ERP vs. HRMS: which should manage your payroll?

Everybody knows payday is the best day of the week. In addition, the most-liked person in any organization is the one who prepares the payroll.  What is the better tool: ERP or HRMS?

HRMS advantages

Most HRMS systems come with an assortment of handy, useful tools such as employee appraisals, loan balance and payment calculations, miscellaneous deductions, and time off balances.  Do you need help attracting new employees?

Maybe your staff needs some motivation. How about legal help with employment laws and regulations? Your annual employee performance reviews are coming shortly.  Many HRMS systems have the answers you want to find. Generally, these tools are easy to use and user-friendly too.

HRMS disadvantages

What is not to like?  A big disadvantage of most HRMS systems is that they are stand-alone and not integrated with your ERP, the central repository for business data.

For instance, when allocating an employee's time to a specific project, you can add the project code easily to HRMS, but you still need to use the total page of the HRMS report to justify a journal entry.  On the other hand, that project exists in ERP, and the accounting for that person’s time is handled completely within the ERP.

Integration challenges

You certainly can develop your own integration or hire someone to perform the work.  Your HRMS and ERP salespeople probably told you how easily and quickly this can be accomplished.  Check with your own IT staff, and you likely will learn it is not a simple task and they already have competing priorities that can delay or complicate the process.

Find the features your new ERP system needs with our free ERP features guide

ERP for payroll management

​ERP systems are capable of accurately processing payroll, with staff already familiar with their interfaces and workflows. ERP payroll is 100% integrated with accounting and project management with no additional work.  Some of the features that make HRMS attractive are already contained in your ERP. Check with your ERP provider and other features might be available for a small cost.

Bottom line

​Deciding between ERP and HRMS for payroll management depends on your organization's specific needs and resources.

Both systems offer distinct advantages and disadvantages. Evaluating the benefits and costs associated with each option will guide you to a solution that offers more efficient payroll processing while supporting your organization's broader operational goals.

Automation also plays a crucial role in modern payroll management. By selecting a system that minimizes manual data entry and reduces administrative burdens, organizations can improve accuracy, enhance compliance, and free up HR teams to focus on strategic initiatives.