Personnel Today
  • Home
    • All PT content
    • Advertise
  • Email sign-up
  • Topics
    • HR Practice
    • Employee relations
    • Equality, diversity and inclusion
    • Learning & training
    • Pay & benefits
    • Wellbeing
    • Recruitment & retention
    • HR strategy
    • HR Tech
    • The HR profession
    • Global
    • All HR topics
  • Legal
    • Case law
    • Commentary
    • Flexible working
    • Legal timetable
    • Shared parental leave
    • Redundancy
    • Maternity & Paternity
    • TUPE
    • Disciplinary and grievances
    • Employer’s guides
  • AWARDS
    • Personnel Today Awards
    • The RAD Awards
    • OHW Awards
  • Jobs
    • Find a job
    • Jobs by email
    • Careers advice
    • Post a job
  • XpertHR
    • Learn more
    • Products
    • Pricing
    • Free trial
    • Subscribe
    • XpertHR USA
  • Webinars
  • OHW+

Personnel Today

Register
Log in
Personnel Today
  • Home
    • All PT content
    • Advertise
  • Email sign-up
  • Topics
    • HR Practice
    • Employee relations
    • Equality, diversity and inclusion
    • Learning & training
    • Pay & benefits
    • Wellbeing
    • Recruitment & retention
    • HR strategy
    • HR Tech
    • The HR profession
    • Global
    • All HR topics
  • Legal
    • Case law
    • Commentary
    • Flexible working
    • Legal timetable
    • Shared parental leave
    • Redundancy
    • Maternity & Paternity
    • TUPE
    • Disciplinary and grievances
    • Employer’s guides
  • AWARDS
    • Personnel Today Awards
    • The RAD Awards
    • OHW Awards
  • Jobs
    • Find a job
    • Jobs by email
    • Careers advice
    • Post a job
  • XpertHR
    • Learn more
    • Products
    • Pricing
    • Free trial
    • Subscribe
    • XpertHR USA
  • Webinars
  • OHW+

Personnel Today

Payroll software: the bigger picture

by Personnel Today 20 Aug 2002
by Personnel Today 20 Aug 2002

How
much does a payroll system really cost? Keith Rodgers reports.

Compared
to more complex enterprise applications, purchasing payroll software should be
a relatively straightforward exercise. The processes are usually well-established
within organisations, the IT market is mature, and the basic requirements are
fairly standard.

The
reality, however, is that many companies still fail to make the best choice
when they go through the selection process. This is partly because payroll
options have proliferated in recent years – as well as a variety of standalone
applications and modules, vendors offer a range of outsourcing services, from
management of the entire payroll function to remote “hosting” of the
application.

But
part of the blame lies with users themselves. Most purchasers of HR software
focus on features and functionality, believing that the key task is to find the
most suitable application at the best price. But to get the maximum return from
an implementation, users need to tackle a far broader range of issues,
including the total cost of ownership and the management of service and support
agreements.

A
vast range of factors impact the total outlay on a payroll application –
ultimately, the software licence itself may account for as little as a third of
the total project outlay.

So
what are the major components of the cost model?

Licence
fee
Most vendors still charge for a payroll licence using traditional models, based
on a combination of the number of users and servers. Given the economic
climate, vendors are likely to be ‘creative’ with their pricing – particularly
if the payroll purchase is likely to open the door to further sales of other HR
applications. Given that the annual maintenance contract is usually charged as
a percentage of the licence fee – typically 15 to 20 per cent – the initial
outlay has long-term repercussions.

Customisation
The degree of customisation carried out on the application doesn’t just affect
the initial implementation costs: repeat customisation will need to take place
each time the standard package is upgraded, so there’s an ongoing cost to
consider. It’s therefore important to ensure that each customisation ‘project’
is essential – project managers should look favourably on changes that add
business value, and reject requests that are simply ‘nice-to-have’. Many
requests for customisation come from users seeking to replicate the features
they already have – these may not, however, be business critical.

Integration

Although payroll applications can be run as standalone, some level of
integration will be required with other HR and financial systems. Since most
organisations run a variety of systems, the level of integration work required
can be high – a factor often underestimated in IT projects.

Training

One advantage of payroll over many other applications is that the number of
users requiring training is relatively limited. However, once self-service
systems are introduced – allowing, for example, employees to view their
payslips online – training needs will extend across the organisation. While
browser-based self-service systems will be familiar to most PC users,
non-computer-literate staff may require training.

Hardware/infrastructure

Users need to consider whether the payroll systems require more investment in
hardware, databases or network bandwidth. If self-service applications are
being installed, these costs will frequently be absorbed as part of a wider HR
initiative.

Management/project
team/employee time

The true cost of ownership includes an assessment of the cost of devoting
in-house resource to the implementation project – not just the project leaders,
but also managers and end-users.

Maintenance
and support

The maintenance contract will typically include upgrades, fixes, software
enhancements and some degree of support, perhaps through a hotline. Users need
to establish precisely what’s covered, and estimate how much additional support
will be charged through vendor or third-party hourly consulting fees. For a
major implementation, it’s worth hearing the experiences of existing users, and
finding out how vendor support staff are incentivised and assessed.

Service
level agreement

A comprehensive service level agreement is essential where the payroll service
is outsourced to a specialist bureau or facilities management provider, or
where the software is ‘rented’ through an application service provider.

Agreeing
a contract is a difficult balancing act between tightly defining requirements
and leaving room for manoeuvre as business needs change. The advantage of
payroll is that the requirements are limited – fundamentally, employees need to
be paid on time and accurately each period. The key performance indicators can
therefore be kept relatively simple and easy to manage, and an accuracy
threshold of 98-99 per cent is a reasonable demand. It’s important to note that
providers will not offer cover for consequential loss if the payroll doesn’t
run.

Organisations
also need to ensure that both the service contracts and the software itself are
flexible enough to cater for new requirements, from small-scale changes in
bonus structures to major corporate reorganisations.

Managing
the service provider predominantly comes down to forging an effective business
partnership. Just as account managers take responsibility for customer
relationships, so a business manager needs to be appointed to run the
relationship with a payroll service provider.

Avatar
Personnel Today

previous post
Civil Service braces itself for further strike action
next post
Firms at risk from equal pay claims

You may also like

The Search for Talent: Six Major Employer Pitfalls

24 May 2022

Grants scheme set up to support women’s health...

16 May 2022

How music can help to ease anxiety at...

9 May 2022

OH will be key to navigating ‘second pandemic’...

14 Apr 2022

OH urged to be aware of abortion consultations...

8 Apr 2022

How coached eCBT is returning the workplace to...

8 Apr 2022

Why now is the time to plug the...

7 Apr 2022

Two-thirds of shift workers feel health affected by...

18 Mar 2022

TUC warns of April Covid risk assessment ‘confusion’

14 Mar 2022

Consultation on new NHS cancer standards, as waits...

11 Mar 2022
  • The Search for Talent: Six Major Employer Pitfalls PROMOTED | The Great Resignation continues unabated...Read more
  • Navigating the widening “Skills Confidence Gap” in 2022, and beyond PROMOTED | Cornerstone OnDemand conducted a global study...Read more
  • Apprenticeships are the solution to your recruitment problems PROMOTED | Apprenticeships have the pulling power...Read more
  • What it really means to be mentally fit PROMOTED | What is mental fitness...Read more
  • How music can help to ease anxiety at work PROMOTED | A lot has happened since March 2020, hasn’t it?...Read more

Personnel Today Jobs
 

Search Jobs

PERSONNEL TODAY

About us
Contact us
Browse all HR topics
Email newsletters
Content feeds
Cookies policy
Privacy policy
Terms and conditions

JOBS

Personnel Today Jobs
Post a job
Why advertise with us?

EVENTS & PRODUCTS

The Personnel Today Awards
The RAD Awards
Employee Benefits
Forum for Expatriate Management
OHW+
Whatmedia

ADVERTISING & PR

Advertising opportunities
Features list 2022

  • Facebook
  • Twitter
  • Instagram
  • Linkedin


© 2011 - 2022 DVV Media International Ltd

Personnel Today
  • Home
    • All PT content
    • Advertise
  • Email sign-up
  • Topics
    • HR Practice
    • Employee relations
    • Equality, diversity and inclusion
    • Learning & training
    • Pay & benefits
    • Wellbeing
    • Recruitment & retention
    • HR strategy
    • HR Tech
    • The HR profession
    • Global
    • All HR topics
  • Legal
    • Case law
    • Commentary
    • Flexible working
    • Legal timetable
    • Shared parental leave
    • Redundancy
    • Maternity & Paternity
    • TUPE
    • Disciplinary and grievances
    • Employer’s guides
  • AWARDS
    • Personnel Today Awards
    • The RAD Awards
    • OHW Awards
  • Jobs
    • Find a job
    • Jobs by email
    • Careers advice
    • Post a job
  • XpertHR
    • Learn more
    • Products
    • Pricing
    • Free trial
    • Subscribe
    • XpertHR USA
  • Webinars
  • OHW+