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Dave Foxall 5 Key Factors for Successful Payroll Software Implementation

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 By Dave Foxall

The Core Factors of Payroll Software Success

Gartner's Thomas Otter says, "Payroll is the oldest form of technology outsourcing" and with advanced payroll technologies displaying ever greater flexibility – including Software-as-a-Service delivery, business process automation, mobile access, analytics, new social tools, etc. – more and more organizations are considering the reasons for payroll software to remain in-house versus leveraging other options. However, new payroll projects are not without risk, as evidenced by the Los Angeles Unified School District in 2008, where a $95 million system crashed very publicly due to implementation issues such as hardware failure, poor data cleansing and a widespread lack of staff training. The underlying reasons cited by the LA Times were, "Dysfunctional management and internal power struggles".

Countless reports have cited that less than 40% of software projects actually deliver their full projected value, and even though selection of appropriate software may follow the right process, as the LA example shows, projects can fail when key implementation factors are neglected. Here are 5 just such factors that should be ignored at your own risk.

Payroll Software Implementation Factor #1: Engagement

As in any business change program, stakeholder motivation is a central issue. From C-suite executives looking for organizational performance improvements, to HR and Finance/Accounting's need to collaborate, to the employee expecting an accurate and timely paycheck, a comprehensive communication and involvement strategy – briefings, reports, bulletins, updates, common issue FAQs – is needed. That said, many employees are positive about payroll advances; the American Payroll Association's 2011 Getting Paid in America survey: "When asked how they would feel if their company offered an online pay statement in lieu of a paper pay statement, 47.4% said their companies already employed such a strategy, to their delight. Another 25.5% said they would prefer that their company offer such an online portal."

Payroll Software Implementation Factor #2: Testing

When users are likely to see even the smallest error as failure, rigorous testing and parallel processing with legacy systems are required to ensure first time success. David Funk of accounting firm McGladrey says, "Payroll implementations require multiple input-build-output validation cycles. Several periods of parallel payroll processing are typically necessary before you are confident the new payroll system is ready to be deployed. Often, your payroll staff will need to maintain employee master data in both the new and the legacy system for a period of time." The payroll team, and other core implementation staff must be ready and able to shoulder the extra workload.

Payroll Software Implementation Factor #3: Training

As Sage's 2010 white paper, How to Implement an HR and Payroll System says, "Training is one area where you simply cannot afford to cut corners." The quicker users and system administrators can use the HR and payroll system proficiently, the quicker the efficiencies and savings accrue. As well as course-based and other face-to-face training, staff may be supported by manuals, just in time online how-to guides and tutorials, and ongoing help desk support. Easy knowledge access for all users will make the difference between a rapid implementation and another failure statistic for KPMG.

Payroll Software Implementation Factor #4: Data Issues

Collaboration is paramount to implementation success in large part because of the communication that has to occur between IT and payroll staff in order to cleanse, extract, interpret and import employee data to the new system. McGladrey's opinion is that "Data Migration is often the bottleneck which busts the budget and schedule early in a payroll implementation project." A lack of planning or an over-optimistic estimation of task size can see the 'go-live' date slipping from quarter to quarter. To set expectations ahead of time, perform samplings by extracting and reviewing the quality of HR and payroll data early in the deployment planning period.

Payroll Software Implementation Factor #5: Cost Containment

Gartner's Andy Kyte suggests that, "We're spending more than ever on technology, but we're not paying attention to where that money goes." In 2010, Personnel Today magazine offered four cost-capping steps:

  1. Only pay for what you need – aim for minimum functionality; enough for current and foreseeable future needs and no more.
  2. Analyze current software – some required functionality may already exist within the organization or on the other hand, some existing licenses may not need renewal following implementation.
  3. Try your existing supplier – David Bradshaw of IDC recommends weighing up the opportunities afforded by staying with a vendor you know: "If it means one less service level agreement, one less set of due diligence and one less relationship to manage, it might be worth looking at paying slightly more for software to get that saving."
  4. Embrace the new - Gartner warns against 'software hugging' (users keeping systems that are familiar when there are newer and better alternatives available). Beware of arguments for retention of legacy systems once the new solution is proven.

Payroll System Implementation – The Bottom Line

As a fundamental element of the employment transaction, smooth and efficient payroll operations are taken for granted by most employees and the implementation of new payroll system can concern every member of the organization. As such, organizations have to remain in full awareness that the right payroll software selection steps are just one part of the process. Full stakeholder engagement and training coupled with robust system testing and data migration arrangements can mean the difference between a seamless transition that passes by largely unnoticed or a payroll software implementation that becomes part of that 60+% failure rate. The choice is your's. End

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Collaboration is paramount to implementation success in large part because of the communication that has to occur between IT and payroll staff in order to cleanse, extract, interpret and import employee data to the new system."


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