Compliance with ever-changing wage and hour laws is becoming more complex, and many companies are realizing that it’s time to evaluate their processes and technologies.
As you think about investing in a new HCM system, consider which of your legacy policies need to be automated in the new solution. These are the company-specific premium pay or other incentive policies that require a lot of time and effort. Some of these legacy policies are required, due to union or other employee agreements. Others are viewed as an important part of the company culture for incenting employees to produce more or improve efficiency.
These legacy policies are typically managed in spreadsheets or manually, and they pose a risk to your organization because they’re usually only understood by a couple of people at the company—yet they impact your payroll with unreliable, manual methods.
That’s a very risky situation to be in.
As you take inventory of all of your pay policies, here are some considerations you should factor into your evaluation of a new HCM system. Be sure to communicate them to your list of potential vendors to see how they can accommodate your needs.
What Policies Are Need to Have Vs. Nice to Have?
Many companies never drop some manually intensive pay policies, simply because that’s the way they’ve always done it. This can be risky if the past practice is actually out of compliance.
Take a close look at the impact of your company-specific policies (e.g., different bonus or incentive pay) to see which ones you really want and need to keep in the future. If a policy is contractually obligated, then the answer is easy—you still need it. If it’s something that has minimal impact on the company and can be changed to fit within a vendor’s core product—so that it’s easier to manage and support long term—then now is a great time to put that policy in the past.
How Many Employees Are Impacted by Different Manual Processes?
We work with a lot of companies that give us several spreadsheets with very complex calculations, saying that the policy is vital to their business. But analysis shows that the policy only impacts a small percentage of the overall employee population. While the policy still may be critical, it’s important to determine if the new vendor must be able to automate the policy or weigh the costs of customization vs. cost to continue managing it manually for those few employees.
Have You Documented the Business Rules with Detailed Examples?
HCM vendors will ask several questions during the sales process to qualify your requirements. Ideally, they’ll uncover everything. However, to help you make the most informed decision on a new HCM system, be sure to supply a complete list of all of your pay policies with examples on how you expect them to be accommodated.
Work with your internal stakeholders to include the steps you’re performing today to meet your unique business rules, and communicate them early in the sales process. The more details you provide, the more the vendor can give you peace of mind that all of your company-specific needs will be met.
Can Your Policies Be Configured into the HCM System?
Remember that most commercially available HCM systems can handle the majority of most pay policy needs, but they won’t be everything for everyone. It’s impossible to meet every possible policy, and it would severely impact the overall processing of the HCM system and complicate upgrades.
While some HCM systems can be customized more than others, your preferred HCM providers may involve partners to address some of your unique needs. That isn’t a knock against the HCM system, because it allows them to invest into addressing 80-90% of your needs while bringing in a partner to get you to 100%. If the HCM vendor uses partners, you definitely want to research the partners’ experience so that you’re confident that they can accommodate your requirements.
After you perform your internal and external evaluations, do a final comparison of the costs and benefits of their overall offering, including automating certain policies:
- What’s the risk of potential wage and hour or other violations if you’re audited while using your current methods? Research employee lawsuits and fines against similar companies for comparable policies such as piece rate pay.
- How much time is being spent managing the unique policies vs. the cost the vendor is proposing to automate your needs? How could that time be spent on other company strategies? Be sure to factor in time spent on correcting errors after payroll is processed.
- How many employees are impacted? The smaller the group, the easier it is to manage the policies as you do today. Based on your company’s longer term strategies, will that number change in the future?
Company-specific policies are part of the fabric of many organizations. We’ve worked with companies that believe some of their unique incentive rules are the “secret sauce” to their continued success and employee retention. If you’re educated on these policies, prioritize their importance and share details during your HCM vendor selection process.