Executive Summary

Domestic Payroll

The payroll preparation process has long been an inefficient, labor-intensive set of administrative tasks designed to ensure that everyone is paid correctly and on time. Historically, it has been a transactional- and compliance-centered function involving manual adjustments, reconciliations and the answering of repeated routine questions. Now, advances in digital technologies and delivery models have rendered the payroll function considerably more efficient with the added bonus of delivering new value to the business through automation, data-driven decision support and direct contribution to an enhanced employee experience.

Advances in digital technologies and delivery models have rendered the payroll function considerably more efficient, with the added bonus of delivering new value to the business through automation, data-driven decision support and direct contribution to an enhanced employee experience.

In our view this technology-mediated shift to a new style of payroll management is well worth the effort. We advise that organizations seeking improvement embrace an integrated approach that not only optimizes the payroll function but also connects payroll with other core HR, talent management and workforce management systems and their related information and processes. With this integration in place, organizations can make better and often more strategic workforce-related decisions using payroll-related data such as overtime hours worked, PTO, types of bonuses paid, benefits participation rates or the ratio of regular to contingent worker costs.

According to the traditional understanding of payroll management, an organization either gets it right, completing payroll runs accurately and on-time, or does not. But modern payroll systems shake up this conventional wisdom through an array of approaches that deliver variable added value. While gross-to-net calculation engines may still deliver the same results, processing speeds can vary greatly, as can a particular software product’s ability to detect and resolve errors without restarting the calculation cycle.

Several recent technological advances in particular have significantly reduced the time it takes to complete a payroll cycle. These advances not only include faster processing speeds but also robotic process automation, artificial intelligence and machine learning (AI/ML) that can instantly predict, detect and correct errors, and chatbots that can field workers’ routine questions. And with the application of generative AI, these chatbots have become even more conversational, making responses personal to the specific employee rather than issuing a generic company-wide response that may still require a phone call or a help ticket with an HR service center.

To varying degrees, vendors also differ in their software’s ability to seamlessly maintain compliance and consolidate reporting and analytics across multiple regions: national, state, local and everything in between. Tax calculations, from federal to state to local school district, must be accurate and, importantly, regularly updated and maintained. This is no small task and requires considerable commitment and expertise on the part of the vendor. Similarly, the ability to manage the full complement of garnishment types, generate mandatory reporting for ACA and other federal programs, and perform calculations and audits for ever-changing minimum wage and overtime regulations should all be table-stakes capabilities of any domestic payroll software, but not all perform to the same standards.

Now, however, technology is available that integrates the various aspects of HCM, connecting HR, payroll, talent and workforce management information and processes.

Over the last three decades, payroll management was widely outsourced. As a result, most of payroll management operations were either partially or completely severed from other human capital management (HCM) processes. This isolation prevented organizations from using payroll information and planning in strategizing. Organizations were not readily able to utilize payroll data to manage important initiatives such as pay-for-performance strategies, optimizing worker schedules or pay equity analyses.

Now, however, technology can integrate the various aspects of HCM, connecting HR, payroll, talent and workforce management information and processes. Furthermore, analysts, managers and executives can apply powerful analytics tools to enable better-informed decisions. More recently, tools such as robotic process automation, natural-language chatbots, now often referred to as co-pilots or assistants, and AI-enabled predictive and personalization capabilities are contributing to easier and more effective workforce management. These advances have also played a significant part in enabling organizations to work toward providing a superior employee experience, increasingly a requirement for attracting and retaining top talent. Workers expect an engaging user experience when entering hours worked or pulling up a current or past pay stub to confirm earnings, taxes and deductions. In new payroll systems, intelligent virtual assistants can provide conversational user experiences, answering questions such as, “How do I fix a timesheet error?” or, “When will I receive my first check?” These questions may not be critical from a business perspective, but they are typically urgent for the employee, and with these new tools they can be addressed within seconds rather than requiring a game of phone or email tag that leads to frustration and disengagement.

Workers increasingly expect an engaging user experience when entering hours worked or pulling up a current or past pay stub to confirm earnings, taxes and deductions.

Also in the realm of the employee experience, there have been significant advances in the flexibility of pay types, including the ability to pay via mobile-wallet, complemented by ancillary services such as targeted savings and financial wellness tools. Earned Wage access is another valuable tool that is becoming increasingly common, offering workers real-time access to a portion of the wages they’ve earned, providing a path away from predatory lenders and toward financial stability.

Over the past decade, the payroll function has become firmly established in the cloud. For organizations, this means more frequent updates and new releases without requiring organizations to retrofit customizations. Consequently, cloud-based services generally mean less reliance on an IT department to manage implementations. Further, vendors are increasingly offering no-code or low-code configuration options, thus bypassing the need for IT intervention at all. Nevertheless, small and midsize organizations continue to gravitate toward less sophisticated systems that provide reliability at a moderate cost, as offerings laden with innovative features often require a dedicated HR team to manage the deployment. Fortunately, vendors of all sizes are improving their offerings to include more sophisticated and valuable tools and functionality that are elevating the roll of payroll within organizations.

This research evaluates the following vendors that offer products that address key elements of domestic payroll as we define it: ADP, Ceridian, Infor, Oracle, Paychex, Paycom, Paycor, Paylocity, SAP, UKG and Workday.

Buyers Guide Overview

For over two decades, Ventana Research has conducted market research in a spectrum of areas across business applications, tools and technologies. Ventana Research has designed the Buyers Guide to provide a balanced perspective of vendors and products that is rooted in an understanding of the business requirement in any organization. Utilization of our research methodology and decades of experience enables our Buyers Guide to be an effective method to assess and select technology vendors and products. The findings of this research undertaking contribute to our comprehensive approach to rating vendors in a manner that is based on the assessments completed by an organization.

This Ventana Research Buyers Guide: Domestic Payroll is the distillation of over a year of market and product research efforts. It is an assessment of how well vendors’ offerings will address organizations requirements for domestic payroll software. The index is structured to support a request for information (RFI) that could be used in the RFP process by incorporating all criteria needed to evaluate, select, utilize and maintain relationships with technology vendors. An effective product and customer experience with a technology vendor can ensure the best long-term relationship and value achieved from a resource and financial investment.

Ventana Research has designed the Buyers Guide to provide a balanced perspective of vendors and products that is rooted in an understanding of business requirements in any organization.

In this Buyers Guide, Ventana Research evaluates the software in seven key categories that are weighted to reflect buyers’ needs based on our expertise and research. Five are product-experience related: Adaptability, Capability, Manageability, Reliability, and Usability. In addition, we consider two customer-experience categories: Validation, and Total Cost of Ownership and Return on Investment (TCO/ROI). To assess functionality, one of the components of capability, we applied the Ventana Research Value Index methodology and blueprint, which links the personas and processes for domestic payroll to an organization’s requirements.

The structure of the research reflects our understanding that the effective evaluation of vendors and products involves far more than just examining product features, potential revenue or customers generated from a vendor’s marketing and sales efforts. We believe it is important to take a comprehensive research-based approach, since making the wrong choice of a domestic payroll technology can raise the total cost of ownership, lower the return on investment and hamper an organization’s ability to reach its potential performance. In addition, this approach can reduce the project’s development and deployment time and eliminate the risk of relying on a short list of vendors that does not represent a best fit for your organization.

Ventana Research believes that an objective review of vendors and products is a critical business strategy for the adoption and implementation of software.

To ensure the accuracy of the information we collected, we asked participating vendors to provide product and company information across the seven product and customer experience categories that, taken together, reflect the concerns of a well-crafted RFI. Ventana Research then validated the information, first independently through our database of product information and extensive web-based research, and then in consultation with the vendors. Most selected vendors also participated in a one-on-one session providing an overview and demonstration, after which we requested they provide additional documentation to support any new input.

Ventana Research believes that an objective review of vendors and products is a critical business strategy for the adoption and implementation of domestic payroll software and applications. An organization’s review should include a thorough analysis of both what is possible and what is relevant. We urge organizations to do a thorough job of evaluating domestic payroll systems and tools and offer this Buyers Guide as both the results of our in-depth analysis of these vendors and as an evaluation methodology.

How To Use This Buyers Guide

Evaluating Vendors: The Process

We recommend using the Buyers Guide to assess and evaluate new or existing technology vendors for your organization. The market research can be used as an evaluation framework to establish a formal request for information from technology vendors on their products and customer experience and will shorten the cycle time when creating an RFI. The steps listed below provide a process that can facilitate best possible outcomes.

1. Define the business case and goals.
   Define the mission and business case for investment and the expected outcomes from your organizational and technology efforts. 
2. Specify the business needs.
   Defining the business requirements helps identify what specific capabilities are required with respect to people, processes, information and technology.
3. Assess the required roles and responsibilities.
   Identify the individuals required for success at every level of the organization from executives to front line workers and determine the needs of each. 
4. Outline the project’s critical path.
   What needs to be done, in what order and who will do it? This outline should make clear the prior dependencies at each step of the project plan. 
5. Ascertain the technology approach.
   Determine the business and technology approach that most closely aligns to your organization’s requirements. 
6. Establish technology vendor evaluation criteria.
   Utilize the product experience: Adaptability, Capability, Manageability, Reliability and Usability, and the customer experience in TCO/ROI and Validation. 
7. Evaluate and select the technology properly.
   Weight the categories in the technology evaluation criteria to reflect your organization’s priorities to determine the short list of vendors and products.
8. Establish the business initiative team to start the project.
   Identify who will lead the project and the members of the team needed to plan and execute it with timelines, priorities and resources. 

The Findings

All of the products we evaluated are feature-rich, but not all the capabilities offered by a technology vendor are equally valuable to types of workers or support everything needed to manage products on a continuous basis. Moreover, the existence of too many capabilities may be a negative factor for an organization if it introduces unnecessary complexity. Nonetheless, you may decide that a larger number of features in the product is a plus, especially if some of them match your organization’s established practices or support an initiative that is driving the purchase of new software.

Factors beyond features and functions or vendor assessments may become a deciding factor. For example, an organization may face budget constraints such that the TCO evaluation can tip the balance to one vendor or another. This is where the Value Index methodology and the appropriate category weighting can be applied to determine the best fit of vendors and products to your specific needs.

Overall Scoring of Vendors Across Categories

The research finds ADP atop the list, followed by Oracle and UKG. Companies that place in the top three of a category earn the designation of Leader. ADP has done so in five of the seven categories; Oracle in seven; UKG in five; SAP in four.

The overall representation of the research below places the rating of the Product Experience and Customer Experience on the x and y axes, respectively, to provide a visual representation and classification of the vendors. Those vendors whose Product Experience have a higher weighted performance to the axis in aggregate of the five product categories place farther to the right, while the performance and weighting for the two Customer Experience categories determines their placement on the vertical axis. In short, vendors that place closer to the upper-right on this chart performed better than those closer to the lower-left.

The research places vendors into one of four overall categories: Assurance, Exemplary, Merit or Innovative. This representation classifies vendors overall weighted performance.

Exemplary: The categorization and placement of vendors in Exemplary (upper right) represent those that performed the best in meeting the overall Product and Customer Experience requirements. The vendors rated as Exemplary are: ADP, Ceridian, Oracle, UKG and SAP.

Innovative: The categorization and placement of vendors in Innovative (lower right) represent those that performed the best in meeting the overall Product Experience requirements but did not achieve the highest levels of requirements in Customer Experience. The vendor rated as Innovative is: Workday.

Assurance: The categorization and placement of vendors in Assurance (upper left) represent those that achieved the highest levels in the overall Customer Experience requirements but did not achieve the highest levels of Product Experience. The vendor rated as Assurance is: Paycor.

Merit: The categorization for vendors in Merit (lower left) represent those that did not exceed the median of performance in Customer or Product Experience or surpass the threshold for the other three categories. The vendors rated as Merit are: Infor, Paychex, Paycom and Paylocity.

We warn that close vendor placement proximity should not be taken to imply that the packages evaluated are functionally identical or equally well suited for use by every organization or for a specific process. Although there is a high degree of commonality in how organizations handle domestic payroll, there are many idiosyncrasies and differences in how they do these functions that can make one vendor’s offering a better fit than another’s for a particular organization’s needs.

We advise organizations to assess and evaluate vendors based on their requirements and use this research as a reference to their own evaluation of a vendor and products.

Product Experience

The process of researching products to address an organization’s needs should be comprehensive. Our Value Index methodology examines Product Experience and how it aligns with an organization’s life cycle of onboarding, configuration, operations, usage and maintenance. Too often, vendors are not evaluated for the entirety of the products; instead, they are evaluated on market execution and vision of the future, which are flawed since they do not represent an organization’s requirements but how the vendor operates. As more vendors orient to a complete product experience, the more robust of an evaluation can be conducted.

The research based on the methodology of expertise identified the weighting of Product Experience to 80% or four-fifths of the overall rating. Importance was placed on the categories as follows: Usability (20%), Capability (20%), Reliability (15%), Adaptability (10%) and Manageability (15%). This weighting impacted the resulting overall ratings in this research. ADP, Oracle and UKG were designated Product Experience Leaders and received A- grades as a result of their top-ranked weighted performance. SAP closely followed, also receiving an A-.

Many organizations will only evaluate capabilities for those in IT or administration, but the research identified the criticality of Usability (20% weighting) across a broader set of usage personas that should participate in domestic payroll from employees to administrators.

Customer Experience

The importance of a customer relationship with a vendor is essential to the actual success of the products and technology. The advancement of the Customer Experience and the entire life cycle an organization has with its vendor is critical for ensuring satisfaction in working with that vendor. Technology providers that have Chief Customer Officers area more likely to have greater investments in the customer relationship and focus more on their success. These leaders also need to take responsibility for ensuring the marketing of their commitment is made abundantly clear on website and in the buying process and customer journey.

Our Value Index methodology weights Customer Experience at 20% of the overall rating, or one-fifth, as it relates to the framework of commitment and value to the vendor-customer relationship. The two evaluation categories are Validation (10%) and TCO/ROI (10%), which are weighted to represent their importance to the overall research.

The vendors that evaluated the highest overall in the aggregated and weighted Customer Experience categories and were deemed to be Leaders are ADP, Oracle and UKG. These category leaders in Customer Experience best communicate their commitment and dedication to customer needs. Vendors such as Paycor and SAP performed closely behind the Leaders.

Many of the vendors we evaluated did not have sufficient information available through their website and/or their presentations. While many have customer case studies to promote their success, they lack depth on their commitment to an organization’s journey to work with a vendor in domestic payroll. This makes it difficult for organizations to evaluate vendors on the merits of their commitment to customer success. As a result, some of the vendors’ performances were graded B- and below to C level grades. As the commitment to a vendor is a continuous investment, the importance of supporting customer experience in a holistic evaluation should be included and not underestimated.

Appendix: Vendor Inclusion

For inclusion in the Ventana Research Domestic Payroll Buyers Guide for 2023, a vendor must be in good standing financially and ethically, have at least $50 million in annual or projected revenue verified using independent sources, sell products and provide support in at least two countries in North America and have at least 50 customers. The principal source of the relevant business unit’s revenue must be software-related and there must have been at least one major software release in the last 18 months.

The research is designed to be independent of the specifics of vendor packaging and pricing. To represent the real-world environment in which businesses operate, we include vendors that offer suites or packages of products that may include relevant individual modules or applications. If a vendor is actively marketing, selling and developing a product for the general market and it is reflected on the vendor’s website that the product is within the scope of the research, that vendor is automatically evaluated for inclusion.

All vendors that offer relevant domestic payroll products and meet the inclusion requirements were invited to participate in the research evaluation process at no cost to them.

Six of the 11 vendors responded positively to our requests for additional information and provided completed questionnaires and demonstrations to help in our evaluation of their domestic payroll products. We categorize participation as follows:

Complete participation: The following vendors actively participated and provided completed questionnaires and demonstrations to help in our evaluation of their product: ADP, Oracle, Paychex, Paycor, SAP and UKG.

Partial participation: The following vendors provided limited information to help in our evaluation: Workday.

No participation: The following vendors provided no information or did not respond to our request: Ceridian, Infor, Paycom and Paylocity.

Vendors that meet our inclusion criteria but did not completely participate in our Buyers Guide were assessed solely on publicly available information. As this could have a significant impact on their classification and rating, we recommend additional scrutiny when evaluating those vendors.

Products Evaluated

Vendors of Note

We did not include vendors that, as a result of our research and analysis, did not satisfy the criteria for inclusion in the Buyers Guide. These are listed below as “Vendors of Note.”