Author: David Jenkins, NZPPA CEO

I am regularly contacted by employers looking for a new payroll system. NZPPA sees a high level of dissatisfaction (negatively) with payroll systems in New Zealand. Most reasons to move are driven by issues with the Holidays Act, followed by poor service and support.

I will state that NZPPA is neutral, and we do not sell or promote payroll providers or their software. NZPPA provides services to help an employer identify their payroll business requirements (so they can go to market) and offers support to the employer in configuring a new payroll system to ensure legislative compliance; it meets business needs and payroll best practices.

Also, an important start point to have when selecting a new payroll system is that when looking for a new payroll system have a view that, bottom line, all payroll systems should be seen as non-compliant until proven otherwise because there is no certification in New Zealand, and the liability sits with the employer (so buyer beware or as MBIE often states “the employer must do due diligence in selecting a compliant payroll system”).  Use the selection process (if done correctly) to prove the payroll system will meet legislative requirements. Ask questions of the payroll provider on their software until evidence provided proves this or the response from the provider clearly shows it does not.

Issues arise with the payroll provider and their software because the employer (their new client) did not take basic steps right at the start to ensure the relationship, services, liability, and ongoing cost of the new payroll system were known, identified, documented, and agreed upon (who does what and when the cost is involved). If more time had been spent on this area, dissatisfaction may never have happened. Moving to a new payroll system is a major risk to an employer (and its payroll) if it goes wrong. This is not just about money but the time involved, compliance, and relationships with employees and other stakeholders (internal and external). Spending time ensuring all areas are covered at the start, will reduce the risk to the employer (and payroll) and make the payroll provider more accountable for the payroll software provided.

I could easily write a book on the areas that an employer (payroll) needs to cover when moving to a new payroll system and ongoing after moving, but as a starting point, here are 15 points that, at the very least, the employer (payroll) should consider and discuss with a new payroll provider (shortlisted) as part of the selection process. The next step would be to include as much as possible in a formal contract.

  1. Define Expectations Clearly: Establish clear expectations for the payroll software and services you are purchasing from the outset. Document your requirements, including compliance needs, reporting, and specific features you expect the software to have.
  2. Review the Service Level Agreement (SLA): Carefully review the SLA provided by the payroll provider. The SLA should outline the provider’s responsibilities, including software maintenance, support, response times, and guarantees regarding accuracy and compliance.
  3. Contractual Agreements Ensure that your contract with the payroll provider includes clauses that define their responsibilities and consequences for not meeting them. This may include penalties for errors, non-compliance, or service disruptions.
  4. Request References: Before choosing a payroll provider, ask for references from their current clients. Contact these references to inquire about their experiences with the provider’s software and services, including issues they have encountered and how the provider addressed them. You can contact NZPPA if you are looking for users of a payroll system you are interested in so you can talk directly and get their insight into the strengths and weaknesses of the payroll provider and their payroll system.
  5. Demo and Trial Period: Before committing to a long-term contract, request a demonstration of the software and, if possible, a trial period. This allows you to assess whether the software meets your needs and expectations.
  6. Compliance Assurance: Ensure that the payroll software meets the latest legislative requirements (Holidays Act). The provider should be responsible for maintaining compliance, which the contract should explicitly state.
  7. Data Security and Privacy: Payroll providers should have robust data security measures to protect sensitive employee information. Verify that they follow industry best practices and comply with relevant data privacy laws (such as the Privacy Act 2020).
  8. Regular Auditing: Ask about what periodic audits of the payroll provider’s services are undertaken to verify accuracy and compliance. Do they use internal or external auditors for this purpose? Will they share the audit results with you and how any corrective actions were applied for any identified issues.
  9. Communication and Support: Ensure the provider offers responsive customer support. Establish channels for reporting issues and concerns and ensure that they have a process for addressing and resolving problems promptly.
  10. Training and Support: The provider should offer training to your staff on how to use their software effectively. Adequate training and ongoing support are essential for minimising errors.
  11. Dispute Resolution: Include a dispute resolution process in your contract. This process should outline steps to resolve conflicts or disagreements, such as mediation or arbitration.
  12. Escalation Process: Establish an escalation process in case issues are not resolved satisfactorily at the customer support level. Ensure you have a point of contact within the payroll provider’s organisation for escalation purposes.
  13. Performance Metrics: Define key performance indicators (KPIs) the provider should meet, such as error rates, response times, and compliance metrics. Regularly review these KPIs with the provider.
  14. Documentation and Records: Maintain detailed records of all interactions with the payroll provider, including contracts, correspondence, and audit reports. These records can be crucial in case of disputes.
  15. Legal Recourse: If the payroll provider consistently fails to meet their obligations and rectify issues, how will legal counsel be used to explore legal remedies available under your contract or applicable laws?

In conclusion, moving to a new payroll system should take time (as long as is needed) to ensure the employer (payroll) fully gets the payroll system that meets their business requirements. A new payroll system must achieve a range of areas (as detailed in this article). Still, compliance with legislation must always be at the top of the list (if not met, then that should be a game changer in not selecting that payroll provider’s software).

If all of the areas raised in this article are covered and achieved, this will provide the payroll system the employer (payroll) needs while also making the payroll provider more accountable. Just one last point: this article is not a beat-up on payroll providers; if they meet the fifteen points in this article, it builds on a real relationship with their client (so they stay) while also enhancing their payroll software, which is a win-win for everyone.

NZPPA Supporting NZ payroll since 2007!

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