Most of us long-timers in the payroll space have in the past decade focused our attention on whether to move our tired, worn, but comfortable payroll applications to the cloud. There’s more to payroll choices than simply deciding between cloud or on-premise options. The choice of payroll software, payroll services, time and attendance solutions, and integration with human resources management software all contribute to your total cost of ownership (TCO) for getting paychecks out the door. The best payroll solution will also support the future growth of your enterprise.
The Basics of Payroll Software Choice
When choosing a new payroll solution, we start with the cost of our payroll solution today and typically look to find comparable or even lower costs. Unfortunately, the costs of payroll are not always apparent.
The total cost of a payroll operation varies depending on the frequency of pay, the number of pay cycles, the complexity of payroll rules, number of employees, breadth of geographic expansion, maintenance fees, hardware costs, retroactive pays, and more. These are payroll basics, but we also must look beyond these costs to determine which payroll option suits the business that we expect to thrive.
When making your decision, remember that best in class payroll software:
- eliminates manual effort;
- reliably maintains compliance so you don’t have to;
- Intelligently identifies and automates the correction of errors;
- provides visibility into payment, deductions, and processes for managers and employees; and
- makes data readily available so that management can proactively make decisions about the health and welfare of the business.
Creating Growth Opportunities with Payroll
A choice of payroll solution is not binary: either cloud or on-premise. You can think of this choice as a continuum across the anticipated changes in the economy, your business trajectory, and the technology landscape. Things you should consider include:
- Engaging the workforce: A tight labor market might call for payroll innovations that attract and retain employees—like FlexPay, an SAP on-demand pay solution. It certainly calls for payroll that is accurate and on time. A Kronos Workforce Institute Survey found that almost half of Americans will leave their job after just two payroll errors.
- Scaling to your business size: What about your business size? For a long time, we have thought of SAP software as the mainstay of large enterprises. Today we see implementation options coupled with managed services that allow even startup businesses to take advantage of the best software in the world. With the right implementation model—potentially with some tasks outsourced where resources dictate—and the right partner, small businesses, acquisitions, and joint ventures can get started with SAP SuccessFactors Employee Central Payroll (ECP) and forget about noncompliant, inefficient spreadsheets. Using ECP from the start gives you the foundation to grow your payroll function with your business.
- Keeping up with technology changes: With the extension of mainstream maintenance for SAP ERP ECC 6.0 into 2027, organizations that currently use SAP payroll on-premise—as well as organizations that are looking to replace non-SAP payroll solutions—have options along a continuum of choices. For the next seven years, SAP customers can continue to use SAP HCM ECC 6.0 Payroll on-premise. With extended maintenance, that choice can continue for ten years into 2030. All of this allows us to get our “ducks in a row” for a total ERP platform rejuvenation to SAP S/4HANA. The question for each of us is in payroll is “why wait?”
What Are Your Payroll Options?
Your choices are as unique as your business. But here is how some ASUG member companies are approaching their payroll technology needs.
Ground Zero - Startup Payroll: Get out of spreadsheets and into compliance. Deploy SAP SuccessFactors ECP “out-of-the-box.” Do it rapidly to minimize your initial investment. Use managed services to gain the payroll administrative expertise you need immediately. As your business grows, this payroll will easily scale with your business.
Established Company - Disparate Payrolls: Now is the time to consolidate. A single source of payroll ensures the volume of data is collected, protected, and accessible for regulatory reporting—daily if needed. And your size doesn’t matter. As described above, modern implementation and managed services offerings are making ECP readily accessible to any size company. SAP’s breadth of country localizations makes it easy for moderate size companies with a global footprint to jump into ECP.
Established and Mature Companies - Using SAP On-Premise Payroll
For the next seven-plus years, these companies can continue to do what they have always done. But what are their options?
- Do Nothing: Leaving payroll untouched allows companies to direct available resources to other innovations, like moving core HR and talent to the cloud. But most ASUG member companies have a plan for transformation, and many are already executing on that plan.
- Move to Infrastructure as a Service: This option continues the use of on-premise software but streamlines and simplifies the landscape by outsourcing the management of the servers to a third party. In this scenario, technical resources turn their attention to transforming other technology, and business resources save time on the application of support packs and BSI Tax Updates.
- Wait for SAP HCM for SAP S/4HANA, the On-Premise Edition, to Become Available in 2022: Fully integrated with SAP S/4HANA, this solution will be an advantage to your finance operations. SAP will support this option through 2030.
- Adopt Employee Central Payroll: ASUG member companies are also moving to ECP. And the benefits are significant, especially when integrated with Employee Central Core HCM. Employee Self-Service is part of the total solution—without any additional configuration or programming required to deliver it. Automated inclusion of BSI Tax Updates with system maintenance updates saves significant in-house resources. The opportunity to implement payroll in a simplified, streamlined fashion is a long-term business benefit. And this is the ultimate direction for organizations that want to remain competitive and innovative.
Mature Companies - Not Using SAP Payroll Yet
SAP on-premise payroll remains an option for companies that have not yet adopted an SAP payroll solution. Depending on global corporate needs at this time, that might be a place to start. Perhaps one or two of the countries in which you do business do not have an ECP localization solution now. But SAP is developing new localizations all the time. In some cases, partners build localizations for specific countries. So, be sure to ask the question: What countries are on the road map? But if it were me, I would start with ECP.
Depending on where we are in our business and technology journeys, we will all approach change in different ways. This blog is by no means comprehensive of the options you have. It is, however, representative of why we need each other to filter through the vast amounts of content, well-meaning analysts’ insights, and general hype out there.
Register for the on-demand ASUG webcast, “Reporting Options for HR and Payroll for SAP SuccessFactors Customers.” And don't forget to join us in 2020 for our ASUG Experience for Human Resources & Payroll event.