Payroll Service Bureaus (PSBs) exist for thousands of reasons. Those reasons are the clients they serve, multiplied by all the employees they handle, times the number of hours those people work and the various tax rates that apply, plus the withholdings for benefits and accounting for paid time off. It’s a job for specialists using expert systems.
Nearly all the inputs for payroll calculations tend to come from different systems. And the data those systems provide is often changing in real time. Regardless of how fragmented the back office processing of that data may be, it all needs to come together in time for an accurate payroll run.
The more tightly integrated those systems are, the more efficiently and accurately the payroll can be processed. The ideal situation is for all those data sources to share a central platform. A Human Capital Management (HCM) system is such a platform, connecting all the necessary data feeds while providing operational benefits well beyond payroll processing.
Here’s what a comprehensive integration of payroll inputs can do for PSBs and their clients at each step of the process:
Taming Payroll Data Sources
Stand-alone payroll processing software can sometimes feel like it’s standing very much alone. It may require manual entry of time records (because any process that requires human intervention, even mouse clicks, is still a manual process). And those records may come via email that definitely requires a human in the loop. Likewise, deductions for benefits may only need to be entered once a year. But they still must be entered by hand.
If a PSB’s client utilizes an automated time-tracking solution, that can speed up payroll data collection and minimize errors… once it’s connected directly to the payroll platform. Of course, that involves two different pieces of software (payroll and time-tracking) usually joined by a third semi-custom configuration. And these might still be separate from the HR software that tracks PTO.
It’s very unlikely that payroll processors have real time visibility into employee profile changes—like marital status, dependents, or residency—that might affect tax calculations. The same applies to qualifying life events that affect benefits deductions. Unless the client is proactive in getting that information to the PSB, deductions could go overlooked for several pay cycles before being remedied.
Oddly enough, the software that handles employee status changes can sometimes actually complicate the issue. With the move to employee self-service portals, employees can make changes themselves. Depending on the level of integration, the alert system, and how a client processes such updates, even a client’s HR might miss the change. But, sooner or later, the bill will come due.
Integration of all the functions noted above onto a central platform increases operational efficiencies and the timeliness of having data entered directly into the system. This also limits errors caused by handling data outside the system.
The Ins and Outs of Integration
“Human Capital Management” may sound like more software than a small or medium-sized company needs. It’s true: Large-scale enterprises use HCM platforms that can handle tens of thousands of employees inside a single account, and are designed for in-house payroll teams to do that work. Such a closed system is one form of integration.
But small and medium-sized businesses can benefit from HCM systems too, just not at the scale and complexity of a large enterprise. The practical solution for most smaller businesses is a system built around the employee database that enables any additional functions to be activated as needed, and to tightly interoperate while still allowing for a suitable degree of customization. Think of this as “right-sized” integration.
Payroll is often considered a core HCM function, and tends to be the most tightly integrated. For this reason, time-tracking and other workforce management (WFM) functions like shift scheduling—with their implications for labor costs and labor law compliance—are also closely integrated modules.
In fact, once a PSB’s clients see the visibility and control they can achieve over their business with HCM software, they are often inclined to activate as many modules as they need to extend those benefits to every aspect of their employer operations.
The benefits for PSBs include: incremental revenue from every service they provision; a more central role in their clients’ business; plus lowering their own operating costs for higher margins with all the efficiencies these systems enable.
Payroll with Bonuses
Even though a PSB’s primary focus in software integration may be greater efficiency and accuracy in processing payroll, there are much greater implications for their company. By offering an HCM system as their payroll platform, they are opening a range of opportunities for their business and their clients’.
A full-featured HCM can streamline and even automate HR functions of all kinds, from recruitment and onboarding, to benefits election and administration, to performance reviews and employee development. All these software-enabled value-added capabilities represent additional revenue streams for PSBs who already enjoy the trust of their clients. And they are logical extensions of the mission of any HRO provider dedicated to helping clients succeed.
Perhaps the greatest value-add is one that a payroll consultant is best-positioned to deliver: the strategic visibility and insights revealed by all that data passing through their HCM platform. As “numbers people” and money managers, PSBs are ideally placed to analyze a client’s operational data and generate actionable reports on business health and growth opportunities that owners and executives crave.
This perspective can elevate a PSB from a valued service provider to a critical strategic resource. The relationship is stronger. The account is bigger. And the opportunities continue to grow with the client. That’s definitely the most rewarding integration of all.
If you’re a PSB and don’t currently offer an HCM to your clients—or are looking at integrating with a modern payroll platform that can drive more revenue while securing more loyal clients—visit prismhr.com/software/hcm to learn about PrismHR’s HCM and what it can do for your business.
