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5 phases of payroll system implementationImplementing a payroll system involves five phases: scope, planning, execution, monitoring and evaluation. Here’s a high-level overview of the associated activities of each phase.


The organization formulates the project’s primary objectives. These create the basis for the anticipated investment of time and resources needed for implementing and maintaining the new system. A gap analysis is also performed to identify existing deficiencies and system features that require improvement.

The organization then prepares a tailored statement of features they are seeking, which constitutes the project deliverables and assists in selecting the right payroll solution (e.g., off-the-shelf software, in-house or outsourced solution, software hosted on a local server, or a cloud-based solution).

An implementation project is costly, so the organization must also establish a reasonable project budget based on a detailed cost-benefit analysis and consistent with the organizational financial goals. Solution features should be categorized as “must have,” “should have” and “would like to have” to help evaluate them against budgetary constraints.

The organization then creates a shortlist of suppliers. The possible solutions are presented, reviewed and evaluated, and the provider and system are selected.


The organization creates a critical path for the project, identifying and assigning all tasks and responsibilities required to complete the project. This plan should include a complete timeline, and the financial and human resources needed. Training and support for end-users should also be outlined.

The organization develops a detailed communication plan, with a “go live” target date, for key stakeholders impacted by the change. The organization must also identify any potential service interruption risks and have contingency plans in place.

Execution and Testing:

The organization converts and maps existing payroll data to the new system, identifying any gaps, eliminating any redundancies and incorporating new or customized processes.

Once the data conversion and modifications are complete, testing is vital. Parallel payroll runs are performed to validate the accuracy of the payroll output, with particular emphasis on exceptional situations. Any discrepancies are fixed and further parallel testing is conducted to ensure issues have been resolved.

This parallel testing and analysis of output results also highlights any differences or changes in operation. All key differences and changes should be communicated to project stakeholders.

Upon completion of the testing phase, final approval and sign-off is granted.


Following launch, the organization should continuously review and validate the payroll system’s functionality to ensure its performance meets expectations. Areas to monitor include employee accounts, legislative compliance of the payroll processes, reporting, level of integration with other business systems, and security and audit controls. By tracking progress consistently, the organization can fix errors quickly and know the new payroll system is running as it should.


Now the organization should assesses the project’s success and the team’s performance. All stakeholders provide feedback on the system functionality, determining whether the intended goals were met. Note any challenges or areas of improvement for the future.

While implementing a new payroll system may seem overwhelming at first, a clear process and plan to manage the change will deliver a better payroll experience and outcome for your organization.

This article is an excerpt from Dialogue Magazine, which is received by members of the National Payroll Institute. If you are not already a member, we encourage you to join.

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