reflect the most current legal developments, may be changed without notice and is not guaranteed to be complete, correct, or up-to-date.

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