HR Benefits Platform As employeesget more involved and “hands-on” with their benefits, integratingpayroll makes the end product easier for consumers as well as HRprofessionals. (Photo: Shutterstock)

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Like announcements for a new fusion restaurant, some companieslately have been describing the merger of benefits and payroll platforms with terms thatare as spicy as … well, as spicy as they can make them.

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“Strengthen growth strategies!” “Unparalleledresponsiveness!”

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The terms don't roll off the tongue quite as well as “Tex-MexEgg Rolls!” but there are reasons to get excited, just thesame.

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The move toward integration of payroll and benefit managementplatforms exists for a relatively simple reason: it createsefficiencies and ease-of-use for both employees and HR departments.The actual process of finding seamless integration between payrolland benefit platforms has been less simple. But as technology andAI advances have opened new possibilities, integrated systems arebecoming more common.

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Related: Benefits administration: trends, deal breakers andtechnology's massive potential

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“There have been a couple of dynamics over the past ten yearsthat are driving this,” says Tom Dugan, vice president of productmanagement at Benefitfocus. “The breadth of what needs to be in abenefits program has been a key contributor. The shift post-ACA tomore high-deductible plans, and the growth of voluntary benefitsand specialty products—like identity theft protection, forexample—all these things are playing a role. As administrativeteams have had to manage a broader range of benefits, it has forcedrapid innovation.”

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The ongoing changes have created greater demand for moreefficiencies in benefit systems, Dugan said. “Because it hasbrought together solutions from different areas, that integrationbecomes really important; otherwise it becomes a challenge for thebenefits team—and the company as a whole.”

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Creating efficiencies for HR departments—and consumers

But it's not just employers and their HR departments that need amore efficient system. As employees get more involved and“hands-on” with their benefits, integrating payroll makes the endproduct easier for consumers, as well.

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“The 'employee experience' is becoming a buzz term—you're seeinga greater attention on how to make benefits easier,” says KevinAndrews, president and chief technology officer at Hodges-Mace.“We're seeing HR departments move more to an HR-mobile strategy;companies are getting rid of paper and letting employees choosebenefits online. That brings in support tools, which are drivingthe payroll side toward tighter integration as data isexchanged.”

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Dugan agrees that the consumer is counting on seamlessintegration to make their benefits easy to access and understand.“There are a whole host of things happening with payroll that needsto feed back into benefits administration. There needs to beconsistency, and data quality is really important.”

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Still in a period of transition

Dugan also notes that the benefits world still has not developedindustry standards and systems have been built that createchallenges for automating and data collection. “There are still alot of file-based interfaces out there; even the leading playersmay have numerous payroll systems. So there are a variety ofdifferent interface models.”

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With the rise of application program interface(API)-basedmodels, Dugan says there's a gradual move toward a more efficient,standardized solution. “The use of API has been a way to connectbetween systems, and I think that's a shift in the technology, butit also leads to businesses thinking about the market differentlyas it's evolving.”

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Dugan points to distributed ledger and blockchain technology astwo areas that could bring innovation to payroll systems.Distributed ledger technology consists of databases that are spreadacross nodes or computing devices, which are updated independently,and not reliant on a central source. Blockchain is a form ofdistributed ledger technology, but in this model, data is groupedtogether and organized in linked blocks, which are secured usingcryptography.

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“These are emerging concepts that are still very early on; butfive years out, they may offer some possibilities,” Dugan says.

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Scale continues to matter

According to Andrews, there are payroll solutions available toevery size of employer. His experience is that solutions can befound for every size of employer, and that complexity of thebenefit package is more of a challenge than the number ofemployees.

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However, small companies face some unique challenges, he adds.“Highly complex benefits in small companies can drive costs up. Ifyou're under 50 employees, you will still have some challenges inautomation. You just don't have the same efficiencies on thebackside [as larger companies].”

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On the other hand, Andrews adds, getting integration betweenpayroll and benefit platforms can be challenging on any level.“There are still learning curves,” he says. “It's been interestingto watch mammoth payroll companies trying to figure this out.”

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