Why Payroll in the Cloud: A Guide for Payroll Managers

Over the past two decades, many companies have turned to Software as a Service (SaaS) to support the digitizing of processes within the Human Resources (HR) function, including payroll.

In fact, the global Cloud-based payroll software market is expected to be worth $17.39 billion by 2027, with the benefits of Cloud-based software proving unparalleled in terms of operational efficiency and cost savings.

The Payroll Cycle

Payroll, the process of calculating an employee’s wages or salary and ensuring that they are paid correctly and on time, has not changed significantly over time. Organizations employing greater numbers of people typically have a payroll department that is responsible for processing, balancing, and reconciling payroll data with accounting systems, as well as processing taxes and other deductions. The payroll cycle therefore involves a series of steps:

This series of systematic processes, traditionally performed by diligent back-office administrators across the organization, exposes itself to an array of inaccuracies: an employee updating their own changes through a self-service feature could enter incorrect data, or a tax could be mistakenly applied based on an address error. Getting payroll wrong can be devastating for staff members who rely on timely, accurate payment. Mistakes can also be costly, not only for a company’s bottom line but also for its reputation.

The Hefty Cost of Payroll Errors

(Source: Cost and risks due to payroll errors: Results of the 2022 HR Processing Risk and Cost Survey, conducted by EY)

Given payroll’s importance as a primary and essential business function that impacts a company’s brand, profitability, operational performance, and corporate compliance, payroll needs to be prioritized along with other business transformation strategies. This is evident in the fact that 80% of global companies have a company-wide payroll strategy in place or have plans to develop one. While the payroll process itself remains the same, the technology available to power payroll systems has improved significantly. The efficiency gains unlocked by using the latest technology allow companies to manage and perform payroll tasks more effectively, more accurately, and with a greater degree of control.

What are Cloud Payroll Solutions?

A Cloud-based payroll solution is a payroll management system where you can access, operate, and control everything about your payroll over a remote system—the Cloud—with nothing but a computer and internet connection. SaaS are subscription-driven applications, usually billed monthly or annually, that do not require any software downloads. Through automation, moving one’s payroll to the Cloud delivers many benefits, all which future-proof a company’s payroll function.

Improved user experience

In the modern workplace, an employee’s user experience is of paramount importance. In addition to the fundamental issues of being paid accurately and on time, Cloud payroll solutions can create a user-friendly, transparent interface that enables employees to access more in-depth detail.

Innovation

Barriers to innovation that exist with on-premise systems are removed by incorporating Cloud payroll solutions. This paves the way for agile and easy adoption of the latest software developments in a fast-paced, ever-changing business context, saving time for valuable resources.

Future

The trend towards Cloud payroll has increased significantly over the past decade, and organizations that have not yet made the leap are already considered “behind the competition” by many employees.

Scalable

One of the biggest advantages of Cloud payroll systems is the ability for services to be scaled in line with where a business is at. Cloud solutions can expand as the business grows, making scaling up easy and affordable.

Cost of ownership

Using Cloud payroll solutions requires no costly upfront software purchases or expensive ongoing development costs, which means that operating costs are reduced, together with a decreased need for things like information technology (IT) support, server maintenance, and extensive testing of updates.

Automation

Payroll cannot be considered a standalone function—it requires consistency from different people across an organization. Cloud-based solutions automate and integrate the processes involved, greatly improving the efficiency and accuracy of data available for the payroll function.

Security and compliance

In contrast to the risks associated with storing data locally, payroll in the Cloud is protected against data loss in the event of hardware malfunctions, malicious threats, or even user error. Cloud service providers have matured significantly in their security expertise and compliance toolsets and are able to offer peace of mind to users.

SAP SuccessFactors EC Payroll

SAP SuccessFactors is the most widely adopted SaaS business software in the world and is used by 235+ million people in more than 200 countries and territories. As an implementation partner of choice since 2005, Effective People supports organizations in taking their payroll function to the Cloud, utilizing the award-winning SAP SuccessFactors EC Payroll solution. This Cloud solution helps businesses streamline global payroll, simplify payroll operations with continuous payroll and reduce risk.

Key features include:

• Localized payroll functionality to run in-house payroll in more than 47 countries.

• Built-in mobile and self-service functionality to provide top-notch employee experience and reduce manual administrative work.

• Off-cycle support, retroactive payments, and payroll processing for concurrent employments.

• Innovative and continuous payroll functionality, which helps improve quality, reduce processing time, and lower payday stress, freeing up the payroll team to focus on strategic work.

• Continual enhancements through innovative technologies which support the Payroll Control Center (PCC), helping payroll professionals to be more responsive to the needs of the business.

Case Study: Large Multinational Food Manufacturer

The Challenge

A market-leading multinational food manufacturer was operating several fragmented, old systems. To improve their processes, they needed technology that would combine HR, payroll, and time tracking across countries. The changes needed to be rolled out in a way that allowed the company to maintain its market position while also expanding its competitive advantage.

The Solution

Effective People worked with the client to implement a SuccessFactors Suite of HR products with payroll for their key markets, which included the UK, Ireland, France, and the Netherlands. They created a road map to improve employee experience through the addition of talent modules.

Business Impact

Processes were streamlined between payroll, HR, and time management. The fact that employees had access to real-time data meant that the administrative burden on managers was greatly eased, with time saved. HR and Finance leaders had access to key analytics and people data to facilitate strategic decision-making. During the project, the business contended with a major acquisition, with a further 2000 employees added to the solution. The new system demonstrated its capability and flexibility to adapt and provide solutions to large business changes.

Effective People and Your Cloud Payroll Solution

Cloud HR and payroll software providers like SAP SuccessFactors have revolutionized people processes. Although the system is standardized and can be rolled out on a global scale, the Cloud is ever-evolving. This means that organizations need to embrace continuous improvement alongside efficiency and innovation. Often, a one-size-fits-all approach does not work.

With 20 years’ industry experience, and having partnered with SAP SuccessFactors since 2005, Effective People has market-leading expertise in helping clients understand the business impact of HR and payroll, so that they can focus on driving long-term, sustainable transformation. Our clients are typically category leaders in their industry, looking for ways to streamline people operations, gain actionable insights from people data, run payroll and workforce management with less effort, and improve overall employee and manager experiences.

Conclusion

There are many compelling reasons to move your payroll function to the Cloud. While payroll accuracy has always been essential, studies show that today’s younger workforce is more likely to make public complaints (with social media at their fingertips) and change organizations than previous generations. Talent acquisition and retention, employee engagement, and building up your company’s reputation are just some of the pertinent motivators to make the change to Cloud payroll. Greater accuracy and transparency, and the ability to have data on hand to drive future business growth, provide further compelling reasons.

Indeed, there are several complexities to consider and important decisions to be made prior to implementing a comprehensive Cloud-based payroll solution, but working with a team of expert and trusted specialists will put you and your organization in a prime position to reap the rewards of what is fast becoming a must-have for business continuity and organizational success.

Of course, implementation is only the start of a new phase which will require a forward-looking strategy to create continued value and innovation. As you leverage technology to deliver the key organizational outcomes you seek, Effective People is the partner you need to support you on every step of this exciting journey. Contact us for more information.

If you want to learn more about the benefits of migrating to Cloud payroll, you can download our eBook: "Making the Case for Cloud Payroll with SAP SuccessFactors".