Understanding Human Capital Management & Its Relation to Payroll

No organization that values its reputation can function without taking care of its employees. Employees are an asset. The goal of efficient human resource management and human capital management is working toward business success through effective employee management.

Human capital management (HCM) promotes efficient recruitment, talent development, and retention, and when integrated with a centralized payroll system, it creates standardized scheduling and reporting. It is an organized process that covers employee acquisition, employee management, and employee optimization, and enhances how employees progress in their careers in an organization. 

Part of this process naturally involves payroll management as employees need compensation for services rendered to an organization. 

Let’s explore and answer the essential question, “Is payroll part of HCM management?” And let’s also look at how human capital management and payroll overlap for employees and the organization’s overall benefit.

What Exactly Does HCM Entail? 

In modern-day HR departments, human capital management processes are made easier by using multi-feature software solutions. Automated systems make it easier for human resource management professionals to implement the following essential HCM processes: 

Talent acquisition

This process covers: 

  • Recruitment 
  • Application tracking
  • Hiring
  • Onboarding

Talent management

This area covers: 

  • The building of company culture
  • Payroll 
  • Performance appraisals
  • Time and attendance monitoring and management 

Talent optimization

This part of HCM manages:

  • Career development
  • Competency mapping
  • Training or learning and development 
  • Succession planning

HCM processes typically include all human resource management (HRM) methods under its umbrella. These methods cover recruitment, onboarding, positioning, performance management, succession planning, salary, benefits, tax, compensation connectivity, HR analytics, and data compliance.

How Is Payroll Part of HCM?

If you’re wondering where the question “Is payroll part of HCM?” comes in, most HCM solutions also incorporate labor and payroll management within their scope, which further expands their functionality. And most modern companies incorporate payroll as part of their HCM implementation.

What Are the Benefits of Integrating Payroll With Human Capital Management? 

Uniting HCM systems and payroll systems within a single platform supports company operations from any location, leading to a host of strategic business and cost-saving advantages. 

Integrating payroll with HCM solutions adds significant value to HR processes within an organization. Some of the most visible benefits of integrating payroll with HCM solutions include: 

Elevation of HR policies and procedures within an organization

When companies consolidate employee data and payroll data, HR professionals spend less time completing repetitive and time-consuming data entry tasks. The elimination of these tasks allows HR to concentrate more on human capital management’s core tasks. This shift in focus has been instrumental in helping people develop their talents and grow in their careers. 

In these scenarios, HR professionals can focus on making proactive decisions regarding core HR functions, such as sourcing new employees and talent, forecasting staff numbers for future workloads, and managing recruitment, onboarding, and learning and development. 

These proactive processes also ensure that HR team members align better with their organization’s long-term business goals and objectives. 

All these strategies have an impact on the organization’s productivity and ability to achieve its mission. This approach also promotes employee engagement and boosts HR staff morale. The resulting improved confidence helps reduce staff turnover and improve organizational success.

When these steps take place, the HR staff contributes to positive solutions. They are proactive because they are involved in advanced HR analytics and making valuable contributions to the organization’s overarching mission and vision.

Decreasing organizational labor costs

A unified Payroll and HCM system can play an essential part in helping an organization reduce its labor costs. A centralized, comprehensive HR and payroll solution with standard procedures and processes across the board can standardize payroll data. This consolidation enables organizational leaders to view real-time employee data on a single interface.

If you are part of an organization that operates across multiple locations, this system enables you to pay salaries in a standardized manner that is fully compliant with all local and regional tax regulations.

This system also allows HR professionals and company leaders to view labor costs and allocations at a glance. HR executives can then use this information to perform workforce spend analyses, shift some roles based on program need and funding, and prioritize hiring efforts accordingly.

These improvements allow human resources management to refocus their efforts on value-adding tasks.

Reduction of payroll processing costs

Human services organizations with complex pay scenarios and unique operational structures may find it challenging to find HCM and payroll solutions that are able to effectively handle these specific needs while ensuring compliance every step of the way. Organizations without HCM support that use a decentralized and fragmented or manual payroll solution can also experience difficulties.

A unified HCM and payroll solution consolidates and reduces payroll processing costs. The efficiency of HCM systems reduces the chances of any data redundancies, as time and attendance data can flow directly into payroll. And, when you move payroll from manual systems to a cloud-based, centralized platform, again integrated with HCM, you remove the need for concentrated IT support across your company network, which saves you additional money.

Improvement in employee engagement

Cloud-based HCM solutions increase employee engagement.

Just 20 to 30 years ago, interactive phone systems and big mainframe computers ran HR departments. HR professionals stored employee data and carried out all HR processes on these big mainframes that operated in secure, air-conditioned rooms, which only they and IT professionals could access. As such, only HR professionals could view and update employee data.

Many employees experienced onboarding and employee training via laserdisc presentations, which was often a slow and tedious process.

Since the late 2000s, HCM systems have been situated in the cloud and incorporate a single global payroll solution. These solutions provide employees with one-stop, omnichannel, on-demand access to all the information they need instantly, enhancing their engagement in company processes.

Employees now do not have to rely on an HR professional to access basic personal information about their:

  • Paid time off and leave accruals
  • Pay and benefits
  • Performance assessments
  • Sick time entitlements
  • Tax deductions

By making it quicker and more straightforward for employees to access their information and get what they need, the organization dramatically enhances its overall image. The organization also improves its employees’ experience with HR. 

Strengthening of data compliance

Data security and compliance has become non-negotiable, especially when dealing with employee information.

Although every company pays special attention to payroll data security no matter their location in the world, regulations require the implementation of tighter compliance levels. 

A single, unified payroll and HCM platform enables companies to have a centralized, secure database to store and manage employee data. This solution eliminates the risks of data redundancy and duplication because holding multiple employee records can increase the likelihood of a data breach.

Because modern HCM solutions store all employee data in the cloud, malicious tampering or fraud is significantly reduced compared to manual, decentralized HCM solutions.

Wrapping It Up

Human capital management elevates HR policies and procedures, ensuring that HR professionals spend less time on mundane, time-consuming tasks and more time on human capital management. This strategy works to align the workforce with an organization’s overall mission, vision, and business goals and objectives.

These processes elevate employee morale by building genuine opportunities for employees to carve out their career paths, improve their earnings, and better understand how to fit into the company culture. Integrating a global payroll solution into your organization’s HCM solution takes things up a notch. 

HCM also helps companies adhere to strict data compliance regulations (which could eliminate the possibility of hefty fines from the authorities), enhance employee engagement in the company and its culture, and reduce global labor and payroll processing costs.

Your HR and Payroll Expert

If you want to learn more about how your organization can benefit from enhanced HCM services and learn more about empowering your organization with a unified HR and Payroll platform, contact DATIS today

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