The most exhausting week of any HR department is the payroll week. The whole team is on pins and needles, the team works past their designated work hours, and a lot of commotion goes on. If you feel exhausted and need help every time you wrap up payroll, you’re shouldering more responsibility than you need to handle, and it’s time to upgrade your payroll stack. Whether you’re new to a payroll system or want to move to a better option, this blog is for you.
We’ll touch upon the basics of a payroll management system and dive deep into how you can choose the right payroll system for you.
What is a Payroll System?
A payroll management system describes software or a process that manages employee compensation, including salary calculations, tax deductions from gross pay, benefits, and direct deposits. It ensures that employee payroll is calculated accurately including compulsory deductions while complying with labor laws, tax laws, and tax regulations.
A good payroll management system can help companies by streamlining a lot of work, periodically (more on this later) Here are features of a payroll that'll serve you well in the long run:
Ensures there are no unnecessary steps in capturing information
Streamlines the chain of command for payroll approval
Have all statutory calculations and submissions built in for a smooth experience
Automatically syncs with the HRMS
Catches errors before processing and flags them
Maintain perfect accounts after the pay run to reconcile payroll, post and pay tax deposits, quarterly and half-yearly reconciliation duties
Why CHROs Must Prioritize a Robust Payroll System?
Not many would care if a team bonding event your team organizes doesn’t land the way it’s supposed to. Few things affect employees the hardest like an error in their paycheck. It’s a non-negotiable, and volatile. The flip side is no one talks about it if the payroll runs perfectly, but even if a slight bump shows up, it’s a catastrophe.
That’s why you need a person-agnostic system so that even if you set up a new department with new employees and a trusted payroll management system, it should run flawlessly.
Given how complex the payroll of a single geography is if you’re entering a new and complex geography like the Philippines, standardised systems allow us to steer clear of penalties, earn goodwill as a good paymaster, and have all payroll records straight.
Culturally, and geographically the Philippines is unique. You have a whole different bunch of statutory compliance requirements – social security system, Philhealth (national insurance program), PAG IBIG fund (housing fund), and income taxes, to name a few. Unlike most other countries in the world, Filipinos have a 13th-month pay – equivalent to an employee’s 1/12th of base yearly income to help in Christmas celebrations.
They are also entitled to an employee compensation program that offers relief to workers who contract work-related illnesses to all employees uniformly, regardless of the sector. These nuances keep adding to the already exhausting task of managing a diverse workforce in a foreign nation.
As people leaders, you’re also entirely responsible for being on top of all dues, contributions, and payroll taxes being paid regularly. If there’s any default, the penalties are huge and eat away at the HR budget.
One other aspect of payroll people leaders are exasperated by is the never-ending approval chain.
Approvals after entering new joiner info, deducting loans and advances, calculating shift allowances, calculating payroll taxes, going back and forth with managers for attendance approvals… and the list is endless. After multiple iterations when the file is finally sent to your finance team, they return it with a list of corrections.
This is one of the things that keeps your payroll team awake at night and one that can be effectively addressed with a robust payroll system. Accurately automate this process with payroll software that appeals to your needs the most.
Key Features of an Effective Payroll System
Getting people technically and efficiently paid is the fundamental goal of a payroll system.
| Special instance |
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| A startup had standalone, non-integrated tools (the tools didn’t integrate with each other) for every part of their HR function, and had to carry on with repetitive employee data inputting, therefore had to juggle a lot of data manually. A new joiner who joined towards the end of the month wasn’t entered, and the salary for the days they worked in that month wasn’t accounted for in the payroll management system in the subsequent payout, because it wasn’t integrated with the HRMS. |
| The new joiner had to wait a whole month for their joining month salary. Guess what impression they had of the company? Not good, probably. A well-integrated payroll system with a real-time sync, or periodic sync with the HRMS would have blown the issue out of the water. |
Automated Salary Computation & Tax Deduction
In the Philippines, tax rules can be tricky, there’s so much to consider, like salary brackets, exemptions, and those mandatory contributions to SSS, PhilHealth, and Pag-IBIG. Keeping up with all that by hand? It’s a nightmare.
With an automated payroll management system, it’s all done for you. The system takes care of the salary calculations, making sure accurate record keeping, no more room for human error. It even handles all those tax deductions automatically based on what’s required, so you can trust that everything is right every single time.
Automated systems keep track of any changes in tax rates or contribution rules, so you’re always in the clear. You won’t have to stress about keeping up with every little update from the government.
Compliance Tracking
All statutory requirements for the Phillippines need to be calculated based on employees’ contributions and pay grades and must be accurately deducted from their salaries and sent to the correct agencies, to avoid ending up paying hefty fines and interest charges. The right payroll management system tracks these requirements ruthlessly and flags any anomalies right away. It’s like having a reliable friend to watch your back while fulfilling record-keeping requirements.
When you work with any geography, you’ll need to store payroll records of transactions, payroll taxes, payments, and accounts for at least 3 years, which includes details of pay frequencies, dates of employment of your workforce, overtime pay, deductions, and net employee salaries. If you operate out of the Phillippines and have a remote workforce, they need to be given special provisions to protect remote workers’ rights and welfare, ensuring fair treatment and minimum labor standards.
Your payroll service provider needs to be versatile, strong, and reliable to keep a tab on all these and more all the time.
Seamless Integrations
A payroll system that doesn’t integrate with most other tools isn’t a good choice to begin with. Integrating with popularly used accounting software, HRMS, time tracking software, benefits administration tools, banks, expense tracking and management tools, and third-party providers is downright essential for a payroll management system. Since payroll needs excellent sync and minimal downtime, your payroll system should come with a reliable integration ecosystem and minimal usage of middleware.
If it does require middleware, take time to study how it works, and how often it pushes data to payroll, to ensure you’re in the clear. Time is of the essence, especially for your payroll team, and if, in your research phase you find out certain tools take long to sync data, or have glitches in integration, steer clear of them to keep your payroll doubly safe.
Customizable Pay Structures
We already had salaried employees, part-time workers, hourly workers, blue-collar workers, employees of vendors deployed at the company location, and such types of workforces in vogue. We also have freelancers and fractional consultants join the mix and have long-term relationships with companies.
Cutting a check every month for different pay structures is going to be a tedious task for your payroll team who is already burning the midnight oil. Ensure your payroll management system has the option to come up with multiple, different payroll structures, which can be sent to the bank along with regular pay structures, so no payment gets missed. This is one of the biggest benefits of choosing payroll, streamlining and automatically carrying on automated payments.
Employee Self-Service Portals
First off, employee self-service portals make things a lot more efficient. Instead of employees having to contact your team every time they need to check pay statements for employees or update their bank details, they can just log in and take care of it themselves. This takes a huge load off your team, allowing them to focus on more strategic work rather than answering routine queries.
Another great thing about self-service for employees is that they help reduce mistakes. Handling it all by yourself independently without payroll management company's support could be dangerous. Employees can directly update their personal information like addresses, income tax exemptions, or banking details, which means fewer errors when it comes to processing payroll. Your team no longer has to worry about inputting wrong data, and employees are paid accurately and on time, every time.
There’s also the cost-saving aspect. By automating things like time-off requests or payslip downloads, your team doesn’t have to spend time doing these tasks manually. This frees up time for them to work on more valuable things, cutting down on operational costs for the company.
Choosing Payroll Management Software For Your Organization
| Special instance |
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| In an IT product company, there was a big disconnect between the HR and payroll team, the payroll vendor (outsourced), and the management, with no solid payroll management system. Everything was on emails, and with a high turnover happening in the HR department, a lot of details were falling through the cracks. |
| Things were getting by until the management decided to withhold the last month's pay for an employee who was relieved of duty. With people constantly moving in and out of the HR team, his F&F was left in the lurch. His follow-up emails went unanswered, and after waiting several days, he wrote an email directly to the CEO, and the C-suite members and escalated the issue multifold. |
| If there was an effective payroll management system, and it was integrated directly with the offboarding module of their HRMS, none of it would have happened, therefore meaning fewer errors. |
Cloud-based vs. On-Premise Solutions
One of the biggest decisions you’ll face is whether to go with a cloud-based solution or stick with an on-premise system. Some companies still prefer on-premise solutions because they offer more control and data security. For businesses that deal with sensitive or proprietary information, having everything stored on their own servers gives them the peace of mind that they’re in charge of their data’s safety.
There’s no need to worry about third-party providers potentially mishandling their information or dealing with any data breaches that could happen through cloud services.
Companies with a dedicated IT team might also feel more comfortable with on-premise solutions because they have the resources to maintain and manage the system themselves. They might prefer to have the infrastructure in-house, where they can directly control updates, security measures, and troubleshooting.
Cloud-based systems are like using an app on your phone, everything is stored online, and you can access it from anywhere, anytime. This is great if you have employees working remotely or across different locations. You don’t need to worry about servers or IT maintenance because the service provider handles all of that. It’s easy to scale up as your business grows, and you just pay a subscription fee. Plus, cloud systems are usually updated automatically, so you always have the latest features without lifting a finger.
But, here’s the million-dollar question – Is your payroll data truly safe on the cloud? Cloud-based payroll management systems are generally safe, but like anything online, it depends on how the provider handles security.
Most reputable cloud payroll management software are equipped with strong security measures to protect your data, including encryption (both for data in transit and at rest), multi-factor authentication (MFA), and regular security audits.
These measures help ensure that you deliver smoother payroll and have only authorized people can access sensitive payroll information, like employees' salaries, income tax details, and bank accounts. Look for providers with a good track record, certifications (like ISO 27001), and transparency in how they protect and handle your data.
Scalability & Integration
If you’re a startup or a mid-market company, scaling up is always on your mind and a big priority of your leadership. If you’re an enterprise setting up your unit in a new region and planning to grow exponentially, your payroll management software needs to be able to do the following while scaling up:
Deal with a mass influx of new joiners and exits of varying capacities and pay grades
Not stall when processing a vast amount of data
Multi-currency and multi-tax compliance (if you’re sure to bring in international experts to sit at your leadership table)
Secure storage of your employee personal details, payroll data, income tax filings, and benefits
Allow for flexible deductions from the gross pay based on (likely to change) company-specific policies and government regulations
Bring in role-based access to help regulate the growing payroll team while maintaining data sanctity
Create alerts and notifications to monitor any irregularities in processing payroll
Has built-in redundancy, regular system updates, and real-time monitoring to minimize downtime (a greater chance that the system might experience downtime, impacting processes involved in payroll during critical pay periods)
Now that we’ve sorted out this side of the equation, let’s move on to the integration part. We already discussed some of it in the previous section.
| Special instance |
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| The HR team of a startup used an app to track attendance; an app that didn’t send out any notifications to those who didn’t fill up their check-in and check-out days, or those who needed regularization. Since this couldn’t be set up, HR had to manually follow up every manager to regularize or approve each team member’s attendance for the whole pay period. |
| Things were getting by until the management decided to withhold the last month's pay for an employee who was relieved of duty. With people constantly moving in and out of the HR team, his F&F was left in the lurch. His follow-up emails went unanswered, and after waiting several days, he wrote an email directly to the CEO, and the C-suite members and escalated the issue multifold.The master file wasn’t approved without every single manager’s go-ahead, so every pay run was chaotic. If only they had automatic notifications triggered from the tool and approved attendance data automatically synced to payroll! |
This is a classic case of tools not talking to each other.
Make a list of tools that you need to talk to the payroll management software, and check if the options you’re exploring can be integrated with the tool. Don’t rely solely on what’s available on the internet or ask an AI tool. Look up review sites, or better, talk to the product team to know if the tool will exactly agree with yours. If your integration needs API to function well, check if there are limits on the requests per minute for API calls, and see if it works for you.
Ease of Use & Accessibility
Your best bet at a payroll management software should be intuitive, and not have you scrambling for buttons at a crucial time. Similarly, there must be a wealth of resources for you to dig into for help, in case of issues, without waiting for the customer success team to answer your ticket. Any delay in answering can have a cascading effect on your payroll. You never know what may go wrong during payroll processing, so it’s better to have the A-team by your side.
The system should allow easy access to payroll data for both administrators and employees, offering mobile-friendly options for on-the-go access. Features like automated updates, clear workflows, and intuitive dashboards enhance the overall experience, making it simple for users to input data, run payroll, and generate reports.
Data Migration Process
This is one of the most important aspects of choosing a payroll management system. The entire bulk of data you’ve worked with and stored diligently for years needs to be carried forward meticulously without an iota of ambiguity. The data between the two systems needs to be migrated so as to avoid any sort of duplication, omission, or deletion by mistake. This is often overlooked when exploring payroll management software but can make or break your transition.
Check if your employee payroll management system provider has a three-step process in place for migration:
Do they support data cleanup before the migration?
Do they have systems or templates in place for you to fill in and transfer data?
Do they have any hygiene checks in place when the data enters the new system?
How long does data migration take?
Can you run parallel payrolls (old and new systems) before fully switching over?
What security measures do they have in place to protect sensitive payroll data during migration?
Will historical payroll data be fully migrated, or will it be stored separately?
How do they ensure fewer errors in payroll migration?
Test Environment and Process
Since the payroll management process involves multiple stakeholders – from HR, to finance, to managers, and employees, you need representatives of all these stakeholders to test your employee payroll software before you implement it throughout your organization. These tests need to have multiple rounds of feedback and iteration (configuration, first-level user acceptance testing, feedback round, change incorporation, second round of testing, and final feedback/go-ahead).
These multiple levels of tests need to be in place for every feature there is, and all possible use cases for every feature need to be checked.
Ensure you ask and clarify the following questions to your provider before finalizing them:
How closely does the test environment replicate the live system?
Can you conduct test runs with real or dummy data?
How long will you have access to the test environment?
Can you run parallel payrolls in the test environment to compare results with your current system?
How quickly do they address and resolve issues identified in testing?
How many rounds of testing are included before the final rollout?
Can they provide training or guidance for our team to conduct effective UAT?
Are They a Good Tech Partner to Have?
Working with any tech partner is a long-term association and for a tool like a payroll software, you need a reliable partner who’s readily available, can work with you at your pace, understands the gravity of your issues, and have support you can rely on.
This partnership goes beyond contracts and fine print, it speaks to the level of commitment they have in your business. Go over their case studies and talk to reps of the companies they work with.
Check the following in particular:
What are their TATs for small requests, and big product walkarounds you need?
Will you get an exclusive account manager for your company if you subscribe to their tool?
What is their average response and resolution time for support tickets?
What training and onboarding support do they provide for your HR and payroll teams?
What is their client retention rate, and why do customers stay with them?
How Payroll Automation Transforms HR Teams
Instead of chasing around those helpdesk tickets, and trying to answer every pesky email that comes in during payroll season, you’ll have a system that takes care of queries and makes your employees self-sufficient.
When your time is considerably freed up, you can focus on what truly moves the needle – reworking your compensation system, finding ways to reduce the tax burden, how to manage budgets better and so much more.
If you are a one-person HR team dealing with manual payroll management, getting an employee pay system will be an absolute lifesaver. You don’t have to struggle alone from the middle of every month right till the end of the month following managers for approvals, answering questions, double checking every entry you make, and losing sleep. When you’re occupied with these administrative burdens, you lose quality time to deepen your rapport with your employees and bring in process improvements.
Given how important the payroll experience is for your employees to form a good impression of your company, with a good payroll processing system you don’t have to keep them in the dark about minute details about their employee pay statements. Also, no employees experience inaccurate pay. They can access payroll data, and employees wages details at any time with their employee self-service portal. Plus, employees can log in to self-service portals to check their payslips, tax details, and benefits without having to email HR a dozen times. No more back-and-forths, just clarity and confidence in payroll operations.
Conclusion
The only step you need to take to put all the mayhem of payroll behind you is to trust in a payroll processing system that’s proven to be super effective over time, like Darwinbox. For a unique region like the Philippines with a fast-growing, high-contributing population, Darwinbox’s payroll system gives you a competitive advantage. The system is 100% accurate, and audit-ready, and also comes with the complete people management suite, so all your people data stays in the Darwinbox ecosystem, and helps you maintain accurate payroll processes.
Darwinbox's payroll system is designed to adhere to Philippine-specific regulations, automating statutory compliance and integrating seamlessly with government platforms like SSS, PhilHealth, and Pag-IBIG. This reduces manual intervention and minimizes compliance risks with respect to employees' wages.
With a dedicated account manager for every mid-sized to enterprise account of more than 500 employees, and an exclusive team to oversee any level of customization you require, you can get the payroll system entirely customized to suit your geography, your workforce, bands, grades, and just about everything else.
Contact our sales team today to see a complete walkthrough of the system and see how we can help you.
