It has been a while since I shared my thoughts on payroll (affectionately misspelled as pay roll). It is usually a pretty quiet time of year for payroll administrators everywhere. We can call this the lull before the storm.
Many companies use this time to convert payroll systems. There are many, many reasons why companies want a new payroll management system. Whether payroll reports into the Human Resource department or into the Finance department, the reasons for new payroll solutions remain the same – the organization has outgrown the current payroll management system; the organization is looking to streamline their multiple systems to use on hr system solution that works synergistically with the finance system. Whatever the reason is the HOW is the most important.
The key to a successful conversion or implementation of a new HRIS, HR system, Payroll Accounting System to meet your company’s needs is the work that goes into the preparation for the change.
Organizations today are split between in-house and outsourced payroll systems. There is a new trend to stay vanilla with these programs as it makes maintenance and updates much simpler to manage. Either choice requires the same pre-work.
Below is a list of preliminary actions you should take to ensure a successful system implementation or conversion:
1) Determine what the current actions executed by your Payroll Administrators or Payroll Specialists
- Understand how to streamline these processes
- Will the new system make these processes better or will they increase the workload
2) Understand the current customizations that make the job more efficient
- Do you have any special spreadsheets that are easily imported into the current system thus reducing the amount of manual input
- Do you have any outside systems that need to be integrated with the new program/system (web, desktop or outsourced)
i. These could be timekeeping systems
ii. These would include any HR or Finance systems
3) Do a fit-gap analysis
- Examine what you currently have and compare to what the new system will provide. Any deficiencies are considered a gap or missing component. Can you live with the deficiency in the new payroll management system?
- Identify exactly what the differences between the systems will be.
- Do the benefits of the HRIS system out way the deficiencies?
- Will the conversion create better processes and simplify the existing ones?
4) Include your team of payroll administrators and payroll specialists in the fit gap analysis.
- No one knows the existing processes better than they do. They will share the intimate secrets you don’t know if you are not in the fold of payroll processing every pay period
- Keep in mind that change is not easy and you could meet some resistance from the team so you will need to take their view objectively
5) Security is important with any new system but extremely important with a payroll accounting or HR system.
- Does the system allow for segregation of access? Are there different levels of access to the confidential information held within? Big decisions to be made…
i. For example should someone in Accounts Receivable have access to sensitive employee pay details? Can this new software limit the amount or type of access staff have access to
ii. Do managers have the same access as administrators?
iii. Does all of HR have access to payroll regardless of their role because HR handles the hiring, wages and termination of all employees
- What kinds of web or system locks are in place to avoid hacking and cyber stealing?
- Is there a strong encryption?
6) Is the system easily integrated with your existing systems?
- Do you need to change your financial reporting system?
- Do you need to change your time management or time keeping system?
Now that you have selected the payroll management system that is best for you, there are several steps to follow to complete your successful conversion or implementation:
1) Clean up the data in the old system
- Garbage in definitely means garbage out. There is no need to maintain old, stale or invalid data and transfer it to your shiny new HR system
- The data you are converting or moving over will need to fit the parameters of the new program: the number of characters in a field; the types of fields required; essential information vs. nice to have information
2) Outline all the rules required to meet your company policies and/or collective agreements
- Although every great system will come with the legislative compliance built in, this is also your responsibility to test for accuracy
3) Build the set of rules in the new system.
- Be careful to build the rules as they exist today. If you are switching pay frequencies, this frequency switch is the very last step you perform!
- The key here is to make sure the new system handles the task exactly the same way in order to achieve the same results as the old system
4) Test, test, test. You should be performing several types of tests. The goal is to achieve the results you are looking for not to count how many tests you performed
- Create test cases that are driven by existing processes and scenarios in your current HRIS
- Regression testing – usually managed/completed by the project team. This will be performed many times throughout the processes. The more changes are required the more testing will be required
i. The purpose of regression testing is to confirm that a recent program or code change has not adversely affected existing features.
Regression testing is nothing but full or partial selection of already executed test cases which are re-executed to ensure existing functionalities work fine.
This testing is done to make sure that new code changes should not have side effects on the existing functionalities. It ensures that old code still works once the new code changes are done.
ii. Regression Testing is required when there is a
- Change in requirements and code is modified according to the requirement
- New feature is added to the software
- Defect fixing
- Performance issue fix
Check out this really helpful link on regression testing
- System Integration Testing aka SIT – usually managed/completed by the project team
i. System integration testing (SIT) is a high-level software testing process in which testers verify that all related systems maintain data integrity and can operate in coordination with other systems in the same environment. The testing process ensures that all subcomponents are integrated successfully to provide expected results.
ii. The main goal of SIT testing is to test the automation of aggregated components and the dependencies that exist between them. In a complex environment, this is a tedious task, as there are a number of components and dependencies. SIT testing ensures that it follows the dependencies available in a sequence, thereby simplifying the task. After system integration is performed, data flow testing takes place through three states, namely the data states within the integration, database and application layers.
iii. Test cases for SIT testing are developed using test design techniques such as:
- Use case testing
- State transition testing
- Load testing
- Usability testing
- Volume testing
- Graph-based testing
- Decision table testing
- User Acceptance Testing or UAT – performed by the end user of the product
i. Formal testing with respect to user needs, requirements and business processes conducted to determine whether or not a system satisfies the acceptance criteria and to enable the user, customers or other authorised entity to determine whether or not to accept the system.
ii. In User Acceptance Testing, the user requirements are used to derive the functional hierarchy. As such they are likely to be specified very much at the business transactions and processes rather than specific logical functionality. The test cases created in ‘design’ therefore are going to be testing the functionality of the system as a whole to simulate the Business processes including potentially non system procedures.
iii. UAT Tester should possess good knowledge of the business. He should be independent, should think as an unknown user to the system. Tester should be Analytical and Lateral thinker and combine all sort of data to make the UAT successful.
iv. The main purpose of this testing is to validate the end to end business flow. It does NOT focus on the cosmetic errors, Spelling mistakes or System testing. This testing is carried out in separate testing environment with production like data setup. It is a kind of black box testing where two or more end users will be involved.
Another greatly useful link for you
5) Parallel test runs
- It is imperative the you perform a minimum of 2 parallel runs
i. What is a parallel run – processing the same data in the old and the new system and achieving the exact same results.
ii. This will only happen if you are comparing apples to apples. Payroll frequencies must be the same, converted data must be the same (employee information, YTD values, statutory requirements, company and collective agreement policies) and the input into the new system must be the same (wages and salary changes, the # of hours paid, vacation, bonus, commission, etc)
- Identify any differences and determine why they exist – if it’s data related make corrections to the data and rerun the parallel. If it’s programming related, then program changes need to be made, testing needs to happen (for all phases of testing) and the parallel needs to be rerun
- Rerun the parallel as many times as deemed necessary to produce the expected results
6) Make the frequency change (if applicable)
- Once all the above requirements pass the high standards of your organization you make the change of pay frequency
i. You cannot implement a proper payroll management system if you perform this task out of order
ii. You will never have a true parallel if the two systems don’t match and the issues that will come crawling out of the woodwork are enough to scare a termite off a log cabin
- Do one last test run to ensure the results are reasonable after switching payroll frequencies
7) You’re not done yet
- Do you have other systems that need to communicate with payroll? All these need to be tested also
i. Do you have an automatic GL upload to your finance system?
ii. Do you have information that needs to be fed back to HR?
iii. Does information need to flow to/from a time keeping system?
- Does everything balance?
i. Do your payroll records from the new system balance (yes, to the penny) with that of the new system?
- Do you need to produce and ROEs of tax forms from the old system?
i. If you are not converting all the payroll information into the new system then it is wise to have year-end tax forms prepared from the old system
ii. Whether or not you are switching pay frequencies, the new system will not have the pay period details required to complete a proper ROE (record of employment) for at least 52 weeks. It is in your best interest to complete a set of ROEs from the old system. If you use ROE Web, you can submit them with the reason of “pay frequency change.” This will not impact the employees in any way. It simply means if/when they need to file for EI (employment insurance) then there would be 2 ROEs from your organization – one from the old and one from the new payroll system.
Food for thought….
Many employers don’t take the timing of the implementation into consideration. If at all possible it would be very helpful and would cut a lot of duplication of work if the switch is done for the first pay of the year.
Here’s to helping you better understand what’s in your pocket
Until next time.