Author: Sara M. Wincek

Summary

  • Employers commonly outsource some or all payroll functions to a third party payroll company in order to be relieved of the responsibility of withholding income and employment taxes from employees' pay, and of reporting and remitting amounts withheld to federal, state, and local authorities, among other payroll tasks. There are many third party payroll companies to choose from that offer various types of services that meet employers' specific needs. Payroll/HR managers should carefully consider the advantages and disadvantages of outsourcing before deciding to do it. See Outsourcing Payroll.
  • For employers that prefer to keep the payroll function in-house, the two main methods available include a manual system using simple calculators and timesheets, and automated payroll software developed by an outside company. Before deciding on an automated system, employers should explore not only the available software options, but also the many considerations and decisions that will be involved in choosing and implementing the right system for the organization. See In-House Automated Payroll Systems.
  • Automated payroll systems (APS) use computer software to compute payroll in-house and perform several other essential payroll functions. There are many considerations as well as advantages and disadvantages to be aware of when choosing an APS. See How to Choose an Automated Payroll System.
  • Before implementing an APS, payroll/HR managers should take specific steps: prepare and plan by establishing an implementation timeline, train staff, perform a gap analysis, convert data, test the system, and evaluate system performance. See How to Implement an APS.
  • APS can make it easier for staff to have access to confidential payroll and employer financial information. At a public employer, the Sarbanes-Oxley Act of 2002 (SOX) should be complied with when establishing system controls.

    See
    Employee Management > Training and Development;
    Employee Management > Employee Discipline;
    Labor Relations > Employer Liability;
    APS Controls for Publicly Held Employers.
  • If changing over to an APS, standard payroll policies should be retained but with some changes. Like payroll procedures, the main purpose of APS procedures is to ensure that the payroll process runs efficiently, securely, and accurately. See APS Policies and Procedures.
  • While using an APS relieves many security concerns, it also creates new ones. Payroll/HR managers should establish certain access controls and guidelines for the system, as well as certain internal controls. See APS Security.
  • Because most companies that provide APSs have large backup systems, including off-site backup systems, employees will continue to be paidwithout interruption even if a fire, hurricane, or earthquake should occur. See APS Disaster Response.
  • Automated time and attendance systems (ATAS) efficiently record and manage employee attendance and keep track of hours worked for payroll purposes. The right system can ensure that the payroll department remains compliant with the Fair Labor Standards Act. See Employee Compensation > Employee Classification. When choosing an ATAS, payroll/HR managers should know what factors to consider, as well as the advantages and disadvantages of the various system options. See Automated Time and Attendance Solutions .
  • An employer can pay for optional features to be added on to its APS that will make it easier to do payroll and HR updates. These features generally include employee self-service (ESS), manager self-service (MSS), HR information systems (HRIS), and HR management systems (or solutions) (HRMS). See Optional APS Services.