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HomeMy WebLinkAboutItem 6d1 City of Lakeville Finance Department Memorandum To: Mayor and Council From: Jerilyn Erickson, Finance Director Tammy Schutta, Human Resources Manager Date: June 15, 2019 Subject: Financial/Human Resource/Payroll Software The City of Lakeville has been a member of LOGIS (Local Government Information Systems, an intergovernmental consortium of Minnesota local government units) since 1976. In 2001, the City converted its financial and payroll functions to the JDEdwards software. Other modules have been in place prior to 1998. The City utilizes LOGIS for many software applications as well as network services. For 2019, the City will pay approximately $574,000 for those applications and services. Those costs will increase $60,000 or 10.4% to $634,000 for 2020. The City currently pays $115,000 for the financial and human resources/payroll applications. In 2020, the cost will be $137,000 ($22k or 19% increase). The increase is due to LOGIS updating its allocation (based on the current number of transactions in each application) after having not done so for a few years. For reference, LOGIS costs for these applications have increased 68-77% since 2010. City staff have been interested in exploring options for financial and human resource/payroll software for various reasons including functionality, automation, interfaces, and cost. Some questions that staff has considered: 1) Is there functionality in our current software that is not being used; if so, why not? 2) What functionality is not available? 3) What are the City’s goals for automation? 4) Which applications currently do not interface with the general ledger? Functionality that is not currently being used: 1) Budget – LOGIS recently rolled out a budget module that has basic functionality. Staff reviewed this module in Fall 2018 and thought it lacked functionality. 2) Accounts Receivable – staff had reviewed this module several years ago and found that it lacked functionality despite the advantage of being able to interface directly with the general ledger. 3) Tungsten document scanning – a number of cities are using this automated accounts payable processing module. Initial cost would be approximately $12,000 for the first year. Staff will need to research if additional software licenses would be required. 2 Functionality not available: 1) Project accounting – the ability to track project revenues and expenses across departments and funds. 2) Employee Self Service (ESS) – the ability for employees to submit timecards, access pay statements and W2s through mobile app. Automation Goals: 1) All departments have read-only access to the financial system to review department transactions, generate reports, enter and scan accounts payable invoices. Additional licenses would be required. 2) All departments have access to budget module to enter proposed budget. 3) Eliminate or minimize manual processes for all modules. Interfaces: 1) Special Assessment module doesn’t currently interface with the general ledger. 2) Payroll module doesn’t fully interface with general ledger. Estimated resources needed: 1) Consultant – estimated cost = $60,000 a. conduct a needs analysis (identify the functionality needed to provide efficient services) b. prepare a Request for Proposal c. establish process for reviewing and selecting a software solution d. negotiate the software contract 2) Consultant – estimated cost = $60,000 a. to assist staff with implementation of the software 3) New software – this is unknown until such time that we would seek proposals from software firms. The current CIP does not identify resources for expanding the current software, conducting a needs analysis, implementation of new modules or software, etc. As we think about our current needs and prepare for the needs of our growing organization, it is important to have a robust system (financial and HRIS) that provides efficient processes and comprehensive reporting capabilities. Staff would like to engage a consultant to conduct a needs analysis to identify the functionality that is needed to provide efficient services. Attached is an interesting article about the changing business needs which place new demands on payroll systems. 6/11/2019 Changing Business Needs Place New Demands on Aging Payroll Systems https://www.shrm.org/resourcesandtools/hr-topics/technology/pages/changing-business-needs-aging-payroll-systems.aspx 1/3 (www.shrm.org/ResourcesAndTools/hr- topics/technology/Pages/payroll-vendors-guide.aspx) Changing Business Needs Place New Demands on Aging Payroll Systems By Dave Zielinski November 6, 2018 The HR technology industry has experienced a renaissance over the past few years as vendors have introduced a bevy of modern, user- friendly features designed to meet client's new needs. Yet arguably, one of the most important platforms has often been left behind in that movement: payroll systems. In many organizations, payroll systems are outdated and lack the modern capabilities needed to meet changing business and compliance needs. A new survey from the American Payroll Association and Kronos found that almost 30 percent of respondents are using systems that are more than 10 years old, and almost half of polled organizations don't track and report on key performance indicators in their payroll functions. The survey includes responses from 1,000 payroll professionals in small, midsize and enterprise-size companies across industries. [SHRM members-only online discussion platform: SHRM Connect (https://community.shrm.org/home? _ga=2.268625778.206560651.1493167936-920689375.1491920969)] Costs of the Status Quo Organizations have been reluctant to upgrade aging payroll systems for a handful of reasons, experts said. Atop that list is a desire to avoid xing what isn't broken. Most legacy payroll systems are on-premise models that have been highly customized with multiple integrations to other HR systems. Payroll professionals can be reluctant to introduce change for fear of creating problems in a process in which data accuracy and system reliability are paramount. Major payroll providers often oer plans for clients with older, on-premise systems to transition to newer, cloud-based versions, said Mollie Lombardi, co-founder and CEO of advisory and analyst rm Aptitude Research Partners, which recently completed a major study of the global payroll market. But many payroll leaders are hesitant to make the change because of a risk-averse nature. "Payroll touches everyone in the organization, and there's a belief [that] a system change needs to be as painless as possible," Lombardi said. 6/11/2019 Changing Business Needs Place New Demands on Aging Payroll Systems https://www.shrm.org/resourcesandtools/hr-topics/technology/pages/changing-business-needs-aging-payroll-systems.aspx 2/3 Experts said many modern payroll systems can help HR provide enhanced levels of service and strategic support to organizations. Lombardi's study found that many of these platforms have expanded self-service options that can help boost employee engagement, new on-demand reporting tools and an ability to create seamless integration with time and labor-management systems. Aptitude's study included 500 respondents across industries and company sizes. Failure to modernize payroll systems has real costs, said Sam Grinter, a senior research analyst with research and advisory rm Gartner, based in Stamford, Conn., who recently published a study on multicountry payroll solutions. Outdated, heavily customized applications require scarce and often costly resources to adapt to changing legislative compliance requirements and shifting end-user demands, Grinter said. "While in theory older systems shouldn't break down due to age because vendors make promises to continually invest in maintaining or upgrading them, that isn't always the case," Grinter said. "Levels of investment by vendors in these systems is variable." Another drawback of aging payroll systems is an ability to comply with regulations like the recently enacted General Data Protection Regulation (GDPR) (www.shrm.org/resourcesandtools/hr-topics/talent-acquisition/pages/ready-gdpr-deadline-may-25.aspx). Similar data privacy laws may be introduced around the world in coming years, said Stacey Harris, vice president of research and analytics with HR technology advisory rm Sierra-Cedar. GDPR requires organizations operating in the European Union (EU) or doing business there to protect the personal data and privacy of EU residents. "Payroll systems need an ability to access and remove employees' personal information, which isn't easy to do without disturbing historical data," Harris said. "That's a challenge and risk with older payroll systems that have been highly customized. They may contain data and tables that can't be easily removed or encrypted in a way that the data can be maintained for longer-term needs or compliance requirements in many countries." Capabilities of New Systems Payroll providers serving small as well as large companies have developed next-generation systems with a variety of new capabilities. Lombardi said by harnessing the power of the cloud and separating processes like payroll reporting from payroll calculations, some vendors have transformed batch processes that once took hours to complete into a real-time view of payroll status at any point in a pay cycle. That capability allows companies to adopt practices like same-day pay for hourly workers, Lombardi said, an approach proving to be an eective recruiting and retention tool in some industries. Aptitude's payroll study also found other innovations, including increased use of mobile self-service apps, chatbots and proactive communication tools designed to relieve HR's administrative burden and improve customer service. Self-service and a greater focus on the employee experience are hallmarks of modern payroll systems, Harris said. "We've seen the adoption of self-service technology increase dramatically even for smaller and midmarket companies, since many employee questions come in the area of payroll," she said. "Organizations are really rethinking the idea of what the help-desk model in HR should look like." The number of payroll providers targeting the small and midsize markets has grown rapidly, Lombardi found in Aptitude's report, in part because those businesses nd themselves with increased regulatory requirements that once aected only larger enterprises. The economics of software-based products also are allowing smaller businesses to capitalize on that technology to meet compliance needs, Lombardi said. Some providers also have added features that facilitate improved sharing and analysis of payroll data across a company. On-demand analytics and reporting allow functions like operations and nance to leverage payroll data when making business decisions and to improve insight into labor costs. "The idea of generating real-time data from payroll systems was previously unheard of," Harris said. 6/11/2019 Changing Business Needs Place New Demands on Aging Payroll Systems https://www.shrm.org/resourcesandtools/hr-topics/technology/pages/changing-business-needs-aging-payroll-systems.aspx 3/3 Contact Us (www.shrm.org/about-shrm/Pages/Contact-Us.aspx) | 800.283.SHRM (7476) © 2019 SHRM. All Rights Reserved SHRM provides content as a service to its readers and members. It does not oer legal advice, and cannot guarantee the accuracy or suitability of its content for a particular purpose. Disclaimer (www.shrm.org/about-shrm/Pages/Terms-of-Use.aspx#Disclaimer) How eectively payroll is integrated with other systems also can play a role in the ability to recruit and retain talent. Oerings like student loan repayments, retirement investments and even pet-sitting services require myriad payroll deductions and thus system exibility and interoperability, Lombardi said. Integration with third-party providers collecting payroll deductions ranked in the top three provider selection criteria in the Aptitude survey, behind only cost and automatic tax updates. Dave Zielinski is a freelance business writer and editor in Minneapolis.