Unified Payroll vs. Integrated Payroll: What's the Difference?

Choosing the right payroll system is a cornerstone for creating positive employee experiences, streamlining payroll processing, and ensuring compliance. 

When payroll runs smoothly, it's practically invisible. However, when it’s less than efficient, employees who are incorrectly remunerated, paid late, or not at all, will quickly let you know. By selecting the best payroll system, businesses can avoid these pitfalls and set the stage for a harmonious, compliant, and productive workplace.

In this article, we’ll explore the differences between unified payroll and integrated payroll systems to help you find the right solution for your company.

What is unified payroll?

Unified payroll is an all-in-one solution that consolidates all payroll-related tasks within a single platform. Usually, the platform has been developed by a single vendor for this purpose. Unified services typically include payroll as one of four employee-related services:

• Payroll: the remuneration of employees, plus mandatory deductions
• Workforce management: the logistics of worker deployment
• Human resources: managing staff, training, and disputes
• Talent management: employee recruitment and development

In this way, payroll is one division of the whole employee lifecycle management process. Unified payroll simplifies the workflow by reducing the need for multiple software tools, making it easier to manage payroll processes seamlessly. 

With a unified system, businesses can handle everything from payroll calculations to compliance reporting in one place.

What are the advantages of unified payroll?

Unified payroll systems offer several advantages:

• Automation and accuracy: They streamline workflows, reducing the complexity of managing payroll by having all functions in one platform. This consolidation improves data accuracy, as there is less room for errors with data entered and processed within a single system. 
• User experience: The ease of use of a unified system is another benefit, providing a user-friendly interface that simplifies payroll management. 
• Scalability: Additionally, unified payroll systems are scalable, making them suitable for growing businesses that need to expand their payroll capabilities without integrating multiple software tools.

Potential drawbacks of unified payroll

However, unified payroll systems are not without their drawbacks:

• They may offer less flexibility compared to integrated systems, particularly if a business requires specialized features not included in the unified platform.
• Adapting to a new all-encompassing system can also present challenges, especially for users accustomed to different tools. 

While traditional unified payroll providers may lack flexibility, solutions like Deel offer a scalable approach that includes comprehensive features such as hiring independent contractors, provisioning equipment, immigration support, and more.

Now, let’s consider the other approach, which pulls together different employee-related platforms.

What is integrated payroll?

Integrated payroll systems manage payroll functions by connecting separate software systems. This approach typically involves using APIs or other connectors to sync data between different systems. 

For instance, a company might use one system to pay independent contractors, one to pay direct employees under an owned entity in one country, and another to hire and pay workers under an employer of record. These would be linked with API integrations. Integrated payroll systems allow businesses to maintain specialized tools for various functions while ensuring data flows smoothly between them.

What are the advantages of integrated payroll?

Integrated payroll offers a couple of advantages:

• Customization: The main advantage of integrated payroll systems is customization. Businesses can choose their preferred solutions for different functions, allowing for a tailored approach to payroll management. 
• Flexibility: Integrated systems are also scalable, making it easy to add or update functionalities as needed. This flexibility allows businesses to adapt their payroll systems to changing requirements without overhauling the entire system.

Integrated payroll is often a default strategy rather than an explicit choice. Its adoption is born of using one system, then plugging others into it as the company grows. 

For instance, a start-up with a handful of employees might use a basic payroll system, then add in HR, workforce management, and talent management systems as they scale.

What are the potential drawbacks of integrated payroll?

However, integrated payroll systems aren’t always an ideal solution:

• They can be complex to maintain. Ensuring seamless integrations between different software systems requires ongoing management and troubleshooting.
• Data inaccuracies can arise if systems are not perfectly synchronized, leading to potential issues with payroll accuracy and compliance.
• Design and nomenclature differences between systems can cause user confusion. There may be more manual file sharing or data translation.
• There can be a higher security risk, with more points of potential entry for hackers.

In short, there’s simply more that can go wrong with an integrated payroll system, given the potential stack of platforms that must synchronize. 

Comparing unified and integrated payroll systems

Both payroll systems have their pros and cons, and it isn’t always obvious which route to choose.

Unified systems offer an all-in-one solution that simplifies payroll management, while integrated systems can allow for greater customization and flexibility, depending on the providers. 

Unified systems are generally easier to use due to their single interface, but integrated systems can be more adaptable to specific business needs. The choice between these systems depends on factors such as company size, industry, and specific business requirements.

Unified payroll systems:

• Simplicity: All-in-one solution simplifies payroll management.
• Ease of Use: Single interface, user-friendly.
• Scalability: Everything you need to grow your team in size or location.
• Maintenance: Easier to maintain with less need for multiple integrations.

Integrated payroll systems:

• Customization: Flexibility; can choose best-of-breed solutions for different functions.
• Adaptability: Can adapt to specific business needs and changing requirements.
• Complexity: More complex to maintain, requiring robust IT capabilities.
• Cost: Potentially higher ongoing costs due to multiple software licenses and integration maintenance.

However, if you have an SMB or start-up, or if you’re an enterprise level business considering an overhaul of payroll, we’d advise going for a unified approach, choosing a solution that’s scalable and fully featured.

How can you know which is the best type of payroll system to adopt? Next, we’ll look at the factors you need to consider.

How to select the right payroll system for your business

Choosing the right payroll system requires assessing your business requirements. Consider the following aspects before finalizing your decision:

IT infrastructure

Companies should consider their IT infrastructure when deciding between unified and integrated payroll systems because it directly impacts maintenance, support, and scalability.

Unified payroll systems, requiring less maintenance and support, are ideal for companies with limited IT resources. In contrast, integrated systems demand robust IT capabilities to manage multiple systems and ensure seamless data flow. The complexity of integrating various solutions, along with the cost and resource allocation, may require a strong IT infrastructure.

Budget constraints

Typically, a unified payroll system can be more cost-effective in the long run for small to mid-sized businesses. 

The initial investment might be higher, but it often includes all necessary features, reducing the need for additional software purchases and integration costs. This approach minimizes ongoing expenses related to maintaining multiple systems and their integrations.

While the initial setup cost for integrated systems might be lower, the ongoing costs can be higher due to the need for multiple licenses, integration maintenance, and potential custom development. 

Long-term business goals

As the company grows, a unified payroll system can expand its capabilities without requiring significant changes to the existing setup. This approach supports businesses that prioritize operational simplicity and a streamlined user experience.

For businesses with long-term goals of high customization and adaptability, an integrated payroll system may offer the flexibility to evolve with changing business needs. 

This approach can be beneficial for companies that anticipate significant growth or diversification, requiring specialized tools for different departments or functions. If a unified payroll solution doesn't have everything you need to grow your team, an integrated system can allow for the addition or replacement of components without overhauling the entire payroll infrastructure.

Choose an approach that’s right for you

Understanding the differences between unified and integrated payroll systems is crucial for selecting the right solution for your business. 

Each system has its strengths and potential drawbacks, and the best choice depends on your specific needs and goals. 

However, all things being equal, a unified payroll solution is where we would advise starting, for the sake of convenience, completeness, efficiency, and cost.

Consider Deel for your unified payroll and HR needs

Experience the flexibility and comprehensive features that Deel offers to streamline your payroll and HR operations. With Deel, you can manage US and international payroll, performance, compliance, and more, all within a single platform. 

Don’t just take our word for it, though. We have numerous case studies that explore how Deel helped clients like Turing and DivBrands optimize their global payroll operations.

Book a 30-minute product demo with an expert today to learn more about how Deel can support your global workforce needs.