Cloud-based payroll and HR software

Business growth and all that comes with it – additional employees, more payroll transactions, increased data volume – can strain technical infrastructures and the staff supporting them. Cloud payroll solutions help companies minimize these burdens while streamlining critical processes.

But not all payroll software is the same. Before migrating payroll to the cloud, employers may want to explore the key benefits and potential pitfalls of such a move.

What is cloud payroll software?

Cloud-based payroll software allows employers to manage payroll from any place where there is an internet connection. This accessibility is made possible by hosting data on remote servers. Legacy systems, in contrast, host data locally on servers at the employer’s premises.

What are the benefits of using cloud payroll and HR?

Some executives may be hesitant to move payroll and other critical HR processes off-site, but increasing their familiarity with the cloud can help dispel many of these apprehensions. When making their case for cloud-based technology, HR professionals may want to focus on these key benefits:

• Data centralization – By collecting and combining multiple data sources in the cloud, organizations can better adapt to changing payroll compliance and reporting requirements.
• Employee self-service – Cloud-based solutions allow employees to securely access and adjust payroll data and personal details on demand.
• Cost control – The total cost of ownership is often lower in the cloud compared to legacy systems because employers don’t bear the burden of purchasing, maintaining or replacing physical servers.
• Speed – Critical data in the cloud spends less time in transit and takes less time to analyze, providing employers with actionable information quickly.
• Security – Cloud payroll vendors may offer multiple levels of redundancy, firewalls, application programming interface (API) access and mutual authentication.
• Time savings – Employees usually don’t have to waste time searching for the right services or fighting with incompatible technology in the cloud.
• Scalability – Cloud payroll services typically update automatically and scale with an organization’s changing needs.
• Decision-making – Employers can easily organize and access all their payroll and HR data in the cloud, which leads to more effective analysis and informed decisions.
• Integration – Clouds can serve as the backbone of interconnected finance, payroll and HR systems, allowing all three to share data and eliminate the silo effect.
• Agility – The on-demand nature of cloud computing can ensure businesses always have available resources, even during sudden spikes in activity.

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Are there any drawbacks to cloud-based HR and payroll software?

Some employers may have concerns about cloud-based payroll compliance, particularly the handling and storage of data. If either the employer or the cloud provider fails to meet compliance obligations, the results can be costly. The business may be fined or lose public trust – both of which can shortchange profits and offset the potential benefits of the cloud.

To help support compliance, employers should understand all relevant laws and requirements and consult legal experts when necessary. It’s also essential to partner with a reputable payroll cloud vendor who has viability, a track record and certifications. Some providers may assume responsibility for managing payroll information in the cloud, but liability ultimately lies with the data owners – even if mistakes are the vendor’s fault. Consequently, employers should insist on service-level agreements that explicitly state provider and client roles in protecting sensitive information and addressing compliance issues.

Self-hosted or cloud-based payroll system?

Given the benefits and advanced features of cloud technology, it can be tempting for employers to move their entire payroll and HR infrastructure to the cloud. However, it’s usually best to start lean. Cloud deployments can quickly become bloated with apps and services that don’t add significant business value.

What should employers move to the cloud?

Any payroll process that is critical for day-to-day operations, including compliance and reporting solutions, is ideal for the cloud. Complex functions that would require more re-architecture than they’re worth should also be considered for cloud deployment.

What should employers host locally?

Some applications and data are best left on a self-hosted server. Examples include:

• Mission-critical data – While certain processes will require data in the cloud, having at least one local backup of payroll data is essential.
• Proprietary applications – Often, proprietary apps aren’t designed for cloud-based connectivity and won’t work well.
• Local security solutions – Firewalls and intrusion detection tools may not be able to handle the volume and variety of data created and processed in the cloud.

Frequently asked questions about cloud-based payroll

ADP Editorial Team The ADP editorial team is comprised of human resource professionals with extensive experience solving complex HR challenges for businesses of all sizes.

This guide is intended to be used as a starting point in analyzing how to do a payroll and is not a comprehensive resource of requirements. It offers practical information concerning the subject matter and is provided with the understanding that ADP is not rendering legal or tax guidance or other professional services. Please consult with your legal counsel.

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