What are the benefits of cloud-based HR and payroll system?

The cloud services market continues to grow exponentially and is widely acknowledged as integral to digital transformation and business connectivity, especially when it comes to human resources (HR) and payroll.

Owing to the cost benefits and efficiencies associated with cloud computing, many companies are eager to embrace it, especially as human resource teams face increasing complexities around HR and payroll in a post-pandemic world. Consequently, the burgeoning interest in the cloud, especially for payroll solutions, is not surprising.

This being said, businesses considering migrating their mission-critical data contained in their human resources and payroll solutions to the cloud must be mindful of the challenges and risks that come with this environment. Not understanding the full implications could have significant financial and reputational repercussions.

What is cloud computing?

In simple terms, the cloud is a virtual space that enables different services such as software, databases, data storage, servers and networking to be delivered through the internet.

When it comes to software such as HR and payroll, the cloud presents a single version of the application. If the software is updated it reflects universally across all customer segments.

Types of cloud models

There’s no one-size-fits-all when it comes to cloud computing.

Companies that are considering moving their HR and payroll systems to the cloud have three cloud deployment models from which to choose – private, public or hybrid – and each one provides different capabilities.

The model you choose for your HR and payroll system will depend on your specific business requirements and the evolving technology needs of the organisation.

Let’s examine each of these models in more detail.

• Public cloud

The public cloud is the most common and accessible type of cloud computing deployment. Computing resources are delivered by third-party providers over the public internet and are available to anyone who wishes to purchase and use them. Public cloud services may be free or sold through various pricing schemes such as on-demand or pay-per-usage, where customers only pay for the CPU cycles, storage or bandwidth consumed. Amazon, Google and Microsoft Azure are examples of public clouds.

The public cloud presents the highest degree of risk for compromise for sensitive data belonging to HR and payroll departments, primarily because the cloud services are offered over the public internet.

If the public cloud service provider goes down, for example, the organisation won’t be able to pay salaries. Additionally, if the cloud is hacked the organisation’s private data could be severely compromised. In both instances the impact on the business is huge.

• Private cloud 

On the opposite end of the cloud computing spectrum is the private cloud. This model consists of an infrastructure that is wholly owned and used by a single private business in a secure cloud-based environment. Private clouds are traditionally physically located at the organisation’s own data centre and use its own hardware, but some companies prefer to locate the cloud off their premises.

• Hybrid cloud

As the name suggests, the hybrid cloud is a combination of the public and private clouds in which both platforms interact seamlessly with each other. This means that a company uses the flexibility and computing power of the public cloud for non-sensitive tasks and services which can be accessed by anyone, but keeps business-critical applications and data on premise so that these can only be accessed by the organisation’s own users.

Which model is right for HR and payroll?

When choosing a cloud model to fit into the strategic requirements of an organisation, decision-makers first need to understand what they hope to accomplish from it. A business case must be developed, and the strategic deliverables aligned to the model best suited to the task at hand.

From an HR and payroll perspective, the sensitive nature of the data and the critical role these departments play in the business mean the ideal environments would be either a private or hybrid cloud model. As stated above, the public cloud is simply not secure enough for these vitally important data stores.

Given the real-time environment of today’s businesses, choosing to go the private or hybrid cloud route provides a range of benefits for HR and payroll departments.

What are the benefits of using a cloud-based HR and payroll system?

There are many advantages for organisations to consider, especially when it comes to private or hybrid models.

• Customisation: Private and hybrid cloud models provide human resource and payroll departments with a customised environment. This means the solutions required can be designed to suit the specific needs of the department or business.

• Scalability: This is all about meeting requirements in real time. The organisation can grow its business seamlessly without having to invest in new infrastructure. Similarly, companies can also scale down according to non-peak times of the month.

• Efficiency: Solutions and data on a private or hybrid cloud mean users have secure access to sensitive information wherever they have an internet connection. Furthermore, these cloud-based platforms comply with all regulatory requirements around data protection, so companies can focus on their core business.

• Strategic value: Using cloud-based HR and payroll solutions streamline work processes because the service providers manage the required infrastructure. Additionally, the software enables collaboration between human resources and the rest of the company. The resultant improved employee engagement gives the company a competitive advantage over those still struggling with on-premise systems.

• Manager and employee self-service: A cloud payroll solution enhances efficiencies in that it affords employees the flexibility to view their payslips and benefits documents from their laptop or even a mobile application on their smart phone. And because cloud-based HR and payroll solutions connect every part of the process – from remuneration to legislative compliance – payroll teams are able to manage the company’s payroll from any location, provided they have access to the internet.

• Engaged employees: Because employees can access their information wherever and whenever they want – and they can rely on its accuracy – trust in the company is enhanced, which boosts morale and productivity.

• Legislative compliance: The risk of non-compliance can be costly, to say the least. Human resource and payroll legislation and regulations change constantly, and if the company has a global footprint it becomes even more complex to ensure compliance in the various countries in which it operates. It’s easier to affect these changes into a payroll solution that is cloud-based, thus ensuring that critical deadlines are always met and expensive penalties avoided.

• Cost-effectiveness: All software upgrades and maintenance are managed by the provider, eliminating the need for the company to invest in costly technical expertise and on-premise hardware, and saving valuable time in the process.

• Safety and security: Robust, built-in security protocols protect sensitive organisational and employee data from any unauthorised access.

• Data accuracy: A cloud-based payroll solution ensures quick and easy access to essential employee information because all the data is centralised. This also facilitates maintaining the accuracy of the data, which in turn supports legislative compliance.

• Accurate reporting: With cloud-based payroll there’s no need for manual data entries, which reduces the possibility of human error. Payroll information can be consolidated based on real-time data and customised reports generated at the click of a mouse.

• Error-free performance assessments: Assessing and evaluating employee performance is a human resources function. It is usually done manually, which involves a considerable amount of paperwork and lends itself to human error. A cloud solution not only cuts down on the paperwork, but reduces the possibility of human error because employee performance can be monitored in real time and accurate analytical reports generated quickly and easily.

• Analytics: Cloud-based payroll analytics can be used to identify patterns and trends in the business, and assist in better decision-making.

• Less paperwork: With cloud-based HR and payroll systems important company and employee data is stored electronically, which means it is no longer necessary to keep printed copies of the files. Consequently, storage systems such as filing cabinets, which take up a lot of space, become redundant, freeing up office space and reducing clutter.

The cloud-based payroll bureau

Even with all the benefits that the cloud offers, managing the human resources and payroll function in-house can be extremely time-consuming and complex.

For this reason, many companies look to payroll bureaus to manage their payroll, as a means to improve efficiencies while alleviating risk and reducing operating expenses.

Regardless of the size, type and location of the business, and the industry in which it operates, there are several advantages to appointing a payroll bureau, and even more so if the bureau operates in the cloud.

Why is a cloud-based outsourced payroll bureau better for your business?

A payroll bureau’s most important responsibility is to enable employers to pay their employees accurately, and on time.

Most payroll bureaus manage payroll for numerous organisations, so it’s critical that the payroll solution they run is efficient, secure and innovative. Using cloud-based payroll software ensures flexibility and a streamlined service – two critical requirements in today’s fast moving business world – making it much easier to manage the payroll process, regardless of location.

When it comes to managing multiple payrolls the ideal payroll solution incorporates automated workflows, integration with South Africa Revenue Services, automatic legislative payments such as pay as you earn, a user-friendly customer portal, direct deposits to employee bank accounts and business intelligence tools.

Outsourcing the payroll function to a payroll bureau becomes an important consideration once the business starts to show growth. The beauty of cloud-based systems is that it’s not necessary to change payroll systems during this process, which means you can focus all your attention on the business functions necessary for the growth you wish to achieve.

Businesses that outsource their payroll function to a cloud-based payroll bureau enjoy the benefits of having one system in place that is easily accessed by the payroll team. The time, cost and resource savings gleaned are invaluable.

Conclusion

Ultimately, for sensitive and mission-critical data such as those managed by HR and payroll departments, private or hybrid cloud models work best. They tick all the security and compliance boxes and provide organisations with the peace of mind that they are receiving all the benefits of cloud computing, in accordance with best practice.

Whether your payroll is managed in-house or outsourced to a payroll bureau, integrating the cloud into your environment will ensure your employees experience hassle-free salary payments at the end of each month, while management has the peace of mind that the payroll is always legislatively compliant.