As business and technological landscapes are changing with each passing day, the existence of legacy payroll system is surprising. The survey conducted by Kronos found that almost 30% of respondents are using systems that are more than 10 years old. What is more alarming is 50% don't track and report on key performance indicators in their payroll functions.
Companies' reluctance to switch to newer and better payroll systems generally stems from a risk-averse nature. As put forward by Mollie Lombardi, co-founder, and CEO of advisory and analyst firm Aptitude Research Partners, Payroll touches everyone in the organization; and there's a belief [that] a system change needs to be as painless as possible. They are worried about the new system’s ability to ensure data accuracy and system reliability. However, they aren’t realizing that clinging to old and legacy payroll systems can incur a multifold damage.
A) Loss of Time:
Legacy systems largely depend upon archaic spreadsheets and paper trails to fulfill human resource management tasks. In fact, CoreHR.com reports that one-third of companies are still utilizing spreadsheets and paper forms to track everyday HR elements such as salary changes, vacation requests, and timesheets. Apart from the cost incurred by paper and printer ink, the time that HR and accountant spend in tracking these tasks can be actually utilized in activities that add significantly to the revenue funnel of a company.
B) Costly Upkeep vs. Ongoing Upgrades:
One of the major reasons that companies stick to legacy payroll systems is the cost they would have to sustain if they decide to upgrade to a modern payroll platform. They are overlooking the cost and trouble they are incurring by keeping their old systems in place. When the people who are managing and maintaining these legacy systems move somewhere else or retire, they can become impossible to replace. The reason is younger professionals are not training with bygone methods and technical setups. In the worst-case scenario, it’s possible that vendors may stop offering support for their legacy products. It may make the maintenance exorbitantly costly.
C) Maintaining Proper Compliances:
As the footprints of companies grow, they come under the ambit of multiple regulations of multiple countries. Recently enacted General Data Protection Regulation (GDPR) is a case in point here. It mandates that organizations operating in the European Union (EU) or doing business there should protect the personal data and privacy of EU residents. We may see more data privacy laws getting introduced around the world in coming years.
Legacy systems may prove a hurdle in maintaining the proper compliances with rules and regulations due to their rigid ways of data management. Data in it can't be removed or encoded to ensure compliance. Similarly, it makes difficult for companies to maintain data for a longer time.
New Capabilities of New Payroll Systems
To weed out the aforementioned problems, new payroll systems are coming up with new and better capabilities. They work on seamless automation that takes care of most of the manual processes.
Accrued time off, for example, gets computed automatically and is instantly available for retrieval upon request. Apart from this clear-cut time saving, another benefit with modern payroll systems is that they allow employees to easily log into their accounts and see their personal information for themselves. It makes the whole process more transparent.
Other capabilities such as increased use of mobile self-service apps, chatbots, and proactive communication tools are relieving HR's administrative burden and improving customer service. Some systems come with features that facilitate improved sharing and analysis of payroll data across a company. Real-time data from payroll systems, something which was previously unheard of, is a norm of today’s payroll systems. It makes payroll data an important data piece which can aid greatly in making sound business decisions.