All for the best?

Has the time come to look for a personnel system, offering HR facilities that your personnel department, line managers and even your employees can use? If so, throw your payroll system out as well and buy an integrated personnel and payroll system, offering all the advantages of a single database from a single supplier.

This is the message, loud and clear, from the vendors of the new generation of "fully integrated" HR systems. And there are certainly benefits from this taking this advice.

However, you may have a perfectly satisfactory payroll system that does everything you ask it to do. It is well supported, technologically up-to-date and, possibly most important, you know it inside out and you love it. So, why go through all the pain of a major conversion project when you've already got all you need? If you've got the best payroll, at least as far as you are concerned, why change it?

Is there an alternative? Your business is growing and now needs to manage its personnel records more effectively. The payroll may hold a few extra personal details, over and above the payroll data, but now your personnel department is under pressure to keep more extensive information, covering training, recruitment, post control, organisation charts, job evaluation, absence monitoring, career development, competencies, discipline records, appraisals, health and safety, relocation, salary administration and so on, and so on.

There is an alternative. There are many excellent personnel systems with comprehensive and sophisticated facilities that can readily be linked, or "interfaced", with your existing payroll system, avoiding the evils of double keying and inconsistent data.. In fact, there are more developers of personnel systems who do not offer payroll systems than there are payroll developers who do not have personnel systems. "These are specialist areas", they all say. "We concentrate on what we are good at."

For example, Caroline Frisby, marketing manager at Snowdrop Systems told me "We recommend potential clients with existing payroll systems to go for the 'best of breed' solution; to select the best HR supplier and the best payroll supplier. An integrated system from a single supplier may be an easy option and could be cheaper in the short term, but it may well compromise the efficiency of the two departments."

But, isn't that an old-fashioned approach? Surely the trend is towards full integration where all employee data, both payroll and personnel, is managed on a single database, supplied by one supplier. Ed Ramshaw, marketing director at Cyborg Systems, has noted a trend away from single integrated systems where companies are choosing to outsource their payroll operation. "We find ourselves providing the payroll service from our data centre," he observed, "while the client continues to operate his own preferred HR system in-house. Interfacing the two systems is more complex and we have to address a variety of network and security issues, but I'm not the only supplier to notice this increasing trend."

Commenting on the working relationship between the supplier of the payroll system and the supplier of the personnel system, Ed Ramshaw continued, "I have not seen many occasions where two different suppliers have not worked together for the joint benefit of the customer," he observed. The importance of co-operation between suppliers was also explained to me by Robert Wyeth, sales and marketing director at Infosupport, developers of HR systems. Among the many issues that must be addressed by businesses when interfacing two systems together is the way in which future upgrades to the systems are handled. "If the joint suppliers are committed to their clients," he stressed, "upgrades to each system will be co-ordinated in advance. They should send each other their upgrades to make sure that changes to one system do not interfere with interfacs with the other."

Many suppliers of payroll systems have already successfully interfaced their system with a number of different personnel systems. New to the business of linking payroll and personnel systems together is Frank Beechinor, MD of Visual Business Tools, who has entered the personnel market recently with a range of inexpensive systems. Although his company has its own payroll system planned, he is currently designing interfaces to some of the leading accountancy payrolls. "The generic interface will allow the transfer of common data between the systems," he explained to me. "If you need to do more, for example, to have the files updated live, the interface can easily be customised by dealers in just a few hours."

I asked John Rutherford, MD of Rutherford Webb, about the different kinds of interfaces that are possible. "The most basic link is a simple transfer of data between the systems, at whatever frequency the users require," he replied. "As long as the personnel system has data export and import facilities, it is so straightforward that we just build it as part of our implementation and training charges. I don't recommend two-way transfers, however, unless the data updated in each system is different. If the same data can be changed in both systems, it just causes total confusion."

What about updating systems live, so that a change of detail in one system automatically updates the same detail in the other? "A dynamic link involves more development work and close matching of file layouts," John Rutherford suggested, "but the cost is still not excessive." In the experience of Robert Wyeth, live updating of pay details does not suit many payroll departments. "They like to be in control of their system and generally want to intercept any updates and approve them as they come through."

All of the suppliers, both payroll and personnel, agree that careful advance planning is essential before building interfaces. In the experience of Bill Whaley, MD at Action File, "the requirements and priorities of payroll and personnel departments are different, particularly when it comes to time pressures and absolute accuracy of payments. Whether payroll inputs data first and then updates the personnel record, or vice versa, varies from site to site, but there must be full agreement on ownership and maintenance of data before deciding how the interface is going to work."

Ed Ramshaw made a similar point. "Our main concern would not be the technological issues involved in interfacing," he explained. "More important are business processing issues, such as the validity of the data and how it is handled within the organisation. If data is not handled accurately and efficiently, it doesn't matter how good the interfaces are, the systems are not going to work well together."

Choosing separate suppliers for your payroll and personnel systems is a realistic option, especially when you already have a system, payroll or personnel, that works perfectly well and you have no reason to replace it. There are many issues to consider and pitfalls to avoid, however, and the comments of those who were interviewed for this article have been incorporated into the accompanying Table. Whether you go for a fully-integrated system, or systems from different suppliers, make sure it is all for the best.

Selecting and Interfacing your "best-of-breed" payroll and personnel systems

The following suggestions are a guide to businesses who, already having an adequate payroll system or having settled on a new payroll system, wish to find a suitable and compatible personnel system. The notes could equally be used in reverse, i.e. to find a payroll system that would interface effectively with an existing personnel system.

1 Decide whether the payroll and personnel systems need to be linked at all. Are there political reasons why they should be kept separate, despite the need for double keying and the risk of inconsistent data?

2 Talk initially to the supplier of your existing or chosen payroll system to see what he recommends for a complementary personnel system. He should be able to recommend a number of suppliers of personnel systems with which he has already successfully interfaced the payroll and probably has an established working relationship. However, do not accept the first name suggested. You already have the 'best' payroll system and will not find the 'best' personnel system unless you look at several.

3 Before approaching any prospective supplier, identify your current and future requirements for a personnel system in as much detail as you can. Make sure it includes the ability to import and export data. This process is time consuming but you must not seek to avoid it if you really want to find a system that does what you need it to do. If your business requires you to tender for software, you will be forced to follow this step.

4 If it exists, follow the tendering process set by your business. If not, obtain information from each supplier and, if convenient, visit their stands at Softworld or CiP. Compare what they offer with your requirements. Do not be swayed by price or by fancy features that are not on your list of requirements. Get the ones you prefer to demonstrate their systems on-site, if possible as a joint demonstration with your payroll supplier. Decide on a shortlist.

5 Make your final decision after ensuring that your payroll supplier is confident that

• interfaces to the personnel system can be written, to your budget, if they have not already been
written

• interfaces to existing related systems, e.g. accounts, and to other planned systems, e.g. time
and attendance, can be written

• he can work successfully with the personnel supplier to build them, preferably because he has
done so in the past.

6 If you are also implementing a new payroll system from another supplier, the following steps should be undertaken before you go live with the payroll.

7 Set up a project team to manage the implementation that includes a representative from both suppliers.

8 Identify the data that the payroll and personnel departments need to achieve their objectives. One department may require some information from the other's system for ease of access or in order to produce reports. Identify the data

• that will be unique to the payroll system, e.g. tax and NI cumulatives

• that will be unique to the personnel system, e.g. training records

• that will be shared by both, e.g. name, address, salary, various dates

• for which one system relies on the other, e.g. sickness absence dates for SSP purposes

9 Agree who will be responsible for maintaining

• data that is common to both systems

• setting up starter details before they are transferred to the other system

• entering leaver details

10 Decide on the frequency and direction of the transfer(s). Will they be

• daily, more frequently, less frequently, only as required?

• one-way and, if so, which way?

• two-way and, if so, which data will go which way?

• live and, if so, will payroll want to intercept and approve each update?

11 Identify and manage incompatibilities between the two systems, e.g.

• different field lengths and data formats. e.g. upper/lower case, justification

• fields with the same name but that mean different things to each department

• codes that use look-up tables in one system that have different meanings in the other

• employees with two jobs in the personnel system but only one payroll record

• processing of leavers

• the personnel system allows events to be recorded in advance or retrospectively but the
payroll only accepts changes for the current pay period

• the way in which each system handles employee numbers, e.g. if they are reallocated after
someone leaves, or if they change if a person moves to another pay group

12 If you are replacing your existing payroll system, it should be implemented at this stage. (The implementation procedure is not the subject of this checklist)

13 Develop the interface, decide on an implementation plan, and test the results.

14 After implementation, make monitoring the audit log of transactions an established routine, in order to maintain the integrity of the two systems.