Payroll is one of the key areas of business operation that stands to benefit most as companies increasingly move to the cloud.
Gartner expects cloud solution expenditure to reach $679 billion this year. That said, the cloud will no longer be considered as a disruptor, with an overwhelming majority of organizations already using it. It will “evolve from being an innovation facilitator to a business disruptor and, ultimately, a business necessity.”
However, even with growing levels of utilization, Gartner suggests that only a few organizations are taking full advantage of the technology. There is still much room for exploration, including utilizing new developments such as in artificial intelligence, which can enable businesses to unlock value at scale.
While most organizations are already using some form of cloud service, there is still some room for increased cloud utilization in critical business functions. According to one recent report, for instance, only 50 percent of small businesses use cloud-based software to manage HR functions, with at least 59 percent using spreadsheet-based solutions or even paper documents. Payroll and employee benefits are one area for improvement, wherein businesses can benefit from increased efficiency and reduced potential for human error.
Given that payroll involves financial and compliance aspects of an organization, businesses can gain from investing in digital solutions for managing this aspect of operations. Here’s a look at four of the most compelling reasons why it makes sense to move to cloud-based payroll software in order to unlock greater efficiency and security.
Automatic updates
Cloud-based payroll solutions come with the advantage of being maintained by the provider. As far as reputable cloud payroll apps are concerned, maintenance is usually in line with the latest payroll regulations, formulas, and other crucial factors. Cloud solution providers update their systems regularly without end users having to undertake counterpart updating. There are no manual updates required for HR managers and end users.
Additionally, automatic updates are crucial to proper payroll management. If there are bugs or security vulnerabilities discovered, the fixes are implemented with users usually unaware of the updates. There may be maintenance downtimes during updates, but these are typically planned and announced, and they should have minimal impact on users.
This automatic updating advantage of cloud-based solutions is often overlooked because everything happens behind the scenes. Also, not many see the other benefits, particularly in terms of regulatory compliance. Payroll laws and deduction formulas tend to change often, so it is highly favorable when all changes are automatically reflected on the system without having to do anything.
Cross-platform integration
Cloud-based software is usually designed to work with cross-platform integrations. This provides the advantage of dealing with crucial payroll functions more easily. For example, cloud payroll solutions can quickly pull employee details from timesheet tools and HR information systems (HRIS). They can also connect to fintech apps or web services to seamlessly connect pay amount calculations with the actual salary payments.
Cross-platform integration is a massive boon for payroll accuracy and efficiency. With different software solutions integrated together, data flows through different tools frictionlessly, which results in faster processing and the rapid generation of reports. This also ensures that all the latest relevant information such as new hires and terminations is reflected across different tools virtually in real time.
Moreover, the ability of cloud payroll solutions to integrate with different platforms allows organizations to retain their existing tools. There is no need to get a new HRIS or time and attendance system to have something that is compatible with the payroll system. Conversely, organizations do not have to go through the challenges of looking for a payroll system that is compatible with their existing business software, since cloud-based software is usually built to easily integrate with a long list of other software tools.
Security and compliance
Legitimate cloud-based payroll solutions are built in compliance with existing cybersecurity and data privacy regulations. They do not create systems for data handling and processing solely based on intuitiveness and efficiency. They also take cybersecurity into account as well as the protection of private data. Far-reaching regulations such as the General Data Protection Regulation (GDPR) impact software development, as they require software to abide by sets of cybersecurity and privacy rules before they can be made available to prospective users.
In particular, there are regulations on the handling of sensitive personal identifiable information (PII). Cloud-based systems make it easier to comply with PII regulatory requirements because data storage and management are centralized (on the cloud) as opposed to having data that reside on local machines. It is considerably more difficult to secure data when they are spread across a multitude of devices in different locations.
Payroll solutions usually employ a host of security technologies including encryption, role-based access controls, data isolation, and regular security audits. They also have strict security patching and software update management regimes to make sure that newly discovered or emerging threats are kept under control.
In contrast to locally installed payroll solutions, cloud payroll systems are proficiently maintained and secured by their respective providers. Users usually do not have to do anything to secure their cloud-based payroll system other than to make sure only those with authority get to access the system, preferably with the principle of zero-trust enforced.
Streamlined collaboration
Some organizations suffer from payroll and HR siloing, which happens when the information and tools used in overall HR activities and payroll are not integrated.
This disparity can be remedied without using a cloud solution, simply by employing readily integrated software tools (that usually come from the same vendor). However, this is an option not many organizations would want to take. It entails the replacement of the tools they are currently using, which means more costs and the need to familiarize with a new system.
Most HR teams prefer to rely on a cloud-based system capable of cross-platform integrations so teams from different departments can work seamlessly together without unnecessary additional spending and new software training. What’s more, cloud-based apps are often made for collaboration by avoiding data set versioning confusion, as the latest set is what all users always see, while payroll workflows are built for each relevant team member to handle their aspects of the process in due course.
In summary
There is a case to be made in embracing cloud-based payroll management. As mentioned, the cloud is not a fad; it will eventually become a need for nearly all businesses. Cloud-based solutions provide a number of advantages, especially in terms of security and efficiency. This is not to say that all web apps are reliable, though. It is still crucial to be mindful of the quality and reputability of the solutions being considered to reap the benefits of automatic updating, cross-platform integration, security and compliance, and streamlined collaboration.