With so many different payroll systems in the Philippines, it may be confusing for some companies to choose the right payroll system for them without understanding their differences. So what are the different types of payroll system in the Philippines? And how to choose the right type of payroll system for the company?

On-Premise Payroll Software vs Cloud-based Payroll System

The first question that companies need to ask themselves is if they wish to buy a payroll software or subscribe to a cloud-based payroll system. Before deciding on the type of payroll system, the company needs to consider several factors such as the customization and integration of the system, and the cost of the payroll system.

Companies who choose to purchase an on-premise type of payroll software will have full control over the security of the system and the privacy of their employees’ information. They also have a greater flexibility to customize the payroll software to cater to their needs. Therefore, these companies are more likely to be able to integrate their payroll software with other ERP software. However, that means these companies are also more likely to require dedicated IT staff to customize, maintain and update the payroll software themselves.

On the other hand, companies subscribing to a cloud-based type of payroll system need not worry about the technical aspect of the system such as hardware and software compatibility, and data storage and security. It is also much easier to setup and implement the payroll system with standardized settings. Furthermore, the cost of subscription is likely to be monthly rather than a one-time fee which is usually substantially higher.

On-Premise Payroll Software Cloud-based Payroll System
Data Security Full control Depending on provider
Information Privacy Full control Depending on provider
Hardware & Software Compatibility Must be compatible No problem
Integration with other Software Highly Achieveable Depending on provider
Cost & Budget One-time fee Monthly subscription
IT Staff requirement Yes or outsource Generally no

Modular HRMS vs Dedicated Payroll System

Another consideration is the extent of automation for the human resources department. Besides the payroll system, some companies may also require learning and development management system, performance management system and applicant tracking system. All of these can be found in a human resources management system (HRMS) or human resources information system (HRIS). The payroll system is only a module of the HRMS or HRIS.

If the company intends to automate other functions of the human resources department, it will be advisable to choose a HRMS or HRIS. Because the integration will be much smoother. The whole system should be able to work together properly without much problems and without much modification if any. However, modular HRMS or HRIS usually cost higher than a dedicated payroll system. And when the company does not purchase or subscribe to the whole service, some parts of the core HR module may be redundant.