HCM and Payroll Change Management Guide

HCM and payroll processes involve using technology and systems to manage an organization’s people and ensure they are paid accurately. These processes affect many aspects of an organization’s operations, so the decision to change systems is not a simple task—but it can lead to long-term benefits.

In this change management guide, we’ll walk you through the reasons why you should consider changing your HCM and payroll systems and four key steps to ensure the transition is as smooth as possible.

Why change your HCM and payroll systems?

Organizations spend significant time and money to evaluate such a major change, and it often seems easier to stick with a current process that’s just good enough. But even though new changes come with risk, businesses that stay with old HCM and payroll solutions run the risk of inefficiencies that can become costly down the road.

Your business isn’t static, so operational processes should adapt to support changes over time rather than limiting your growth. Whether you’re already on board with changing HCM and payroll systems or trying to make a case with your team, here are some key benefits to consider.

Improve efficiency and scalability

Outdated technology lacks automation, fails to integrate with HR and financial tools, and requires more manual processes, making it difficult for your business to scale. Transitioning to a central platform that integrates HCM and payroll processes will streamline operations, leading to more accurate data feeding into a single source of truth and fewer operational roadblocks preventing your business from expanding.

See also: 12 Benefits of Payroll Automation with Deel

Easily manage compliance

Labor laws and tax regulations are unique to each country, and keeping up with frequent changes can quickly become a costly challenge. The more platforms you have to manage, the more likely there will be human error, which increases noncompliance risk. In a 2024 Forrester study on global payroll, we discovered that organizations use an average of six different payroll tools, and 48% of respondents experienced increased payroll errors and inaccuracies.

Drive strategic business decisions

When HCM and payroll systems aren’t integrated, it’s difficult to get accurate, real-time visibility into labor costs, workforce planning, and payroll data. But with everything in one place, it not only makes operations easier, but it also consolidates data to better inform strategic business decisions as your team and company grows.

Step 1: Consideration

Before beginning any HCM and payroll system change, consider all the possible impacts, document processes, and set quantifiable goals to measure success. Here are examples of factors to assess and questions to ask across your organization:

Data readiness

• Does your current payroll provider integrate with your HCM system?
• What payroll data exists in your HCM today?
• Is your organization’s structure uniform and documented in your HCM already?

In-country provider status

• When do your current in-country provider contracts expire?
• How tight are the terms of the current contracts?
• Are you able to exit any contracts you might need to end?
• What special conditions are in the agreements?

Current staff

• How much expertise about payroll in different countries does your current payroll team have?
• What unique workflows have evolved that may not be part of the existing documented process?
• What is the new system's impact on processes and workflows for HR, payroll, and finance teams?
• Will new hires or promotions need to take place for this process to be successful?

Return on investment (ROI)

• What are the key challenges you’re solving with the HCM and payroll change?
• How do you plan to measure success and ROI? Do you plan to measure success by fully implementing a new system within one year, a 15% increase in operational efficiency, or a specific amount in cost savings?
• Have you recorded current numbers (operational efficiency, annual cost, etc.) to compare future numbers to?

Asking these questions upfront will help you define key challenges and identify the specific services you absolutely need in a payroll provider. It may also help you identify any actions (such as documenting SLAs, interviewing specific teams about their needs, and assessing data hygiene) that need to take place before moving forward with changing your HCM and payroll systems.

Step 2: Align with key stakeholders

Once you’ve assessed the potential impacts and prepared your data and infrastructure, it’s time to focus on your people. A key part of this step is communication. The more you proactively communicate and incorporate feedback from stakeholders across the organization, the more they will be invested in the new HCM and payroll system’s success.

Here are a few tips on how to effectively communicate with key stakeholders and mobilize them in the change management process.

Understand your stakeholder dependency

The payroll process at your organization may include stakeholders from finance, treasury, IT, HR, and other divisions. With so many people involved, it’s important to build a dependency map for every part of the process throughout the HCM and payroll change. Who are you going to rely on at each step? Who will be the point person for integrations, setting reminders for employees, or getting historical data?

Once you understand each dependency, it’s also important to map out the implications down the reporting line. Use your dependency map to tailor your messaging to stakeholders.

Explain the project goals

Describe precisely what is changing and all parts affected. Not every department may be familiar with everything that an HCM and payroll system change entails. Be explicit about what is changing, speak the language of your audience, and create dedicated time for Q&A sessions to ensure all stakeholders understand the reasons driving the change and the benefits to come.

Describe the benefits relevant to your audience

Take time to understand your team’s different needs and perspectives and communicate the value to each individual. This step is one of the most overlooked elements of change management communication plans. Explaining how an HCM and payroll change helps stakeholders directly goes a long way in securing buy-in and employee satisfaction. Below are some examples of how an HCM and payroll change benefits stakeholders in different departments.

• HR leadership: Less tedious processes for routine reports, which leads to smarter and faster decisions
• HR and payroll teams: Reduced error rates and faster processing times for each payroll cycle
• Finance: Consolidated and accurate data along with a more streamlined process for expansion
• IT and CISO: Fewer separate platforms with sensitive data to manage and better overall data security
• Legal: Reduced liability due to noncompliance and violations of labor laws

Confront objections head-on

Last but not least, don’t hide from the uncomfortable conversations about the HCM and payroll change, especially the changes that are disrupting the status quo. Address them early and often. Listen to and welcome feedback, explain the reasons and plan, and explain again. Here are four main types of stakeholders that you’ll encounter and how to engage with them.

• Supporters are the people who have bought in and are ready to help with the transition. Use them to your advantage to promote the change and its benefits to their peers. These folks are essential, positive influences.
• Fence-sitters are skeptical. They have seen payroll and HR transformation attempts before. They buy into the reasoning, but they’re just not sure you can pull it off. You need to embrace them as well, but you will have to proactively pull them in. As a fence-sitter, they won’t initiate engagement, but if you continue to communicate openly about the change (the reasons why and the goals you’re trying to achieve), they can become supporters.
• Active dissenters are the naysayers, and they make themselves known. They’re not happy about the change, so they’re pessimistic and attempt to poke holes because they’ve seen changes fail before. The good news is it’s still possible to get them on board. For the most part, you can persuade an active dissenter into a supporter by investing in them. Answer their questions patiently, multiple times. Win them over, and they will become your most effective supporters.
• Passive dissenters are the most dangerous group. They are hard to convince because they are hard to find. They never show themselves as active dissenters. They will present themselves as fence-sitters or possibly fake supporters. The best thing you can do is maintain transparency about the change and keep feedback loops open.

Step 3: Cutover

As you get ready for implementation, it’s critical that all of your stakeholders are ready to navigate the transition to the new HCM and payroll systems. Here are some recommended initiatives to prepare your team:

• Train stakeholders on short-term workarounds to continue their business-as-usual work during the expected implementation
• Inform stakeholders of the implementation timeline and key milestones, so they know what to expect
• Provide key channels and resources for ongoing support, such as a dedicated Slack channel, a portal for IT support, or a change management guide
• Send out reminders leading up to the implementation date and highlight any necessary action items

An HCM and payroll change will take significant time, and you’ll likely need to adapt along the way. The key here is to do your due diligence in planning out the logistics of the transition and preparing your team before the change occurs so that your organization can navigate the challenges with a sense of purpose and assurance.

See also: How to Manage a Successful Payroll Transformation Project

Step 4: Post-launch

After the implementation is complete, it’s time to provide ongoing support and training to ensure the newly implemented HCM and payroll processes run smoothly.

Keep the feedback loop open

Feedback is just as significant post-launch as it is in development. You probably didn’t get everything right on the very first try, and that’s okay. By putting in escalation procedures to respond to feedback on the new HCM and payroll processes, problems can be identified and resolved efficiently.

Provide ongoing training for new processes

In any large organization, maintaining consistent processes can be a challenge, even with new and better systems put in place. It’ll take time for people to fully adopt the new processes, but the key is to provide training resources and documentation around new workflows.

As more time passes after the implementation, you’ll likely learn more about what works well and what doesn’t. Measure the effectiveness of your training programs and update your team with clear, consistent reminders on new processes. Over time, the new HCM and payroll systems and workflows will develop into habit, and your organization will reap the benefits of greater efficiency, accuracy, and compliance.

Conduct a post-implementation audit in order to capture the change’s impact. These numbers serve as great evidence to your team that their hard work and collaboration in the change were well worth it.