Payroll and HR technology is successful in helping organizations to manage back-office HR functions, so you may be thinking, “If the wheel isn’t broken, don’t fix it.” However, as HR challenges and federal and state laws continue to change year after year, it may be time to start evaluating payroll and HR operations.
When evaluating how to make your payroll and HR process more efficient, you are faced with deciding whether to continue to run the operations on-premise or moving to a cloud solution.
Cloud-based software
Cloud-based payroll and HR software is a solution that allows you to store data and resources in an online server. The use of cloud-based software has gained popularity over the years, especially in payroll and HR departments. In fact, the global human capital management solutions market size is expected to increase by USD 12.16 billion between 2020 and 2025. Following the increase in the remote workforce, administrators and employees need software that is more accessible. Administrators also enjoy automatic updates regarding tax withholding updates and changes in workplace laws and regulations.
On-Premise
On-premise payroll and HR software is installed locally on a company's computers and servers. The on-premise solution is perceived to be more reliable and cost-effective. On-premise software has popularity in banking and government secures, because of the security of keeping the information within the organization servers.
Evaluation Considerations: Key Differences
Security
Cloud-Based
There is a fear of moving to the cloud due to fear of a security breach. According to Cloud Tech, cloud attacks are continuing to rise. It is important to speak with your payroll and HR provider about the measures that are in place to combat the threat to their sensitive employee and company data.
With Greenshades cloud-based payroll, HR, and tax solutions, there are regular security audits, daily log monitoring to scan for suspicious activity, and updated password security. In the unlikely event of a threat to security, they will assist you in the investigation to resolve the issue.
On-Premise
Mentioned before, on-premise technology tends to be more popular in industries that require a high level of security. Since the software is housed on your servers using your IT department, it gives organizations peace of mind knowing that the information is not held inside a third-party software so their privacy is protected.
Flexibility and Control
Cloud-Based
If you're worried that moving to the cloud will result in a loss of control over your operations, consider working with an in-house provider. When using an in-house provider, you get the benefits of the cloud with the flexibility of on-premise technology. Organizations are not forced into a one-size fits all software that dictates the payroll schedule for you. You maintain control of employee data, the ability to make unscheduled pay runs, and access to your cash flow.
On-Premise
There is also a higher level of control using on-premise software. When it comes to payroll and HR operations, this can be a big benefit. On the other hand, it comes with a high level of responsibility and knowledge of federal, state, and local tax laws and regulations. Incorrect withholdings can cause under or overpayment to employees, leading to costly fees and penalties. You must maintain software updates to stay in line with the changing landscape of workplace laws.
Integrations
Cloud-Based
If your organization is utilizing or planning to use an ERP system, accounting system, or timekeeping system then cloud-based payroll and HR technology is a good fit for you. The cloud allows information to flow freely between systems. This eliminates the time-consuming manual entry process and reduces the risk of incorrect information transfer. When evaluating providers, loop in your IT team to help understand if your system will work with the payroll and HR provider chosen. Providers such as Greenshades are able to integrate with a variety of integration partners due to their open API.
On-Premise
When hosting your HR and payroll operations on-premise, as previously discussed you keep control of all data. This means the on-premise software will not have the same communication abilities as the cloud. Administrators must manually enter data, into each system separately, increasing the risk of human error.
Imagine using a timekeeping system and payroll software that both operate on-premise. If you incorrectly transfer over the employee’s timesheet, then the payroll information will also be incorrect.
Cost
Cloud-Based
When using a cloud-based provider cost will vary based on the provider. Since organizations have the flexibility to choose from a variety of package offerings based on payroll and HR needs, pricing is flexible for your organization. Although providers may charge an implementation fee, the initial costs are usually lower than those of on-premise solutions. The most common packages offered include PEPM (per employee per month) costs that can make cloud-based seem like a more expensive option in the long run. However, in the long run, organizations keep overhead cost low because the cloud eliminates the cost of software upkeep and the cost associated with hardware.
When evaluating, it is important to understand what each package offers and which features result in extra fees. Greenshades keeps costs low while still providing a robust product offering. For products such as payroll, implementation is free, and organizations do not have to worry about surprise fees.
On-Premise
On-premise technology can seem like the cheaper option because there are no monthly or annual fees to access the software. However, overhead costs can add up over time since it is the organization’s responsibility to manage the upkeep and updates.
The biggest challenge of using on-premise payroll and HR technology is maintaining compliance by keeping up with software updates. If you fall behind on updates, it can be difficult and costly to catch up to the latest version. By keeping up with software updates, you can ensure that your organization remains compliant and avoids costly penalties. On the other hand, cloud payroll software like Greenshades automatically pushes updates to you, providing the benefits of an on-premise solution while still ensuring compliance.
What is the Best Solution for your Organization?
Your organization may not be ready to make the move to the cloud. However, CNBC reports that by 2025, more than 95% of new digital workloads will be deployed on cloud-native platforms. Although moving to a cloud can be scary, it may be time to start planning for the future of your organization. As your company continues to grow and scale moving your payroll and HR business to the cloud gives you a platform that can grow and scale with you.
There are many points to consider when deciding between cloud-based and on-premise payroll and HR software you are left wondering “which solution best suits my organization?” For industries that require a high level of privacy and security, such as highly regulated industries, on-premise software can be a better choice.
If your organization has complex payroll needs or a workforce comprised of remote and deskless workers, cloud-based technology will be best suited for you. Software automation, flexible access to technology, and the ability to grow and scale can help meet the demanding needs of your organization.
