How to implement a new payroll system in easy steps


When implementing a new payroll system in your company, there are a few things to remember. If the new system isn’t well-organized and planned, it can lead to mismanagement of salaries and taxes. In this article, we will look at 12 easy steps for implementing a new payroll system.

Understanding the System

Whenever you are implementing a new payroll system, it is important to understand it thoroughly. The team that is going to handle the system must know how it works. The new system will be different from the one you are currently using. Hence, having complete knowledge about its working is important.

Integrating Software

When moving to a new payroll system, you need understand if it can integrate all your HR, accounting and ledger software. An ideal payroll software should have this function, whether in-built or as an add-on. It should be able to collate reports, and prevent duplicate entries and unwanted paperwork.

System Size and Requirements

If you are running a small business, the payroll system will be smaller in size. As your employees grow, so will the size of the system. Small businesses or startups sometimes graduate to a computer-based payroll system as the organization grows. When implementing a new payroll system, you should consider whether its scope suits your requirements.

Evaluation Team

The evaluation team comprises of employees who are stakeholders in the payroll processes. This is the team that helps you make decisions when selecting a new payroll software. The reason you should have a team of stakeholders is because they are going to fund the new system. Hence, it’s best to have them on board throughout the decision-making process.


Whether implementing a new payroll system or transitioning from your old one, timing is very important. Implementing a new payroll system at the start of a new financial year or quarter makes integrating accounts and data easier. Like starting with a clean slate. It is also easier to transfer data to the new software.

Data Transfer

Does the new system allow for automated transfer of all data from your old system? Do you need to manually enter everything or can the data be imported? Again, checking that the data entered is equally important. The new system should be able to do all that.

Parallel Processing

To ensure that the new system is working well, you can run it alongside your existing system for a while. This will pop up any glitches or data that may have been missed/duplicated. Since you are familiar with your existing payroll system, you will know what to expect. This will make it easier to conclude whether the new system is working efficiently.

Additional Hardware

Implementing a new payroll system can be an added expense. Talk to your IT team and understand whether the current hardware is compatible with the new system. If it isn’t, then you may need to purchase new one for the new system. Is this an expense that you are ready for? If not, you may need to rethink your choice of software.

Set Payment Methods

Setting up flexible payment methods that give your employees gives them multiple options for receiving their money. For instance, some people prefer bank transfers while others prefer payroll cards or cheques. This gives them the chance to manage their finances better. Does your new payroll system offer this flexibility?

Vendor Track Record

There is no room for error when it comes to your employees’ paychecks. Hence, when selecting a new payroll system to implement, the vendor must be chosen wisely. Go with someone who has a proven, positive track record. There’s nothing wrong with going for a new vendor provided you have faith in his services. However, for a process like payroll, it’s best to play it safe. The vendor must be credible, reliable, established, and have a positive market presence. He should follow through on post-sales service terms.

Customer Support

This adds to the credibility of the vendor from whom you purchase the new payroll management system software. Does he offer comprehensive customer support? If you are located in a different timezone, does he have a support team that will be available to assist you during your working hours? Are they qualified to be providing such assistance? What is the average response time after you raise a query? Does the vendor have both telephone and online support? It is very important to ask these questions beforehand.


And the final step in choosing the right vendor – references. Obtain information about the vendor and his services from existing clients. Many a time, vendors provide these references themselves. But it is still prudent to do some independent enquiry. Talk to companies that are in different time zones or those that require constant customer support. These are the references that will count the most.

Making the transition to a new payroll management software isn’t a cakewalk. Whether you are changing from an existing system or implementing one for the first time, you need to be prudent. Don’t choose a vendor in haste. Understand your requirements before finalizing a software. Have your employees on board. Maintain the highest level of transparency, the kind that’s expected in the payroll department. And the best bet of all would be to outsource payroll management to a team of experts. If you wish to do it yourself, then consider outsourcing until you get a hang of it at least.

Payroll is a department that cannot afford to make mistakes. One glitch can turn costly. But fret not; it isn’t rocket science. Just know what you want, and don’t be afraid to keep looking until you find the right payroll management system for your organization.