Introduction to this document
As the HR function becomes more sophisticated, many leaders in the “C-Suite” – whether they be the CEO, CIO or the CHRO are finding that their organization’s HR function enabled by legacy HRIS/payroll (PR) technology cannot provide the sophisticated reporting, data mining and scenario modelling that is expected of them. To address this, more and more organisations are looking to either implement an integrated HRIS/payroll system for the first time, or to upgrade their legacy technology.
This article provides a high level over view for anyone thinking of implementing a Human Resource Information System. It is divided into 3 parts:
1. Why consider implementing a HR/payroll system?
2. What are the options/ high level concepts to think about when considering whether to implement and if implementing, what tool to implement?
3. What are the indicative costs of implementing a HRIS/payroll system?
Why consider implementing a HRIS Payroll system?
The following are benefits of implementing an integrated Human Resource Information System:
Single source of truth: In the absence of an integrated HR Information System, HR files and the payroll system can contradict each other; employee data can be kept in separate “silos” making enterprise wide head count reporting time consuming and inaccurate. An integrated HRIS/payroll system will ensure that there is a single point of reference/ source of truth.
Enhanced reporting functionality: Most HR systems come with user definable, web enabled front ends providing approved users (including managers) with the ability to quickly generate their own, real-time reports.
Work Flow: Some HR/Payroll systems facilitate work flow. That is, each task in a process (e.g. New Hire) can be defined in the HR System and “allocated” to the accountable person/ team. This facilitates a more robust and repeatable process.
Facilitate “virtualisation” of employee records: Most HRIS/payroll systems allow anyone with access to the appropriate screens to attach scanned copies of original documents to the employee’s “file” (i.e. record) within the system itself. Thus, enabling “virtual” files.
Single system to manage all employees, worldwide: Most systems allow for employee records to be kept from every country that the company operates in on the same database. This data can be fed into multiple payrolls (depending on how the employee has been set up) to facilitate running pays for several countries from the one system.
Facilitate centralisation of support functions: With a robust integrated HR/payroll system, it is possible to centralise key support functions (HR, payroll, finance) in one country.
What are the options/high-level concepts to think about when considering a HR Information System implementation?
Determining the answer to the below questions for your organisation will greatly assist in guiding your decision making.
1. How confident are you that you know what you want from a HRIS Payroll system?
Most vendors follow a process, as roughly follows, when implementing an HR System: design workshops; vendor assisted configuration; a “test” phase of configurations against documented design workshop outcomes; a conversion of legacy data to the new system; parallel testing of the payroll.
The “design workshops” go at a very fast pace and the outcomes of these are much, much better if the client attendees have a very solid idea of the current business rules, policies and processes prior to attending.
It will ultimately save you time and money to allocate a resource to gather detailed requirements up front. This task will feed into many elements of the project:
• Stipulating the requirements for the RFP to the market
• Checking off the functional specs prepared by the vendor for completeness and alignment to your company’s requirements
• Preparing test cases
• Preparing Standard Operating Procedures and training guides
• Finally, but certainly not least, it will create a foundation of knowledge which will allow the resource to take a leading role in the design workshops
1.1 How robust are your current processes? To what extent have they been mapped?
An overall guiding principal for any technology should be that it serves the business objectives and processes, not that the business objectives and processes fit it.
For most business processes, not all occur within the confines of a system, hence it is important that the end to end processes are understood so that “hand offs”, touch points and/or interfaces between the HRIS/PR system and other systems are understood.
Process analysis should be driven by the client, not the vendor. The vendor cannot get a solid understanding of your business in the short time frame generally allocated to these projects. Moreover, vendor personnel are often technical resources with a deep understanding of their product but a limited understanding of the business environments that they sit within.
1.2 Do you want a “Tier 1” or a “Tier 2” system?
HRIS/PR systems are generally divided into two categories commonly referred to as “Tier 1” and “Tier 2”.
The choices in Tier 1 systems are pretty much limited to SAP and People Soft (Oracle). These are modules of overall ERP (Enterprise Resource Management) systems. ERP functionality is considered superior, as are ERP reporting capabilities. However, ERP systems are generally only considered by large companies. This is due to the fact that their implementations are usually extremely expensive due to the specialised skills required to configure and customise ERPs.
There is a panoply of choices in the Tier 2 systems: Preceda (Neller), Alesco (Talent2), Chris21 (Frontier); Payforce National (ADP); Epicor, Kronos, HR3, Micropay and so on. The quality and functionality available in these systems varies immensely, but generally they are a suite of web-enabled screens which write/ read to/from a database. The core system is complimented by a web enabled front end available to employees and managers “self servicing” for a number of basic transactions such as updating addresses or managing leave.
Although many people consider “Tier 1” systems desirable, careful evaluation of a “Tier 2” system could save considerable time and money – not only during the implementation, but also post implementation. Tier 2 systems are generally simpler to update via user-defined fields as business requirements subtlety alter.
1.3 Do you want to have the system hosted internally or externally?
Hosting the system internally means that the system will reside on your server(s) and your technical resources will be responsible for maintaining response times, etc. Your technical resources would also be responsible for applying patches and upgrades.
External hosting refers to the system residing on the vendor’s servers. A monthly fee is then paid to the vendor and they will ensure that the system is: available; is providing acceptable response times and; patches and upgrades are applied.
Traditionally, internal hosting has been preferred due to lengthy response times associated with external servers and security concerns. However, with the improvements in technical infrastructure and encryption technology, these factors are now less of a concern.
Most organisations now favour external hosting. The monthly hosting fee compares favourably to resource costs associated with maintaining the system internally. If entering into an external hosting agreement, ensure that SLAs (Service Level Agreements) for response times include clauses that bind the provider to these SLAs even during peak use periods. Also ensure that the vendor’s data encryption protocols are acceptable to your company’s data security and privacy policies.
1.4 What modules are you interested in?
Most systems will come with dozens of modules and hundreds of screens. Obviously, the number of screens is inversely proportional to the ease of use and time taken to learn the new HR System.
As such, it is important to have an understanding of which parts of functionality you will require of the system. Most systems have broad areas of: employee data, compensation, payroll, recruitment, learning and development, performance management, reporting, leave management, time and attendance.
1.5 What countries do you operate in? Do you want a global system?
Some HR/PR systems can only support payroll in a limited amount of countries and can only support languages that have “single byte” characters . It is important to understand the languages and payroll legislations that the system supports when selecting a system.
Generally, in order to “future proof” your investment, it is worthwhile trying to find a system which can support the languages & legislations of countries you currently operate in as well as those that you are strategically targeting in the next 3 – 5 years.
However, not having the capability of running payroll in these countries should not immediately exclude a system. If the system scores high on all other criteria, then “work arounds” for the payroll in those countries should be considered and weighed up against the overall alternatives.
1.6 Do you have the resource capacity for an implementation?
The resource requirement for an HR/payroll implementation is more than simply working with the vendor.
These are the tasks that it is advisable to consider having a resource dedicated to in order to ensure that the implementation is thorough and robust. Although allocating the resource to the project will increase the costs of the project, it will ultimately save the company money in that it will ensure:
• the project runs according to budget and time;
• the end product is aligned to your specific business processes and requirements; the vendor has delivered everything they said they would, to an acceptable level of quality;
• all people within your organisation are communicated to effectively; thus increasing buy in to the project and the project’s outcome.
Often, being involved in the system implementation essentially means that people have two jobs. It is worthwhile considering, before the project starts, how these key individuals will be supported – perhaps a back up resource could be drawn from another part of the business or tasks can be delegated to other team members during the project.
Similarly, the project phases involving these key, operational individuals should be planned to occur outside of intensive HR/payroll/finance cycles. For example: year-end or annual salary review.
2.0 What are the cost considerations of HR/payroll implementation?
In addition to the quote provided by the vendor, an accurate budget for a HR software implementation will include the following cost considerations:
• Pre-vendor engagement costs (in-house project manager, gathering requirements, creating the RFP, etc)
• The costs of your resources attending vendor run work shops – include the fully loaded seat costs to obtain a true indication of the costs to the business. Also include the costs of any resource who will be used to “back fill” key resource day to day tasks
• Post implementation costs: the costs of an in-house resource providing training and firm-wide communication, as well as responding to queries in the weeks following the “go-live”
3.0 Conclusion
There are significant benefits to implementing a HR and payroll software solution. However these benefits often elude companies (or are outweighed by the costs) due to mistakes such as:
• selecting a system which is not well aligned to the business requirements;
• failing to properly prepare for vendor engagement by not dedicating the time and resources to gather requirements and define end to end processes and;
• under estimating the over all costs of project by focusing only on the vendor implementation costs, and not also budgeting for the internal costs incurred.
Careful forethought and thorough planning will greatly enhance the success of your HR software implementation.
4.0 About the author:
Bernadette Chandrasegaram is an independent consultant who works with client’s seeking to optimise their support functions. For more information, please go to www.bc-online.com.au