Demystifying payroll parallel testing: A guide to flawless execution

Insights

• Modernizing payroll systems is a major advantage for businesses, improving precision, ensuring compliance, enhancing data analysis, and adapting to expansion.
• However, challenges like data transfer issues or temporary system outages can pose risks to daily operations.
• Payroll parallel testing mitigates these concerns by allowing organizations to evaluate the new system before full deployment, though it requires careful planning to avoid its own complexities.

Upgrading payroll systems is a big win for organizations — it boosts accuracy, keeps them compliant, unlocks better data insights, and scales with growth. But it’s not without risks, such as data migration hiccups or system downtime disrupting operations. That’s where payroll parallel testing comes in, helping companies test the waters before a full rollout. The catch is that parallel testing comes with its own hurdles — and businesses need a solid plan to make it work smoothly.

Game changer in payroll accuracy

Running payroll parallel testing before an upgrade or new system launch is a smart move, as it simulates multiple payroll cycles to make sure everything works smoothly, end to end. This helps the organization catch issues early and guarantees that paychecks go out on time when the system goes live.

Payroll parallel testing ensures the new system calculates accurately, especially with complex statutory requirements. It checks how well downstream processes run and lets teams test multiple pay periods to compare results with legacy data. Plus, it doubles as a hands-on training opportunity, helping key stakeholders apply their learnings to running payroll and get comfortable with the new system before it goes live.

While payroll parallel testing takes care of these aspects and gives a clear picture of go-live readiness, pulling it off successfully requires overcoming the challenges associated with it.

Roadblocks in payroll parallel testing

Human capital management and time and pay professionals often face challenges when testing large-scale system implementations, including payroll parallel testing.

HR and payroll data accuracy issues: Most payroll calculation differences between the legacy and incoming systems stem from incorrect data conversion, missing catch-up data, or user input errors. Researching and correcting the data and fixing these issues is time consuming and can distract from the core payroll testing process.

Lack of testing and research resources: Without proper resource planning, teams can struggle to investigate all the differences, reducing confidence in the payroll setup and overall system accuracy.

Lack of expertise and system knowledge in research resources: Studies have shown that 48% of companies experience payroll skills shortages. Validating earnings, deductions, and tax calculations requires deep knowledge of compensation, pay practices, benefits, and regional tax rules. Teams also need proficiency in system analysis. While the current payroll team knows the data and expected outcomes, the new system or parallel testing experience might be unfamiliar, leading to a lack of expertise and confidence in the process.

Changing system configuration: If other workstreams, like HR, compensation, or absence management, continue making configuration changes, they disrupt the ability to analyze with consistent data. This leads to inefficient analysis and research into variances between the legacy and new systems.

Missed opportunities to fully test financial postings and accruals: As financial requirements for time and payroll grow more complex, testing features like posting rules and accruals is often done piecemeal rather than holistically. This can result in financial posting issues being discovered long after go-live, making them much harder and more complicated to fix.

There are other challenges such as ensuring that all other workstreams — that have an impact on payroll — are available to support the parallel testing phase, which can be difficult in a large organization with multiple workstreams. At times, teams underestimate the effort and time needed for testing.

While the issues are many, they can be solved with active involvement from the payroll functional lead, careful planning and coordination across workstreams in the organization. Ensuring the accuracy of HR and payroll data for testing, clearly defining roles for testing resources, and leveraging subject matter expertise are key.

Mitigating testing challenges

To build confidence in payroll configuration, it's essential to ensure the accuracy of HR and payroll data used by the new system. Reconciliation of employee data after conversion from the legacy system is a must. The payroll functional lead should be involved in data conversion meetings, staying informed about any successes and challenges with employee data conversion. Before starting payroll parallel testing, the data conversion and corrections should meet a predetermined accuracy level, with documentation as part of the testing entrance criteria. Additionally, organizations should reduce the need for dual keying by strategically selecting parallel test periods and using secondary data loads for tax filings, earnings, and deductions. This lightens the load on the payroll team and minimizes manual updates. A final comparison between the legacy and new systems should be done to validate inputs before parallel testing.

To address the lack of testing resources, organizations should plan roles well in advance of the parallel testing window and identify experienced testers. Leveraging testers from finance or HR organizations — who possess the skills and are familiar with policies and pay practices — ensures optimal results. Additionally, partnering with professional services firms can bring in experienced payroll testers to strengthen the team. These external experts can help with payroll testing, comparisons, and configuration research across time zones, extending testing hours and enhancing the overall capabilities of the functional team. Infosys has helped clients such as a large multinational utility with experienced functional and technical payroll resources who work side by side with the client payroll team to perform variance analysis and follow up on testing defects and retesting. The outcome of this partnership was a successful go-live as scheduled, saving costs and resources that a delayed go-live would have incurred.

Planning for roles and responsibilities in advance of the parallel test window allows the functional lead to identify resource gaps. Organizations should consider bolstering support through additional resources from professional services. Training can be prepared and offered to the testing team as well. A study shows that 81% of organizations say they are upskilling existing payroll staff and changing how they work.

The uncertainty of a changing system configuration can be solved by establishing a configuration freeze as entrance criteria for parallel testing. The payroll workstream should sign off on configuration updates on urgent defects and on all defects impacting HR data, compensation, time or pay, with the ability to test against the configuration.

Planning for roles in advance of the parallel testing window and identifying key support contacts in other workstreams such as HR, finance, and IT for integrations will help ascertain teams’ availability. Organizations must plan multiple sessions to involve all teams. Preparing a functional project plan for the payroll workstream will guide in identifying these roles and scheduling the sessions ahead of the testing window. Professional services organizations can help the functional leadership develop a project plan during the early days of the project.

Infosys helped a global construction company create a payroll parallel testing strategy, facilitated meetings with key functional stakeholders, including finance, HR, and the IT project management office; created a day-by-day work plan; and led twice-daily stand-up calls to guide the teams. Putting this strategy in place resulted in realignment of the planned parallel dates, which allowed confirmation of HR data validation and less work for the payroll team to track and manually enter payroll transactions. Infosys facilitated alignment in testing between the time system, the payroll system, and the financial system with pretesting requirements, including time interface file validation, finalization of posting program requirements, and completion of posting program development prior to parallel test commencement.

If there isn’t enough time remaining after conversions, build, and initial testing cycles to adequately perform two to three cycles of parallel testing, the go-live date needs to be reviewed and pushed, instead of shaving time from the parallel testing phase. A day-by-day plan and tracker with earnings codes assigned to assess progress can help stay organized.

To fully test financial postings and accruals, organizations should include post-payroll activities in their parallel testing strategy. They should generate time and payroll posting files in each cycle, first checking the content in the files or reports, then loading them into the test finance system. Getting sign-off on posting programs should be part of the exit criteria. During testing, they should also run accruals to make sure they’re posting and reversing in the next period as expected.

To gain confidence in the new system’s configuration, all variances must be thoroughly researched to identify the root cause and path forward.

By considering these roadblocks and incorporating these mitigations into their payroll parallel testing strategy and planning, organizations can ensure that the parallel testing will be more robust and successful in achieving the overall objective, which is an upgraded payroll system ready to go live.