Your A-to-Z guide to payroll software

Payroll software is becoming increasingly sophisticated. Many packages now offer functionality for everything from holidays to tax credits. To help you understand the jargon, we provide a payroll software A-to-Z.

Absence management
Integrated HR and payroll software will usually have functionality that collects and aggregates information on attendance, holidays and sickness. The main ways the module can be populated are by direct input from paper records, by upload from a data importer or time and attendance application, or via an employee self service-system. The latter is usually done through a self-service system online (via the company intranet or secure internet site). This data can then be integrated with payroll. Also see Time & attendance, Holiday requests, and Employee self service.

Audit trail
Part of any payroll and HR software system is the audit trail, usually accessed through the system admin area. This will detail every transaction through the application, date and who generated it. Regular checks are needed to check the integrity of the data, and to trace the origin of errors translated on to the system.

Originally an acronym for Bankers’ Automated Clearing Services, BACS is a not-for-profit, membership-based industry scheme for the electronic processing of financial transactions. BACS Direct Debits and BACS Direct Credits are made using the BACS system. BACS payments take three working days to clear: they are entered into the system on the first day, processed on the second, and cleared on the third.

Budgeting software brings together data from multiple sources, including HRIS, payroll, performance management and sales forecasting, to help build a complete picture of the current and future business situation. This allows organisations to accurately predict the overall costs and identify where savings could be made.

Bureau services
A bureau service provider is also known as an online payment bureau. Companies that do not have an internet merchant account, required for businesses that wish to process card payments, may choose to use the services of a bureau service provider.

Configuration and customisation
It is important to know the difference between configuration and customisation when sourcing payroll and HR applications. Configuration is the setting up, addition, modification or deletion of parameters and rules within the application, such as sick pay limits and benefits. Customisation is modification of the original software to accommodate your particular requirements, such as new screens and new categories. Such changes can be extremely expensive, so check if replication of existing processes could work instead.

Data importer
This software feature moves data from one application to another and draws it into another application to populate it. Most new or upgraded HR software systems are populated in this way, which saves re-keying the data. It is vital to ensure that all data is clean before migrating it to another application.

Employee benefits
Benefits are administered in a variety of ways, from Excel spreadsheets, through payroll systems, bespoke benefits technology and even all-encompassing HR information systems (HRIS). Benefits can either: be administered in-house by the benefits or HR team; be outsourced to a third-party provider that can supply the technology and administer the scheme(s) on an employer’s behalf; or be administered online by the employer with the actual system being held by the provider.

Employee self-service (ESS)
Employee self-service (ESS) is a web-based application that provides employees with access to their personal records and payroll records. ESS isn’t new, but the latest payroll software applications include sophisticated self-service modules that allow employees to proactively manage everything from sickness reporting and holiday requests to flexible benefits and pensions. Also see: Employee self-service – pros and cons.

Software or source code escrow is a form of insurance to cover the contingency of your software supplier going out of business. A copy of the source code (the programme written by the developer) is lodged with an agreed third party, who would release the code to you under specifically agreed conditions, enabling you to keep the programmes running. This can be an expensive option, however, so do your research.

Employee expenses software helps gather and organise information about all expenses: travel expenses, accommodation expenses, meal expenses, entertainment expenses, etc.

Financial calculators
Financial calculators allow employees to calculate the value of their own benefits, pensions and share options. In the case of pensions and shares, the calculators are able to predict the value of the benefit in the future based on varying investment performance. These financial modelling tools are often used by financial advisers in giving financial education or by financial advice around retirement pensions. They are especially useful as communication tools to demonstrate to employees how much they need to contribute to their pension fund each month to retire with a reasonable pension. Also see Pension modellers.

Holiday requests
Integrated HR and payroll software will usually have functionality that allows managers to approve or reject requests online. The software collects and aggregates information on holidays, and this data can then be integrated with payroll. Also see Absence management.

Hosted service
The software is never downloaded. Instead, it is provided by a hosted service provider and is generally paid for on a monthly or annual basis. Hosted service is also known as the application service provider (ASP) software model. Some of these services charge a percentage of sales in addition to the monthly fee. This model often has templates that a user can choose from to customise their look and feel.

Integrated applications
These applications share a common database, although may perform differing functions – for example, HR & payroll, or payroll and time and attendance.

International capability
Some software can help you operate across international borders by being multi-country, multi-language and multi-currency enabled. It allows you to create user communities in any language with local public holiday schemes and multi-currencies. You can host the software on your servers and access it either via your network or via a secure internet connection.

In-house administration
This is when the benefits are administered by the employer (usually the HR department), rather than outsourced to an external benefit administration company. The employer may use benefit administration and payroll software to help in this task.

An intranet is a network based on TCP/IP protocols (an internet) belonging to an employer, accessible only by employees. An intranet’s websites look and act just like websites on the internet, but the firewall surrounding an intranet prevents unauthorised access. The intranet can give employees access to self-service benefit administration software including information on benefits such as pensions, shares and flexible benefits systems.

Outsourced service
Outsourcing involves the transfer of the management and/or day-to-day execution of a business function such as payroll to an external service provider. The client agrees to procure the services from the supplier for the term of the contract.

Performance-related pay
Performance-related pay (PRP) is a method of remuneration that links pay progression to an assessment of individual performance, usually measured against pre-agreed objectives (it is also known as individual PRP or merit pay). Pay increases awarded through PRP are normally consolidated into basic pay, although sometimes they involve the payment of non-consolidated cash lump sums. PRP typically uses a system based on consolidated pay progression within pay brackets attached to each grade, level or zone in a structure. For performance to be rewarded, it is first necessary to have an effective means of measuring that performance – most commonly via a performance appraisal or review system.

Pension modellers
Pension modellers allow employees to calculate the value of their future retirement pension based on their current pension contributions. Modellers vary in sophistication, but usually take into account age, gender, length of savings, possible investment performance and sometimes state pensions. Pension modellers are especially useful communication tools to demonstrate to employees how much they need to contribute to their pension fund each month to retire with a reasonable pension. They can be used in financial education programmes and by financial advisers in giving financial advice.

P11D processing
This software helps with the administration of form P11D, which is a legal requirement. At the end of each tax year, you must give HMRC particulars of any expenses payments, benefits and facilities provided to employees or directors earning at a rate of £8,500 a year or more, those provided to members of the director’s or employee’s family or household.

Reporting tools
One of the most commonly overlooked features of HR software and payroll software applications is reporting. A typical HR software application might process thousands of pieces of data every minute, and can offer powerful insights into your business. Also see: Using payroll software reporting tools effectively.

Salary analysis
Salary analysis and compensation modelling software makes it easy to model alternative pay scenarios and instantly see the financial impact. Some systems allow you to work with your complete employee population or isolate groups, to allow multiple factors to be taken into account. This can help ensure your pay policy is equitable.

An element of absence management software that allows staff to self-certify why they were off sick. This can also be used to highlight the need for a doctor’s note. Also see Absence management.

Software as a service
Software as a service (SaaS) is a fairly recent expression to describe the supply of software as an on-demand variable overhead rather than a fixed cost. The idea is that you subscribe to services via the internet. All you need is a basic PC with an internet browser and connection. This approach can reduce the up-front expense, and may lead to a reduction of investment in server hardware.

Stock options administration
Stock options can be an important part of any incentive plan, helping to motivate and engage employees in achieving company objectives. Specialist software can help streamline the management of stock option schemes, reducing the administrative burden. Some systems allow employees to review information about the options they have, making them more aware of the options open to them, and of their value.

Time and attendance
This software collects employee time data. This might be entered by the employee themselves, while other systems can be integrated with electronic swipe cards or contactless RFID (radio-frequency identification) badges, worn by employees. This information is stored in a central database, where it can be reviewed and used for payroll and custom reports. Some time and attendance systems can also generate reports to reveal trends in absence and sickness.

The replacement of a product with a newer version of that same product, typically meaning a replacement of hardware or software to update the system or to improve its features or operating efficiency. This is often done by downloading a ‘patch’.

Workforce planning software
Workforce planning software is a planning module that automatically analyses key HR metrics such as headcount, salary and compensation figures to help with future planning. The advantage of workforce planning software is it can speed up and improve the accuracy of planning, using pre-built calculations and data forms to allow HR managers to easily see how different forms of compensation and workforce modelling will affect the organisation.

Workflow technology allows you to automate virtually any business process and reduce duplication of effort. It ensures data accuracy and saves you time.FrontierPayrollPyramidNorthgateCeridianBondTeamSpiritAdvanced mktoMunchkin(“589-ITG-580”);

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