Changing ProcessHow to Build a Business Case for Payroll Software


Building a business case for new payroll software can be challenging, even when your current payroll process is redundant and error-prone. Often the only catalyst for changing payroll software is when a merger, acquisition or strong organic growth pushes the “old” payroll software to its limit. Sometimes, companies are forced to change when the current vendor “sunsets” our payroll software.

What if you could build a business case so strong it could convince HR, finance and operations executives to proactively adopt new payroll software technology? It’s possible, with a business case that shows a strong return on investment (ROI) analysis.

Start by tallying up possible costs to the business from your biggest pain points:

  • Payroll Errors: While payroll errors are difficult to measure, error rates range from 0.2 percent to almost 2 percent of total payroll. Errors usually result from erroneous deductions, incorrect timesheets, miscounted overtime and holiday pay, tax with holdings or wage garnishments. Any reduction in that error rate with new payroll software is considered a hard cost savings – a concept important to CFOs.
  • Payroll Productivity: Calculate the time payroll processing takes, from obtaining gross data – including wrangling timesheets for hourly employees – to closing out the payroll period and generating reports. An aumotated payroll software package will reduce the time required to process payroll – especially if  the system combines time and pay in one application., A self-service payroll application that allows employees to manage their own HR information will also reduce time spent on payroll processing. To determine the ROI, account for the time spent on issues that can be resolved via self-service. Position it as a way of enabling staff to focus on more strategic or pressing elements of HR such as compensation planning, controlling overtime costs and more.
  • Cost of Payroll: What is the cost to your company to run payroll today? Tally current costs such as software licenses, hardware, in-house printers, tax accountants and IT time. It’s very possible that cost will go away with a new payroll processing software.
  • Compliance Risk: If your current time and attendance system is not in sync with your payroll system, you may be hit with fees and penalties from incorrect tax withholdings, wage and hour issues and employee misclassifications. Use a methodology that accounts for the risk of wage and hour issues or employee misclassifications, which could cost the company thousands of dollars if the current system doesn’t define wage and hour, employee classification and tax filing rules.

Next, develop an action plan. Focus on the following areas:

  • Choose an ROI calculator carefully. Payroll software vendors offer ROI calculators but make sure that you select one that is built and backed by a third-party. ROI stands on one leg: credibility.
  • Remember your pain points. When evaluating payroll software vendors, ensure that vendors demonstrate how their solution addresses your biggest pain points. Assume and use conservative savings in each area based on a comprehensive demo. For instance, if you think that the new system will reduce 80 percent of the workload, use 60 percent.
  • Ask for case studies and references. Ask vendors to produce post-implementation case studies from customers. Again, this is about credibility. Third-party awards or case studies drive credibility more than the vendor’s marketing materials.
  • Look for other savings. This includes comparing long-term costs of different models, such as software as a service (SaaS), on-premise and payroll service bureau solutions.
    • With software as a service, the cost to add modules is relatively cheaper than it would be for legacy on-premise or payroll service bureau solutions.
    • Automating and integrating time and attendance with payroll drive great efficiency. Nucleus Research has found that workforce management (time and attendance, scheduling and labor planning) pays back $10.99 on each dollar spent. If you can, opt for a system that has one database and a single rules engine governing time and attendance and payroll.
  • Collaborate with key operational leaders or managers. Partner with these leaders to meet your mutual goals of reduced costs and more efficient operations.

Reuse it! ROI calculation can be useful in other ways:

  • In final vendor and solution evaluation, ROI analysis can help justify higher cost options by demonstrating the long-term benefits.
  • If it costs too much time and resources to get the gross-to-net-to-zero processed accurately and compliantly, ROI analysis can catalyze budget approvals for upgrades.
  • Moving to an automated, modern model for payroll processing can streamline processes such as W-2C production.

Time to Improve Your Payroll Processing with Dayforce HCMLegislative and reporting requirements are making payroll processing more complex by the day. As organizations grapple with manual processes, spreadsheets, W-2Cs andtax-filing errors, they are beginning to understand that archaic payroll technology – or lack of payroll technology – is the root of the problem. Fortunately, with the advent of SaaS-delivered solutions, companies of all sizes have access to better tools. The key is to understand how to position payroll investments in payroll software to financial decision-makers in a credible way.

Dayforce HCM is a single human capital management application that can meet your needs for payroll processing software, along with HR, benefits, recruiting, talent management, performance management, document management, and even analytics. No more redundant data entry, spreadsheets, or weekly uploads of time and attendance data to payroll. You’ll get real-time access to data and be able to report across all aspects of payroll and HR. Learn more about how Dayforce HCM can help you.

Based on an article by Jayson Saba, Vice President, Market Strategy for Ceridian, which originally appeared in Paytech Online.