Siloed and 'locked-in' traditional payroll systems and departments don't align with modern integrated and data-conscious businesses. Moreover, layers of granular software customisations limit the agility of payroll software, creating lock-in where there should be scale and choice.

However, conventional wisdom holds that one needs to customise payroll systems to get the most out of them. Is this still true, or is there a more flexible alternative?

The problems with customisation

Organisations often rely on customised software to match internal processes and workflows. But this approach is not ideal.

Customisation needs extensive development and coding that permanently alters software. Even if the customisations are minor, they still require skilled developers to enact the changes. Those changes can often lead to other effects that must be addressed, leading to more development time and costs.

Even if the customisation was effortless and flawless, it has a shelf life. At some point, updates to the core product will require changes to the customisation. If the people responsible for the customisation leave the organisation, they can take that knowledge with them, making future changes very difficult. When the business wants to change software providers, it must customise everything from scratch.

Unsurprisingly, many organisations elect to keep such a system going long after it's become outdated, a phenomenon called 'lock-in'. They just hope nothing big will change.

However, change is crucial for today's companies. Shifting marketplaces, faster competition, digital risks, and modern business tools prompt organisations to adapt their software. This dynamic is evident with payroll software.

For example, KPMG has identified several trends pushing payroll modernisation (https://apo-opa.co/4dVuHiO), such as better employee experiences, complex workforce compliance, accessing global markets, evolving payment options and structures, and the imperative to embrace cloud technology, artificial intelligence, and data.

The more a payroll system is customised, the harder it will be to adapt to such demands and opportunities. But there is an alternative: configure the payroll software.

Is payroll configuration the better option?

Configuration used to be a very limited and superficial option, not a valid alternative to customisation. Yet, cloud-native platforms are changing how organisations can alter software, says Clyde van Wyk, Director and Co-founder at PaySpace:

"Cloud-native software platforms do things differently. They are modular, making it easier to change specific parts without affecting the overall system. Ownership also works differently. Previously, companies had to buy and own the software they wanted to alter. Now, they can make massive configuration changes without owning any part of the software, so the financial risks are much lower."

Cloud-native software platforms operate from a single entity that serves multiple tenants, each receiving a unique instance of the software. To accommodate customisation needs, platforms provide in-depth configuration options, leveraging modern software concepts to make extensive alterations without harming the integrity of the central system. Examples include changing user interfaces, creating customised and ad-hoc reports, automating elaborate processes, integrating other business systems, and processing different data sources.

This approach avoids lock-in. When the software updates, the configuration carries over unaltered (or is quick to update if changes are needed). Configuration rarely requires developers to make changes—that power now resides with the business professionals using the software. If there is a requirement for developer-specific alterations, these can be modular and easy to migrate.

Configure is the new customisation

Is it better to configure your payroll software and avoid the costs, risks, and lock-in of customisation? When using a cloud-native payroll platform, the answer is yes. Such platforms offer more scale, flexibility, and direct control without development overheads, hefty upfront investments, or delayed changes. They provide robust and fast integration, excellent employee self-service, calculation automation, universal data standards, and push updates for new features and employment regulations.

"It's now easier and better to configure instead of customising," says van Wyk. "Even if there is some customisation, it's limited and easy to graduate into built-in features, but without the technica lock-in or ongoing costs. Thanks to cloud-native software, companies almost never have to rely on customisation again."