The ultimate guide to payroll implementation

Four out of ten employees say they’ve had to address a payroll error in the last 12 months, with 18% experiencing three or more such errors during that time.*

HR carries the responsibility of eliminating these mistakes, especially as burnout and increasing workloads become more common. Over 60% of individual contributors report heavier workloads, and inadequate pay remains a top reason for turnover.

HR teams aren’t immune either: 74% feel they need more technical skills now than they did just recently.** And it’s no wonder. Payroll implementation, among many other critical HR processes, has become more complex alongside growing tech stacks, data requirements, and distributed teams.

In this environment, getting started with a new payroll system may feel overwhelming. But with the right approach, payroll implementation can be a breeze. In this guide, we’ll outline how to implement a winning payroll process and say goodbye to payroll errors.

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*Remote, 2024

**Leapsome Workforce Trends Report, 2024
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8-step guide for successful payroll implementation

We’ve broken the payroll implementation process into eight straightforward steps. While these steps are best followed in order, you may revisit some over time as you optimize your payroll operations.

1. Define your payroll requirements

Start by assessing your company’s needs and building an ideal provider profile. Doing this upfront will improve the likelihood of successful implementation.

Take all of the following into consideration:

• Workforce size — How many people do you employ?
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• Tax obligations — What payroll laws and regulations do you need to comply with? We recommend consulting a legal professional about this if you haven’t already done so.
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• Employee classifications — How many team members are full-time vs. part-time, or exempt vs. non-exempt (in the US)? Do you employ seasonal workers or contractors?
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• Growth plans — Do you plan to scale up or down over the next few years?
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• Necessary features — What features are “must haves” for your payroll system? Are AI and automations essential additions to your workflow?

The intent of this exercise goes beyond preparing for a smooth implementation. You should also take this opportunity to identify gaps in your current payroll strategy and brainstorm how the right provider could help. For example, you may find redundancies in your current HR tech stack. If that’s the case, a human resources information system (HRIS) with payroll capabilities like Leapsome may be your best bet.

🤔 New to payroll jargon? Check out our glossary of payroll terms for clear explanations!

2. Assemble your payroll implementation team

Successful payroll system implementation requires teamwork. So, get key internal stakeholders together early to align, divvy out responsibilities, and build trust. A typical payroll implementation team might include:

• HR and payroll specialists to manage employee data, records, and benefits
• Finance and accounting professionals to handle tax compliance and reporting
• IT team representatives to ensure secure data migration and system integration
• Operations team leaders to manage the project and set valid timelines

Of course, the exact team you’ll work with depends on your company’s specifics. For example, small companies may also involve the founder or CEO in this process. Regardless of the specific makeup of your team, ensure that you and other internal stakeholders nail down key milestones for software election, data validation, and testing. Plan to train employees early and test your system before the first official payroll run.
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3. Prepare & migrate payroll data

Before migrating payroll data, conduct a thorough audit to verify employee details — including names, addresses, tax statuses, and salaries. Removing outdated or duplicate records helps maintain data accuracy and prepare your system for a smooth transition.

This is a great step to start considering automation. Manual data entry and migration are risky, especially in a record-intensive field like payroll management, where simple discrepancies in employee data can result in late paychecks and even compliance issues. 

💬 “Relying on manual data entry in a world of automation is like choosing a typewriter over a laptop. Payroll technology has advanced to minimize human error, streamline processes, and ensure accuracy at scale. Yet, some organizations still resist change, holding onto outdated methods that put payroll accuracy at risk.”  

— Ian Giles, Director of Ian Giles Consulting

During this step, be sure to review compliance with data protection laws such as the General Data Protection Regulation (GDPR) and the Health Insurance Portability and Accountability Act (HIPAA).
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4. Configure payroll settings & integrate with existing systems

Next, it’s time to determine what payroll cycle your company will follow and set up tax deductions, benefits, and direct deposit options.

You’ll also want to start the integration process now. Ensure your payroll provider connects seamlessly with your time-tracking, benefits management, and accounting software, or at least enables quick-and-easy imports/exports of Excel files. Better yet, consider adopting a comprehensive tool that offers two or more of those features natively. 
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5. Train payroll staff & employees

Payroll administrators need solid training on how the system works, how taxes are calculated, and how to fix errors. Consider creating a troubleshooting guide that addresses these common questions and prevents last-minute panic.

Similarly, develop communications materials for your team at large, offering guidance on new features (for example, explaining how to use self-service portals and access pay stubs and tax forms). Customizable, AI-powered solutions like Leapsome Learning can be very helpful in this step.

Alongside onboarding, you’ll want to document your new payroll process. Create standard operating procedures (SOPs) for handling payroll-related tasks with the new system and ensure clear escalation paths for disputes or issues.

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6. Run a parallel test run

Once you’ve finished the integration stage, launch a test payroll cycle to troubleshoot and identify and address lingering errors. This process compares your new payroll system’s performance against your old one’s. 

Assess the results and fix any discrepancies. Specifically, look for miscalculations, incorrect tax deductions, or missing employee details, as these oversights could require you to make inconvenient off-cycle payroll runs down the line.
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7. Go live with payroll & monitor performance

Congratulations, you’ve made it to your first official payroll run! You’ll still want to check for any last-minute issues and confirm that all payments reach employees correctly. But, fingers crossed, all your thorough testing will have set you up for a smooth first payroll cycle.

Now, it’s time to monitor payroll accuracy, tax compliance, and timeliness. If anything seems off, address it right away. Automate routine payroll tasks where possible and tweak workflows as your business evolves to keep things running efficiently.
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8. Conduct a post-implementation evaluation

The final payroll implementation step requires continuous team monitoring. In essence, you’ll have to consistently monitor your system’s performance. A good place to start is by reviewing payroll records to ensure accuracy and efficiency and identifying any bottlenecks or recurring issues.

You’ll also have to stay up-to-date with payroll regulations. Monitor changes in tax laws and compliance requirements and adjust your payroll policies accordingly.

Finally, challenge yourself to continuously improve accuracy and further expedite your payroll process over time. Tracking and reporting on payroll metrics can help here. It’s also beneficial to adopt advanced features like AI-powered payroll automation, which reduces the time you spend manually reviewing reports and initiating payroll. 

“The nature of the data (structured vs. unstructured) you’re working with is an important factor in the decision [of whether to use generative AI]. The other one is the output you need. I encourage my audience to take a step-by-step approach: Can you solve it with RPA?* Do that first. If not, can you solve it with traditional AI? Use that.”  

— Anita Lettink, HR & Payroll Advisor

*RPA (robotic process automation) is software that automates repetitive, rule-based tasks by mimicking human actions in digital systems. It works across applications to handle things like data entry, file transfers, and form processing.

😵‍💫 We know — that was a lot of information!

But if you’re looking for an even more thorough breakdown of how to process payroll compliantly, consider downloading our free payroll checklist.

Streamline payroll implementation with Leapsome

If you choose the right payroll provider and establish a strong implementation process — like the one described in this guide — your system will be up and running in no time.

The secret to our time-to-value? Our award-winning customer service team and comprehensive educational resources. Our CS professionals are dedicated to ensuring you implement payroll (and our other HR and people enablement solutions) successfully and efficiently.

👋 Say goodbye to frustrating payroll runs

Leapsome’s user-friendly, people-first approach to payroll and other core HR tasks empowers you to do your best work without any stress. 

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Frequently asked questions about payroll implementation

What is payroll implementation?

Payroll implementation describes the process of choosing and integrating a new payroll system into your current workflow. It can be a complex process, requiring honest and frequent communication with external and internal stakeholders — including your payroll vendor and finance and operations colleagues. However, with the right guidance and platform, you can start processing payroll successfully in a few weeks.
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Why is implementing payroll software important?

Implementing payroll software matters because a proper setup ensures your systems work together without issues. In other words, successful payroll implementation can be the difference between a clunky, error-prone system and a smooth “set-it-and-forget-it” process. That’s what payroll software is designed for, after all: helping reduce manual errors, alleviating time-consuming tasks, and allowing HR professionals to focus on higher-value work.
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What are some payroll implementation best practices?

Some of the most critical payroll implementation best practices include:

• Communicating with stakeholders proactively — Many internal teams are involved in the payroll implementation process (e.g., HR, finance, operations, and project management). Establish strong lines of communication with these teams early and confirm that you have all their buy-in for your software of choice. Determine a point of contact for each department to ease communication and build trust more effectively. Externally, you’ll also want to build a strong relationship with your payroll vendor’s customer service representative.
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• Training employees early & often — Inform your team about expected changes as soon as possible. They’ll have questions about how your new payroll system will impact their daily work, so be ready to answer those queries in advance. You should also schedule time to train employees on the new payroll system.
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• Choosing the right payroll provider — Select a provider with plenty of positive reviews from peers. Review customer stories on their website to understand time-to-value and how they’ll provide ongoing support. Most importantly, review their offerings and confirm they fit your organization’s growth plans. After all, you won’t want to restart the implementation process anytime soon.
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Do you need training for payroll implementation?

Yes, you need training for payroll implementation. However, these materials are usually provided by your payroll vendor. They should have a library of training resources for you, and, ideally, will be available to answer additional questions throughout your professional relationship.

You’ll also need to train your staff so they fully understand how the new payroll system works. A good vendor can also provide guidance on this.
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What are the most common challenges of payroll implementation?

The most common challenges of payroll implementation include:

• Maintaining compliance — The specific laws and regulations that apply to you depend on where your company operates and where your employees live. Staying aware of regulatory changes and maintaining compliance can be challenging, especially for organizations that do business in several countries and distributed or fully remote teams.
   

• Integrating with other systems — Payroll systems without robust integration features can be tricky to assimilate into your current workflow. For example, if your employee data and payroll records are siloed, you’re more likely to face costly payment errors. That’s why many HR teams turn to HRIS platforms or other comprehensive HR systems to process payroll and host critical employee records
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• Initiating change management — Depending on how well-integrated your payroll system is, change management can also become problematic. Many professionals prefer to use one or a select few HR tools. This is where your choice of payroll vendor and ample training come in handy.