Not Even Partisan Politics Can Hinder the SaaS Delivery Model for Payroll

As politicians continue to debate the proposed Bush-era tax cuts extension—with no guarantee of Congressional approval before the cuts expire—payroll administrators are worrying about finding a huge mess after ringing in the New Year. Whether President Obama’s proposed deal passes or not, it is the latest example of how regulatory and legal changes, particularly one of this magnitude, can create havoc for traditional payroll systems and the people who administer them.

If Congress doesn’t approve the extension this month, it may be too late for payroll administrators to withhold the accurate amount of tax from workers’ paychecks. “The closer you get to the end of the year, the more problems there’ll be,” Michael O’Toole, a senior director at the American Payroll Association (APA), told The Hill back in September. If the IRS issues new withholding tables within three weeks of the end of the year, O’Toole said, most payroll systems could implement them before the tax cuts expire on December 31. He added that the APA was warning payroll departments that “you’re going to really have to pay attention and probably have to move on a dime when there is some certainty” about the outcome of the deal.

Well, that was back in September, and here we are, less than three weeks before the end of the year. Has the IRS issued new withholding tables? Most certainly not—there hasn’t even been a Congressional vote. And if the extension isn’t passed within the next few weeks, payroll departments will be scrambling to avoid IRS penalties by figuring out which workers are mistakenly over- or under-paying their taxes.

Yet there is group of payroll administrators who probably aren’t as stressed about these changes as many of their compatriots. They are customers of Workday, a provider of payroll, human resources, and financial solutions delivered on a software-as-a-service (SaaS) model. That last part is important, because the SaaS model is critical to alleviating the pain these payroll administrators experience in a world of ever-changing tax and payroll rules, at both state and federal levels.

Because Workday is delivered in a SaaS model, Workday updates the system for its customers whenever there are changes to tax laws and regulations. As users of real SaaS−and not merely a hosted software application or payroll system−Workday customers are all on the same code base, which when updated is easily distributed to all. Workday maintains federal, state, and local tax data for payroll processing for every customer and provides weekly updates, which is far more frequent than many payroll system providers. Workday’s Tax Compliance Process is designed to provide updates on a timely basis so that Workday Payroll will be updated to accommodate new rules and laws within 14 days. If the change is effective more than 28 days out, Workday provides updates at least 14 days prior to the effective date. This is the process, but in reality, all of this happens more quickly than that, typically within the same week.

So in the event new IRS tax tables go into effect next year, Workday Payroll customers will be able to get the tax updates implemented in their payroll more quickly than many of those using legacy payroll systems.

SaaS gets credit for a lot of things—lower cost, less maintenance, innovation delivered more frequently to customers, etc.—but often overlooked yet valuable are the examples of how SaaS can ease the pain points of individual departments and people. For Workday, there is no better example than payroll administrators who are stepping into 2011 with confidence, knowing there’s a plan in place to quickly respond and adjust to any new laws or regulations that come with the New Year.