The Best HR and Payroll System for Large Companies: ERP, HRMS or Both?

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Why Companies Use ERP Systems

Your business is rapidly growing or is entering a stability period following immense growth. You’ve likely either already adopted an Enterprise Resource Planning (ERP) solution or are at least evaluating one. ERP solutions, ideally, allow you to manage and integrate all of your company’s systems such as financial, human resources, operations, sales, marketing, supply chain, manufacturing and reporting systems. Scalability, real-time process data insights and incorporation of artificial intelligence are a few of the perceived advantages of using an ERP system.

HR Modules Included With ERP Systems

Many ERP solutions come with HR and payroll modules built in. According to online, independent and customer reviews, these modules tend to be very basic compared to stand-alone human resource management systems (HRMS) that include payroll. Some ERP native HR and payroll apps are less focused on the employee experience both from a customer support perspective and from a system interface perspective. The interfaces for ERP systems like Oracle NetSuite are often reported to be slow and “clunky” and require an IT expert just to make changes. Another common complaint with some ERP systems is that the “included” HR and payroll modules are actually white-labeled third-party systems that the ERP company is marking up to include with their services.

Integrating HR Systems With ERP Systems

There are many excellent reasons to integrate your standalone HRMS with your ERP. For administrative and compliance purposes, it’s important for your HRMS to be the system of record for all employee data. The Fair Labor Standards Act (FLSA), the IRS, the Occupational Safety and Health Act (OSHA) and other laws and government agencies have strict record-keeping requirements for employee information. Employees’ personal, pay, health and safety, and performance information should all be maintained in this system so the information stays accurate and current. This system must also have the functionality to securely store employees’ HR and payroll information, keep certain records separate and restrict access to those records to “need to know”, role-based access.

It’s also important for the people data to flow over to your company’s ERP. When you set up an integration with your ERP, the people data is pushed from the HRMS to the ERP. The integration is used to automatically set up role-based access to the ERP. Most notably, the integration gives the ERP the ability to report on labor costs relative to sales, revenue and production data.

According to Gregory Mader, ERP integration expert and president of Open Source Integrators, combining separate HRMS and ERP products often produces the best results:

“HRMS and ERP systems are very complementary, but not interchangeable. By implementing a highly flexible ERP, such as Odoo, with a specialized HR and payroll system, such as Paycom, you can achieve better visibility of all of your company’s operations and deliver an employee-focused user experience.”

Conclusion

Whether you already have a quality HRMS or are considering using one, the decision seems clear: Integrating an excellent HR and payroll solution with your ERP is a must.

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