Integration of Payroll System with HRIS

Computerization began in the human resource area via the payroll system. Payrolls are large masses of detailed information which need to be accurately and quickly updated. This is a fundamental accounting activity, so organizations had little hesitation in introducing such systems.

Early systems were computer bureaus where data was processed outside the organization. Initially, it seemed that the promised benefits of computerization had finally arrived. The army of pay clerks was substantially reduced. However, new issues relating to input errors and processing delays soon arose.  It is important for HR managers to understand this history because it explains why many early (and even some contemporary) HRIS have a bias towards payroll activities.  Payroll processors first attempted to introduce Human Resource Information System (HRIS) in the mid-1970s when a major vendor offered a HR system with some additional fields of information that could be manipulated. Although a crude attempt to take advantage of an emerging need for HR information, the system gained considerable acceptance.

The primary purpose of a Human Resource Information System (HRIS) is to assist both the HR manager and line managers in decision making. Therefore, an HRIS must generate information that is accurate, timely and related to the achievement of the organization’s strategic business objectives. It is important to analyze HRM needs because each organization will want to use its data in different ways. Some uses of HRIS include the management of personnel records, HR planning, recruitment and selection, performance appraisal, training and development, career planning and development, compensation and benefits, health and safety and industrial relations.

The issue of HR versus payroll systems is still very much alive today. One school of thought is that they should be integrated to create and maintain a ‘complete’ system and to prevent unnecessary duplication of effort (because much of the information kept in HRIS is replicated in payroll systems). According to one expert, improvements in computer technology and the increased availability of PC-based HR and payroll packages ‘means that human resources system integration is becoming not just a realistic possibility, but an absolute must.’ Given the commonality of information, there is much to be gained by streamlining data entry procedures. The input of new hire details into a HRIS, for example, would automatically update both the superannuation scheme and the payroll, eliminating wasteful re-keying and potential discrepancies. Similarly, details of employee exits and the like can be communicated to payroll. This promotes ‘increased operational efficiency and data consolidation.  Furthermore, it is likely that the accuracy of shared information will be enhanced because payroll normally contains the most accurate and up to date information in any organization  for the simple reason that it is audited each pay period by every single employee.

The second viewpoint is that payroll and HR are separate activities and should be treated as such. A payroll system is seen as essentially an accounting function which processes a large number of transactions, while a HRIS is used for HR planning and decision making. Payroll and Human Resource Information System (HRIS) also have other significant differences, for example: HRM transactions are variable and dynamic, whereas payroll transactions are run in batches and are mainly routine; HRM is event driven, whereas payroll is cyclical; HRM has history records, whereas payroll usually maintains details only for the current year; online query capabilities are needed for HR personnel to do their work, whereas payroll updates records according to the pay cycle; HRM needs frequent ad hoc reports which range from simple to complex, whereas payroll reports are usually routine.  Finally, HRIS is specifically used for processing and reporting HR information .

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