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    The Ultimate Guide to HRMS Payroll

    October 10, 2023

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    HRMS payroll is a digital tool that is part of a human resource management system (HRMS). It automatically calculates and pays the different components of an employee's salary. It also synchronizes employee data, so that payroll and other HR tasks like taxes and compliance can be done together efficiently. This article gives you a comprehensive overview of HRMS payroll. It outlines the key features and benefits that make HRMS payroll the perfect solution for your organization.

    HRMS payroll is defined as a digital payroll solution embedded in a human resource management system (HRMS), which can fetch employee records to calculate and disburse the various components of payroll automatically and synchronize employee data so that payroll and other HR processes like taxation and compliance can work in tandem.

    An HRMS can effectively manage payroll for every staff member. Payroll management extends beyond just paying the salary, and encompasses a broad range of activities that have to be included in employee compensation administration.

    Critical HR tasks like salary payments, deductions for taxes, and leave cash-outs, can be carried out efficiently with the assistance of an HR management system. An HRMS optimizes these processes, minimizing the possibility of human error and misconduct during data collection. And, the HRMS can be used to consolidate the payroll administration of your entire workforce – spread across multiple locations and regions in India.

    Any payroll data discrepancy might be heavily detrimental to an organization. Therefore, streamlined and efficient payroll management is of the utmost importance. Using an HRMS is the smartest way to achieve this.

    Learn More: 10 Key Features that make a Payroll Management System Perfect

    Benefits of Using HRMS Payroll

    HRMS payroll systems offer several advantages for a company, no matter the size of the business and across industries. By using HRMS payroll, you can:

    1. Streamline payroll processes

    A sophisticated HRMS can quickly calculate compensation, deductions from it, and tax liabilities, simplifying the entire process. In addition, HRMS payroll software features direct deposit, generating pay slips, and the handling of statutory filings. This results in more connected workflows that leave an audit trail and reduce effort duplication.

    2. Unlock time and cost savings

    Score.org reports that organizations devote over 80 hours annually to payroll processing. This could influence your bottom line as the time isn't spent on other, more pressing enterprise activities that support your larger goals. Payroll automation with HRMS allows your HR teams to spend less time on this task, so they can focus on what's more urgent and mission-critical. It can also offer year-end reports that help you examine your business's time and expense savings in a broader context.

    3. Increase accuracy and efficiency

    According to Score.org, payroll processing issues affect 82 million employees in the United States alone; for a country with India's population, this could lead to an avalanche of payroll errors. And payroll concerns can create problems with morale and employee engagement. An HRMS payroll system will significantly minimize the risk of human error, like inaccurate data entry and unintentional deletion of calculations, thereby reassuring employees that their salaries will be exact and error-free.

    4. Maintain compliance with tax and labor laws

    Another important advantage of an HRMS is that it will help you adhere to labor regulations and laws. Payroll and tax laws can be confusing and are constantly evolving, making it hard for businesses to stay updated.

    For instance, the Indian Parliament has passed four new labor laws that will be implemented in 2023. This includes modifications to take-home pay, an increased contribution to the Employees' Provident Fund (EPF) account, a computation of the number of paid vacations available in a calendar year, and the maximum number of weekly working hours.

    HRMS payroll software can help automate compliance workflows, guaranteeing your business remains compliant with current legal requirements. This may involve the automatic generation and submission of tax forms, keeping track of worker hours and overtime, and complying with minimum wage laws.

    5. Enhance data security

    A manual payroll system leaves the organization vulnerable to security breaches. This is valid for both small and large businesses. Using tools such as conditional system access or password protection, HRMS payroll software safeguards employee payroll data.

    Learn More: 50 Key HRMS Features That You Should Know Of

    Features of an Effective HRMS Payroll System

    It should be noted that not all HRMS platforms will deliver these five benefits. Organizations need to select a robust HRMS payroll system, which has the following features, in order to be truly effective:

    1. Employee self-service portals

    Self-service employee portals offer two primary benefits. It allows employees to make certain adjustments to their profile (such as modifying their bank account number) independently. Moreover, it gives individuals immediate access to their leave balances, pay slips, and tax deduction paperwork, thereby reducing HR's workload.

    2. Automated payroll calculations

    A single error in the positioning of a decimal point or a '0' can lead to significant financial loss for the organization. By seamlessly administering all payroll details, the HR and the accounting team can avoid these errors and save time. Staff data is synchronized across attendance and regulatory systems. As a result, the HRMS payroll software will eliminate any chance of miscalculation and the placement of vital data in the wrong file.

    3. Tax management and reporting

    The most effective HRMS payroll systems will incorporate tax schedules which are automatically updated whenever tax rates change. Tax calculation has traditionally been time-consuming and prone to error. To avoid oversight or issues with state, federal, and other payroll tax regulations, transfer this complex job to HRMS payroll software. The most trustworthy systems offer tax filing capabilities and automated tax reports.

    4. Integration with time and attendance systems

    If your workforce operates on an hourly basis, you'll need to select an HRMS software solution that features a time-tracking functionality – or one that connects with your time-tracking application. This removes the necessity for manual data entry, boosting both efficiency and precision. Even if you do not employ hourly workers, choose an HRMS payroll system that synchronizes with attendance and leave portals to automatically account for absences and paid leaves.

    5. Customizable reporting and analytics

    It is crucial to be able to generate payroll reports and to customize the data according to organizational requirements. The HRMS software must include pre-configured reports, which can be quickly readjusted/edited for easy insights. However, every business is unique; so ensure that the software can produce reports that align with your company's goals and targets. Dashboards can be a useful feature in HRMS payroll, since you can conduct data exploration and generate custom analytics more easily.

    Learn More: 10 Key Features that make a Payroll Management System Perfect

    Factors to Consider When Choosing an HRMS Payroll System

    An effective HRMS payroll system will have the five features we just discussed. In addition, you also need to check for its adoption readiness before you can select the best HRMS payroll solution for your organization. These are the five factors to consider:

    1. Scalability and flexibility

    Scalability is an essential factor to consider when selecting HRMS payroll software. Even small enterprises should plan and prepare for a time when their workforce will expand. Business expansion represents one of the primary goals of any organization. So, it makes sense to have systems that can scale with the business.

    2. Integration with existing HR systems

    Rarely will the system you use possess everything you require. You will therefore prioritize discovering an HRMS payroll software that is compatible with other applications. Integrations spare you the energy, effort, and trouble of adjusting other systems to make them compatible with the payroll platform. Some systems can be connected with time-tracking software, letting you monitor employee hours without specifically inputting the data. This not only reduces your workload, but also enhances payment efficiency. It may also be able to integrate with HR analytics to provide business intelligence on payroll.

    3. User-friendliness and ease of implementation

    User experience is the aggregate impact a system makes on its users. This includes, among other things, navigation, task completion stages, formatting, and design. User-friendliness might be a deciding factor for your HR department and accounting team. When organizations have complex and difficult-to-use systems, they end up with a proverbial "white elephant", that's ultimately of little use or efficacy. It will only incur implementation costs, without giving your non-technical users the value they expect from HRMS payroll systems.

    4. Data security and privacy measures

    Before choosing a particular software, organizations must look for the security levels provided by the vendor. Low-security software – i.e., software with no data encryption, secured cloud hosting, or role-based access – must be promptly removed from the shortlist. After all, payroll information is highly valuable and must be protected to the utmost standards.

    5. Vendor reputation and customer support

    Every business runs on an efficient payroll system, and any glitch or error will have serious repercussions. These issues place the company and its employees in a problematic position. Customer service must be readily accessible to fix issues in as little time as possible, whenever they arise. A reputed HRMS vendor with a strong presence in your country may be better positioned to support your payroll transformation than other, less-reputed competitors.

    Learn More: HRMS - Transforming The Office Environment

    Case Studies of Successful HRMS Payroll Implementation

    Payroll simplification is of utmost importance in a company’s growth trajectory. Well-known organizations such as Delhivery in India and Universal Robina Corporation (URC) in the Philippines are harnessing the power of HRMS payroll to fuel growth.

    Originally, Delhivery had three different systems to manage payroll and other aspects of HR for its thousands of employees across India. The company wanted to digitize payroll clearances, exit clearances, and remote approvals for 1200+ locations. Delhivery decided to streamline payroll by implementing the Darwinbox HR system, which successfully reduced 30% of HR team efforts.

    Through HRMS payroll implementation, the company was also able to reduce its full and final (FnF) settlement time from 62 days to only 13.5 days. Since the implementation, payroll is processed in just 1 day for all 23,000+ employees. The company’s blue-collar workforce can also enjoy OTP-based self-service from a mobile app, used by 3000+ employees in just the first month after HRMS payroll implementation.

    URC is another company that demonstrates the power of HRMS payroll implementation. It transformed its processes in accordance with four pillars of its compensation strategy: annual merit increase (AMI), short-term incentive plan (STIP), sales incentives, and annual employee movement plan (off-cycle adjustments). However, URC was relying on very large Excel files to run these operations, which caused delays, fragmentation, and a lack of intelligence insights.

    Darwinbox led an HRMS payroll implementation which was completed in just 20 weeks. The company was able to digitize and consolidate its compensation processes. The implementation also paved the way for better interconnectivity between talent management and total rewards teams, so that the entire payroll lifecycle can operate in sync.

    Learn More: 6 HRMS Features - To Reduce Attrition at Workplace

    Best Practices for Implementing and Managing HRMS Payroll

    Once you have selected the best HRMS payroll system for your organization and know the benefits to expect, it is time to commence implementation. At this point, it is necessary to remember five best practices:

    1. Clearly define payroll processes and policies

    The various stages or sub-processes and guidelines are the building blocks of any successful system, particularly one that is as complex as payroll. Establishing just one single point of truth for all your payroll processes will ensure that every member of the department functions with the exact same standards in mind.

    Your payroll policies must involve payroll components, timetables, deductions, and perks, among other elements. Your payroll practices should include data input, recordkeeping, computation, pre-payroll arrangements, and post-payroll documentation.

    2. Train HR and payroll staff on system usage and best practices

    Proper training will help everyone adapt to the new system, understand its advantages, and capitalize on the efficiencies it offers. Try vendor-led coaching for your payroll and HR teams, along with your managers, for a successful training program. You can further educate every employee on important functions, like examining their leave balances and going over their pay slips.

    Create management-facing summaries to optimize the use of HRMS payroll data. Ensure that all new protocols and terms are documented so that employees can complete tasks without requiring constant assistance.

    3. Conduct regular audits to ensure compliance

    At least once a year, every business must inspect its payroll processes. Even automated systems are susceptible to error. If all of these are not detected in a timely manner, they could have long-term impacts. You might overpay a worker due to a mathematical error, misclassify a new employee's tax status, or forget to elevate the pay rate of a planned raise recipient.

    Verify the functioning of all documents and processes by carrying out a thorough audit. If you're using add-ons or modules that connect HRMS payroll with other applications, confirm that all interfaces are effectively transferring data.

    4. Stay updated with tax and labor laws

    Frequently, tax schedules and labor laws change from year to year. It is vital that you have a current understanding of these regulations. The latest tax statistics can be downloaded from the Indian Government's website. Make sure that your HRMS payroll updates itself every year to maintain compliance with the newest standards.

    Pay close attention to any revisions to the regulations governing income tax withholding, tax deducted at source (TDS), benefits calculation, tax deductions, and mandatory leaves.

    5. Regularly review and update payroll data for accuracy

    The assessment of payroll data must go on even after the launch of the new system. Payroll departments regularly discover discrepancies at the close of the tax year. This can occur even after an effective HRMS payroll implementation, particularly if a company is expanding or undergoing a merger. Regular data evaluations – at least once every quarter – ensure that inconsistencies are addressed all through the year.

    Learn More: Implementation Is As Critical As Choosing The Right HRMS


    Implementing an HRMS payroll system can bring a lot of benefits to your organization. It helps streamline payroll processes, saves time and money, improves accuracy and efficiency, ensures compliance with tax and labor laws, and enhances security.

    With features like automated calculations, integration with time and attendance systems, and customizable reporting, today’s HRMS payroll systems are designed to meet your specific needs.

    When choosing HRMS payroll, consider factors like scalability, integration capabilities, user-friendliness, data security, and vendor reputation. Embracing HRMS payroll technology empowers you to manage your payroll more effectively and sets the stage for a successful future for your business.

    To witness the power of HRMS payroll for yourself, ask for a Darwinbox demo.

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