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Should you bundle or separate your HR and payroll software? Our decision framework helps you choose the right HR payroll system for your industry, size, and global footprint.
The HR and payroll software decision seems straightforward: pick one system that does both. Unified data, single vendor, no integration headaches. Simple.
Except it's not always that simple.
While the vast majority of businesses benefit from bundled HR payroll systems, there are real scenarios where separating HR and payroll makes strategic sense. The trick is knowing which camp you're in—and why.
This guide provides a decision framework for choosing between combined HR payroll software and a best-of-breed approach. We'll cover when bundling wins, when separation makes sense, and how to evaluate your specific situation.
Let's start with the baseline reality: most businesses should use a unified HR payroll system.
Here's why bundling typically wins:
When HR and payroll live in the same system, employee data exists in one place. A new hire entered in HR automatically flows to payroll. A salary change updates everywhere instantly. A termination triggers final pay calculations without manual handoffs.
Separate systems require integration—and integrations break. Data gets out of sync. Someone gets paid incorrectly. Audit trails become fragmented. Troubleshooting means checking two systems instead of one.
Payroll isn't just about cutting checks. It's about applying rules: overtime calculations, benefit deductions, tax withholdings, PTO accruals, garnishments. These rules depend on HR data—job codes, departments, work locations, exemption status.
In a combined HR payroll system, the rules engine has direct access to all the data it needs. In separate systems, you're trusting an integration to pass the right information at the right time.
One contract. One support team. One implementation. One renewal negotiation. One throat to choke when something goes wrong.
Managing two vendors means twice the administrative overhead, finger-pointing when issues arise ("that's a payroll problem, not an HR problem"), and complex coordination during implementations and upgrades.
Two systems means two subscriptions, two implementations, and ongoing integration maintenance. The math rarely favors separation unless there's a compelling functional reason.
For a deeper look at how HR and payroll systems are structured, see our guide to the four types of HR payroll systems.
Before defaulting to bundled HR and payroll software, run through this framework:
This is the threshold question. If a unified HR payroll system can handle your requirements in both HR and payroll, you should almost certainly bundle.
Bundle if:
Consider separating if:
Certain industries have payroll complexity that general-purpose HR payroll systems simply can't match.
Industries where separation is common:
In these industries, payroll often runs through an ERP or industry-specific system that handles the financial complexity but lacks robust HR features. The solution: pair specialized payroll with a best-in-class HRIS.
Global payroll is where the bundled approach most often breaks down.
Here's the reality: very few platforms can process payroll natively across dozens of countries while also delivering robust HR functionality. The platforms that excel at global payroll (like ADP Global, Deel, or Remote) often have lighter HR features. The platforms with comprehensive HR (like Workday or SAP SuccessFactors) require payroll integrations for many countries.
Bundle if:
Consider separating if:
The common hybrid approach: a global HRIS for core HR functions integrated with a global payroll partner or EOR for countries where native payroll isn't available.
Enterprise companies have options that mid-market and small businesses don't.
Large enterprises (2,500+ employees) often separate by design. The HR team selects an enterprise HCM platform (Workday, Oracle HCM, SAP SuccessFactors) for talent management, workforce planning, and employee experience. The payroll team—often a separate function entirely—selects a payroll specialist (ADP, Dayforce) optimized for accuracy, compliance, and scale.
This works because enterprises have:
Mid-market companies (100-2,500 employees) rarely benefit from this approach. The overhead of managing separate systems typically outweighs any functional advantages. Unless you have a specific forcing function (industry complexity, global footprint), bundled HR and payroll software is almost always the right call.
Small businesses (under 100 employees) should absolutely bundle. The administrative burden of separate systems makes no sense at this scale.
Based on Brett's experience advising hundreds of companies, here are the three most common scenarios where separating HR and payroll is the right choice:
The situation: You're a construction company, utility contractor, or similar field-heavy business. Payroll is complicated—prevailing wage requirements, certified payroll for government projects, union rules, multi-state tax complexity, job costing tied to projects.
Why bundling fails: General-purpose HR payroll systems can't handle this complexity. They weren't built for Davis-Bacon compliance, fringe benefit calculations, or certified payroll reporting. Trying to force-fit construction payroll into a mainstream HR platform creates compliance risk and administrative nightmares.
The solution: Run payroll through your ERP (Sage, Procore, Vista, Foundation) or a construction-specific payroll system like Miter. Pair it with a best-in-class HRIS for employee records, onboarding, benefits administration, and talent management.
What to look for:
Common pairings:
The situation: You have employees in 10+ countries. You need robust HR capabilities—performance management, talent development, workforce analytics—across all locations. But no single platform can process payroll natively in all your countries.
Why bundling fails: You face an impossible choice. Pick a global payroll provider and accept limited HR features. Pick a comprehensive HCM platform and manage payroll integrations in half your countries anyway. Neither option is truly "bundled."
The solution: Embrace the hybrid approach intentionally. Select your HRIS based on HR capabilities, then layer in global payroll through a partner or EOR where native payroll isn't available.
What to look for:
Common pairings:
The situation: You're a large enterprise with 5,000+ employees. HR and Payroll are separate departments with different leadership, different priorities, and different evaluation criteria. HR wants world-class talent management. Payroll wants bulletproof accuracy and compliance.
Why bundling can fail: No platform is best-in-class at everything. Workday has incredible talent features but payroll that some find limiting. ADP has unmatched payroll expertise but HR that feels dated. Forcing both teams onto one platform means someone compromises.
The solution: Let each team select the best tool for their function, then invest in proper integration.
What to look for:
Common pairings:
Important caveat: This approach requires significant resources to execute well. Integration development, ongoing maintenance, data reconciliation, vendor coordination—it's real work. Don't pursue this path unless you have the team and budget to support it.
If you've decided bundling is right for you, here's how to evaluate unified platforms:
HR Side:
Payroll Side:
If separation makes sense for your situation, here's how to approach it:
Must-have data flows:
Questions to ask:
With two systems, you need clear rules:
Separate vendors means potential finger-pointing. Establish upfront:
When in doubt, bundle. The burden of proof should be on separation. Unified HR payroll software reduces complexity, lowers risk, and simplifies vendor management. Only separate when you have a clear, compelling reason that bundled platforms genuinely can't address.
Need help deciding? OutSail has guided hundreds of companies through this exact decision.
Schedule a consultation to talk through your situation.
OutSail is an HR technology advisory firm. We help companies select and implement the right HR, payroll, and benefits technology. Our services are free to buyers—we're compensated by vendors only after successful implementations.
