HCM Integration: What to Look for When Selecting a New Payroll Provider

February 8, 2022
6 mins read
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Considering a HCM integration? Navigating the vendor selection process and choosing the right global payroll partner is daunting. It’s vital that you select the payroll provider that meets your needs and future ambitions. After all, who you select will significantly impact the success of the initial project and the smooth day-to-day operations.

In this blog, we take a look at the most common market issues and offer guidance around what to look for when evaluating payroll service providers.

HCM integration capability

Based on recent research by Immedis and the Global Payroll Association, it’s clear that improvement in the area of HCM integration capability is necessary. Although two-thirds of respondents have a cloud-based Human Capital Management (HCM) system deployed in their organization, less than 15% report seamless integration between their payroll provider and HCM application.

There are clear drawbacks that come with a lack of integration. Among other challenges, it means additional work to ensure that data accuracy in both payroll and HR systems. Worryingly, it also opens the possibility of error and data breaches during the necessary manual interventions.

There are various reasons for this lack of HCM integration from the technology stack in place, how dated systems are, and historical internal practices – all of which need to be reviewed. As part of evaluations, it’s important to look at the integration capability and certifications of payroll service providers in place and under evaluation.

Depending on your needs, this may mean integration with a Tier-1 or Tier-2 HCM solution. If the right questions are asked and you know what to look for, you can achieve seamless HCM integration.

With that in mind, let’s look at key technical aspects that you’ll need.

Achieving seamless HCM integration is possible with the right payroll provider
Seamless HCM integration is possible if you choose the right payroll provider

A technical understanding

A key component you’ll hear about a lot in relation to integration are APIs, or application programming interfaces. Put simply, they enable systems to send information back and forth and lay down the rules for what data can be accessed and moved between platforms while ensuring it is completed securely.

It’s important that you know the system you are integrating from, the system you are integrating to, and the information points that need to sync. As you progress in the evaluation process, we recommend having an internal technical resource who can advise with the initial assessment and provide ongoing project support.

Please note, not all APIs are created equally. The quality of provider APIs is reflected in their ability to gain Tier-1 certification and will impact whether or not integration with a Tier-2 solution is possible.

The Role APIs Play in Securing the Safety and Success of your Payroll and HCM Integration
APIs play a key role in securing the safety and success of your payroll and HCM integration

Tier-1 HCMs and payroll service providers certification

The majority of players in the Tier-1 HCM space have some level of certification program for various partnerships, including global payroll service partners, in place.

What does this mean?

To gain certification, providers need to meet rigorous criteria and go through an extensive process, working closely with the HCM provider, to ensure that the capability to connect and transfer data between the two systems is achieved and done so in a scalable way.

If you have a Tier-1 HCM in place, it’s vital that you ask whether or not the payroll provider is certified, on the road to certification, and understand where this sits on their roadmap to address if not currently in progress. If you’re told that there isn’t a certification process with any of these larger Tier-1 HCM’s and a non-scalable, customized build is needed to connect the systems, it’s probably time to do some further research.

The majority of larger HCM organizations have dedicated web pages or portals in place where you can search for existing certified global payroll partners. This means that you can actively look at payroll providers who can meet your integration needs. We also suggest working with your HCM provider to recommend different payroll providers.

Certification is critical when choosing a payroll provider for your HCM integration
Certification is a crucial component to consider when deciding on a vendor

Tier-2 HCM applications

With Tier-2 HCM applications, it may not always be possible to evaluate payroll providers based on certifications. This is where a review of the payroll provider’s API framework should be undertaken.

But again, by speaking to your HCM vendor, they should offer insights into what payroll services they might already have integrations with. You may also find that payroll providers are actively building specific integrations for a number Tier-2 providers that they see frequently, so it’s always worth asking the question if an ‘off-the-shelf’ HCM integration capability exists.

Assessing API capabilities for HCM integration

Typically, you’ll need to look at a provider’s API framework to determine the future quality of the integration. This API framework will provide the basis for these Tier-2 HCM, and other third-party applications, to link into the payroll solution selected to send and receive transactional or core data sets.

Consider the following:

The set of APIs that are made available to satisfy common real-time integration requirements. This is where you’ll need to understand what core HR information is currently stored in your HCM that is required for payroll. This might include data such as core employees information (Name, address, etc.), salary amount, bank details, joiners/leavers…to name a few.

Once you see what’s available versus the payroll data you need integrated, then you can begin conversations surrounding any gaps that need to be addressed.

How the relevant API layer will be accessed to ensure a secure connection.

You’ll also need to look at the way payroll and HR data will be transferred and discuss with payroll service providers to ensure they can meet your business needs. This will include looking at the volume of information being transferred, the frequency of synchronization, and the nature of any data changes between payrolls.

As mentioned, it’s worth having an internal technical resource who can bring a deeper level of understanding to the overall process and project.

Why the Key to a Modern Global Payroll Platform is HCM Integration
Some of the benefits of HCM integration include a reduction in manual effort and data and reporting accuracy

Main areas to check out

The advantages of a HCM and payroll integration which include the phenomenal level of automation it can introduce and the dramatic reduction in manual effort are evident. However, to realize these benefits, the quality and capability of a HCM integration are critical.

Organizations must:

  1. Develop a base-level technical understanding, particularly around knowing what HR systems need to connect and the data points that are a necessity for processing payroll.
  2. Ask about certifications if you have a Tier-1 HCM in place and utilize HCM resources to find a list of certified payroll service providers. In the case of both Tier-1 and Tier-2 HCM’s, ask for recommendations on payroll providers to include in your evaluation process.
  3. Bring in technical support personnel early in the evaluation process so they can probe a little deeper into certain areas and offer their guidance, advice, and support on different payroll services.

To learn more about our HCM integration capabilities click here.

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