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Putting payroll in the cloud

Moving payroll admin to the cloud should be quick, easy and seamless. But don't forget data security

As recently as just a few years ago, if you’d said you were putting payroll ‘in the cloud’, you’d have got some rather odd looks.

But no more. Cloud storage is everywhere, and it is making strong inroads into payroll by bringing a range of benefits – including the ability for cloud providers to automatically do all the annual updates normally required in-house.

Mervyn McCormick, business manager at financial services group Equiniti, which has been using the cloud for payroll since 2004, is certainly persuaded of the benefits. “The payroll cycle has peaks and troughs, so you don’t need to purchase the infrastructure to cope with these,” he says. “It’s easier to outsource the payroll administration to a third party as there’s no need to move in-house software.”

Pie in the sky?

Another commonly touted advantage of using the cloud is that it can be accessed from anywhere by any device with an internet connection. But some feel this message is over-egged. As Guy Ellis, managing director of HR consultancy Courageous Workplaces, says: “The evidence suggests most employees don’t want to access payroll, apart from at the end of the tax year to fill in tax returns.”

Providers estimate that although the trend to link payroll to the cloud has been gaining momentum, under 10% of businesses currently do so. One barrier is that not all payroll providers offer it.

Nevertheless, unless a business is in an area with poor internet connection there are no obvious downsides. Much boils down to personal choice, as some decision-makers simply feel more comfortable keeping payroll entirely in-house because they perceive themselves as having greater control.

Sourcing the tech

The cloud can come as an option from payroll providers, bundled in with accounts and payroll, or be accessed by outsourcing payroll altogether. Some providers offer the facility free, while others make modest charges, although cost is rarely a barrier.

Seeing what your current payroll provider offers is a good starting point but many firms also look elsewhere. The best way of sourcing a suitable provider is via recommendation from a peer, colleague or accountant, and the dangers of making a wrong decision are reduced by the fact that many providers offer a free trial period.

Making it take off

Implementation should be seamless, as there’s no software to install. Nicky McDonald, finance manager at St Albans-based charity The Counselling Foundation, switched to using her payroll provider QuickBooks’ cloud facility in April 2014, having previously also moved accounting functions to the cloud. “I was able to enter employee names, addresses and other necessary data pretty much in my own time in preparation,” she says. “The cloud system is easier to use and quicker to generate reports on than the previous payroll system, and it updates very quickly.”

Avoiding data dark clouds

Data protection and security issues must be taken seriously as you are entrusting another party with security of data to which you still have the legal liability.

Data protection regulations require personal information to be held within the European Economic Area but cloud providers can give access to appropriate data centres where information is held and processed.

A lot of security available for the cloud is bank-standard, and there is no reason it should be vulnerable to hackers if businesses keep passwords secure and have suitable virus protection. The key is for people to choose the right password (individual to them and containing a mix of numbers, letters and characters).

“It’s just a question of using sensible security procedures,” says Eugenio Pirri, vice president, people and organisational development at Dorchester Collection. “But,” he adds, “no company should ever take their eye off the ball.”

If anything, data is probably more secure as it won’t get lost if someone breaks into offices and takes the equipment. Good cloud providers use high standards of encryption and other security – which may be overlooked in-house.