Anna Burgess Yang

As technology evolves and budgets shrink, employers are demanding more from their vendors: more integrated experiences, more automation, and more work taken off their plates. 

Retirement plan administrators and benefits providers are well aware of the inefficiencies that plague their industries — long chains of manual processes are required to manage benefits like 401(k)s, HSAs, and FSAs. Most employers are unaware of just how much manual effort goes into these benefits, but they still demand that their provider handle the lion’s share of the work — including deductions management.

Automated payroll deduction systems are one way that retirement and benefits providers can take some of the administrative burden off their customers without overwhelming their own internal teams. Powered by API integrations, automated payroll deduction systems allow recordkeepers, TPAs, and benefits providers to write changes back to the employer’s payroll system, eliminating a manual step that often falls on the employer.

Payroll integrations make payroll deduction changes manageable, scaleable, and compliant for both employers and for your company, the provider.

Understanding Payroll Deduction Systems

Internally, an HR team may rely on a payroll deduction system to ensure payroll processing is accurate. Most employees have many deductions from their gross pay, from mandatory taxes or garnishments to voluntary deductions like retirement benefits or cafeteria plans. 

Not only do HR teams need to manage the mandatory and voluntary payroll deductions, but they need to distinguish between pre-tax and post-tax deductions to ensure the employee’s net pay is accurate. 

Related: A Deep Dive Into Payroll Deduction Types: Definitions, Examples, and How to Use Them

Payroll deduction adjustments need to be made in a timely manner, but this doesn’t always happen with manual processes. Say, for example, an employee requests a change to their retirement contribution. If the process in place is manual, an HR rep has to make the change before the next payroll runs. Small teams may struggle with bandwidth, and large teams face a large volume of requests, which makes it difficult to keep up with manual adjustments. 

Alternatively, automated payroll deduction systems will make the payroll deduction adjustments without human intervention. In this case, once the employee has updated their retirement contribution amount, the deduction is automatically updated in the payroll system, ensuring that the next payroll is accurate. 

Benefits of Automated Payroll Deduction Systems 

Automated payroll deductions create a seamless experience between a benefits provider and a payroll system. Employees can self-serve changes to their benefits or voluntary deductions, and the change will automatically be reflected in the payroll system. This takes the burden of updating deductions off the employer, and allows the provider to verify that deductions are accurately reflected in the employee’s paycheck. Automated systems can also put the right guardrails in place, ensuring changes aren’t made outside of specific enrollment periods and that deductions are in compliance with federal regulations.

Automated payroll deductions also reduce the risk of inaccurate data and delays. Since voluntary deductions impact an employee’s net pay — whether pre-tax or post-tax — timing is critical. If adjustments to payroll deductions aren’t made promptly, they can cause issues that need to be corrected and are sometimes tricky to fix.

As a result, manual payroll systems are incredibly inefficient, time-consuming, and error-prone. Automated payroll deduction is increasingly becoming a baseline expectation of employers. They can’t risk inaccurate payroll deductions and the potential local and federal compliance ramifications if timely updates aren’t made.

Then there’s the employee impact. If employees make a change to a voluntary benefit, they expect it to be accurately reflected on their next paycheck. If the benefit is not added or removed appropriately, it impacts the employee’s net pay, which can cause frustration and stress. 

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Building a payroll deduction system using APIs

There are several ways to build automated payroll deduction systems, but the most robust is through API-based payroll integrations. Payroll integrations sync data between your system and the employer’s payroll system, enabling deductions to be automatically calculated and applied to the employee’s paycheck based on the data in your system. 

Related: Everything You Need to Know About 401(k) Payroll Integrations in 2024

What APIs bring to payroll deduction management

There are several advantages to using API integrations to power automated payroll deductions.

Seamless data flow between systems

API integrations connect two systems seamlessly. They often have built-in data validation to ensure that the data received is formatted correctly, even if the data fields differ between the two platforms. 

Self-service employee portals are often powered by APIs, so employees can manage their own deductions and have that data written back to their employer’s payroll system. APIs can also enhance the employee experience by pulling information back from the payroll system and displaying it in your product.

Additionally, APIs have advanced security controls to protect data as it’s transmitted between two systems. 

Timely updates to payroll deductions

It’s critical that deduction information is up-to-date across all platforms. Payroll integrations facilitate near-real-time exchange of data between your product and the employer’s payroll system, ensuring that employee’s net pay is properly calculated during the next pay cycle. 

Use case examples

Many providers would benefit from payroll integrations, including:

• 401(k) and retirement products
• Fringe benefits, such as commuter benefits or student loan repayment
• HSAs, FSAs, and other tax advantaged savings accounts
• Insurance products
• Financial wellness products, such as earned wage access

Some products have specific enrollment periods and requirements that rely on accurate employee data (such as hiring a new employee). Others allow employees to make changes whenever they’d like. A bi-directional or 360° integration will ensure that your product and the employer’s payroll system stay up-to-date.

Related: How to Simplify Employee Benefits Management with Payroll Integrations

Steps to implement an automated payroll deduction system

If you’re looking to connect to your customers’ payroll systems to automate deductions, there are a few things you need to consider as you get started.

1) Assess deduction types and business needs

Depending on the benefits you offer, you may need a one-way connection (where your product writes updated deduction data to the employer’s payroll system) or a bi-directional system (where your product also receives data from the employer’s payroll system). Most use cases require bi-directional integrations.  

For example, if your product only allows enrollment within 30 days of an employee’s start date, you may need to receive new employee data in order to properly enforce the enrollment period.

You’ll also want to consider how many payroll systems exist on the market and how many you want to connect to. The U.S. has a fragmented payroll market, with thousands of payroll systems. There are large players like Quickbooks, but also smaller products that have captured a share of the market. The more payroll systems you can connect to, the larger your potential customer base. 

2) Select or build an API solution

“Build versus buy” is a common question for any technology company. You can build your own API integrations in house, but depending on how many payroll systems you want to integrate with, this could require significant development resources on your end to develop solutions for each unique payroll system.

An alternative is a unified API, like Finch. With Finch, you build a single integration that unlocks access to all of the 200+ HRIS and payroll systems Finch supports.

3) Test your API solution

Whether you use a platform like Finch or build your own integrations, you’ll test connections to ensure they’re accurately transmitting data according to regulatory compliance standards. 

If you build your own integrations to multiple payroll systems, you’ll need to test each one individually. 

Ensuring compliance in payroll deduction management

Whenever you offer benefits that involve payroll deductions, you need to make sure that your product complies with any relevant regulations. You don’t want the employer to be out of compliance as a result of offering your product to employees. 

Key legal and regulatory considerations

It’s crucial to obtain and maintain proper documentation for voluntary deductions. Many states require employee consent for certain types of deductions, and employers will rely on you as the benefit provider to ensure they maintain compliance.

By automating the deduction process, you can ensure compliance with tax laws and regulations and accurate calculations. You should also maintain an audit trail of enrollments, un-enrollments, and any changes made by employees that impact their payroll deductions. Payroll integrations make it easy to pull both current and historical data, which makes end-of-year reporting much simpler.

Related: How to Streamline 401(k) Compliance Testing with Payroll Integrations

How automation simplifies compliance

Since employers are also required to maintain accurate payroll records, automation creates the necessary deductions on the correct pay period in the event of an audit. Automation can enforce pre-configured logic for any benefits limitations or other rules.

Best practices for optimizing your payroll deduction automation

When you integrate with a company’s payroll system, you want to ensure that you’re not only eliminating manual data entry, but also creating a process that doesn’t add any additional burden to the internal HR team. 

This means you’ll need to regularly update and test your integrations for any changes that occur within the payroll provider’s system. Payroll providers may build new functionality or make changes to comply with new tax laws or regulations. If you’ve built your own, you’ll need to keep tabs on each provider’s API. With Finch, these updates are monitored and addressed for you.

You’ll also want to work closely with your customers to ensure the payroll automation is meeting their needs. Is it easy for them to connect to your product? Have they run into any issues with the data transfer? Finch allows employers to securely connect your product to their payroll system though a built-in onboarding tool called Finch Connect.

Your payroll deduction automation should also regularly refresh so your customers don’t even have to think about updates. By default, Finch requests new data from each connection on a daily or weekly basis. 

Simplify your customers’ payroll deductions with APIs

Automated payroll deduction is table stakes. If your potential customers are debating between your product and a competitor’s, they could be swayed by automation versus a manual process. You can’t assume that your product is compelling enough to justify a manual burden on the employer’s HR team.

From there, you should offer automation that is easy to use and manage, and the clear winner is the modern functionality and seamless integration offered by API integrations.

By using Finch, you can connect to more payroll systems and reduce the resource requirements on your end by developing a single API integration. You can also use Finch’s flat file product, which delivers data as a file via SFTP server, rather than building to the Finch Unified API. Flat file is a great solution for teams with limited technical resources.

To learn more, you can sign up to try Finch, or schedule a call today.

Companies today use dozens of employment applications to manage their workforce. They have their systems of record, like HRIS and payroll systems, and then everything else — applications to administer benefits, keep employees engaged, run financial analyses, and so on. Keeping the data in these applications up to date poses a challenge — and that’s where integrated HRIS and payroll systems come into play. 

When an employer’s applications integrate with their HRIS and payroll systems, information can easily and automatically flow between the central database and the applications that need it. For employers, that means less administrative work and higher ROI from their technology. For the applications, that means easier, more efficient access to critical census and pay data. 

What are integrated HRIS and payroll systems?

When two systems are integrated, they’re connected in the background and able to “talk” to each other. Applications that are integrated with HRIS and payroll systems are able to seamlessly share data, so the information is always matching and up to date. For example, if an employee’s salary is updated in the payroll system, their salary will automatically be updated in the other integrated systems, like a 401(k) platform or compensation management tool. 

HRIS and payroll integrations let employers automate time-consuming tasks and reduce the risk of error. Because HR administrators don’t have to manually input data or make changes to multiple systems, they can focus on more strategic tasks. 

Related: The Ultimate Guide to Payroll Integrations (Updated for 2024)

Benefits of integrated HRIS and payroll systems

For employers, there are a lot of benefits to integrated HRIS and payroll systems. They’ll save time and have more streamlined operations when they don’t have to maintain employee information in multiple products. They also eliminate the potential for human errors that can happen when data is manually entered.

HR technology providers also benefit from integrations. First and foremost, they’re able to provide a far easier onboarding process and better user experience to their customers — one where employers realize the full value of the product because they’re not bogged down by data maintenance.

But integrations also make it much easier for these providers to collect the data they need to provide services to the employer—like census and pay data for 401(k) providers, for example. HRIS and payroll integrations let these providers securely access their customers’ data straight from the source, reducing the risk of inaccuracies and noncompliance with state and federal regulations.

In short, HRIS and payroll integrations allow data to flow seamlessly between platforms so employers and applications can focus on the value of the product, rather than moving data around between systems.

Related: The Ultimate Guide to HRIS Integrations (Updated for 2024)

5 use cases for integrated HRIS and payroll systems

Integrations sync relevant data from the employer’s system of record. Employee information like the employee’s legal name, employment status, social security number, address, and birth date provide workforce insights to external apps. Payroll data such as pay period, taxes, and gross and net pay ensure that benefits and deductions are calculated correctly and written back to the payroll system. Data from both HRIS and payroll systems can keep employers and providers compliant with laws and streamline reporting.

Here are a few specific ways HR technology products can benefit from integrated HRIS and payroll systems. 

1) 401(k) plans

401(k) administration is still laden with manual processes and SFTP connections, which can take weeks to set up and don’t scale well. The employer has to shoulder the burden of routinely sending data to their recordkeeper with each pay cycle or to their TPA at year’s end. The recordkeeper to TPA then has to painstakingly check that the data is accurate and reformat it to match their system’s conventions. 

Related: Common SFTP Errors When Sending HRIS Data (And How to Fix Them)

With payroll integrations, plan administrators can connect directly to each sponsor’s payroll system and receive the census and pay data they need automatically — and in a standardized format. They can manage contributions and deferrals for each employee, ensuring that payroll deductions for participants are accurate for each pay period. 360° payroll integrations also automate enrollment for eligible employees and can manage employee contribution changes, seamlessly writing data back to the payroll system. 

401(k) management can be a burden for overworked HR teams and may feel overwhelming for SMBs — even those that may want to offer 401(k) benefits to their employees. Recordkeepers and TPAs who demonstrate a streamlined user experience and straightforward plan management will draw in more clients in a competitive retirement market. 

Related: Challenges of Small Business Retirement Plans: A Plan Administrator's Guide

2) Employee benefits

Employee benefits can be tricky to manage between pre- and post-tax deductions, new benefits enrollment, election changes, and other events that impact an employee’s net pay. Applications managing employee benefits need to write the changes back to the employer’s payroll system so they’re reflected on the employee’s paycheck. 

Payroll integrations are critical so that the payroll data is accurate and timely. By allowing benefits providers to connect to their customers’ payroll systems, integrations allow benefits providers to pull in relevant data and write changes back. They can also automate eligibility checks for benefits with specific enrollment periods. 

3) Employee engagement

While employee engagement applications can automate perks like welcome swag, birthday gifts, and performance-based rewards, managing such systems shouldn’t add additional work to HR teams. If employers feel like an external application is “one more thing” to manage, they may simply opt not to do anything extra for their employees. Or, alternatively, they may opt for applications that can integrate with their HRIS platform. 

Employee engagement applications, rewards programs, and gift-giving rely on employee data, such as start date, location, and manager. Such programs are less effective with out-of-date information, which can quickly become problematic for companies with a large number of employees. The value of these applications is significantly decreased if employers have to upload employee data manually.

With HRIS integrations, the data connection is continuous and syncs employee information to the application. With access to reliable employee data, applications can let employers focus on the employee experience, rather than employee data management. 

“If employee data isn’t being updated in real-time, then you're going to miss the low-hanging fruit of recognition moments that are really going to make the employee experience a lot better and a lot more meaningful within an organization.” — Spencer Linsley, Executive Director of Partnerships at Awardco

4) Employee onboarding and offboarding

Some applications provide critical new employee management functions, such as background checks or company training. The same is true in reverse for offboarding and ensuring that all offboarding tasks are completed. Without access to HR systems, these applications lose some of their value proposition, since employers might miss steps when an employee joins or leaves.

HRIS integrations provide access to census data, allowing these applications to add new employees and contractors automatically. Employee onboarding also impacts benefits providers and employee engagement applications that need to rely on timely access to new employee data. Applications can pre-fill forms with company data, creating a more streamlined experience for their customers’ employees. 

Similarly, when an employee is terminated, HRIS integrations can help to ensure that the employee’s access to important systems is revoked and that they’re offboarded from benefits.

5) Financial modeling

For many companies, employees are the largest expense. They may struggle to build projections or forecast future resources on their own and instead turn to external applications for financial modeling. 

However, such models rely heavily on employee data. Budgets, hiring plans, and scenario planning need to know the total costs in order to provide strategic insights. Without HRIS and payroll integrations, these applications may rely on uploading files or manual data entry — making them not much better than a fancy spreadsheet. 

Integrations pull in employee data and the associated payroll costs, allowing companies to examine metrics like department costs, revenue per employee, and more. Synchronized data gives companies an accurate picture to help them with financial planning. 

Robust HRIS and payroll integrations with Finch’s Unified API

Integrations are more than a nice-to-have for employment technology: they’re essential for maintaining accurate employee data and providing the most value to employers. When exploring potential solutions, most companies would consider such integrations critical.

Yet, for applications, building integrated HRIS and payroll systems is resource-intensive. With hundreds of products on the market, it feels like a tradeoff. Providers need to either devote development resources to creating integrations to a significant number of products, or pick and choose which product integrations they’ll support. Beyond the initial development, providers have to maintain the integration and make updates as systems change.

Alternatively, employment technology applications can use Finch’s Unified API. Rather than build integrations to individual HRIS and payroll systems, providers need to build only one integration to Finch. Our API connects with hundreds of HRIS and payroll systems, covering nearly 90% of U.S. employers. 

Any application relying on employee data needs to put accuracy and efficiency at the forefront. Employers expect integrations, and providers need to deliver. To learn more about Finch, you can try it for free or schedule a call with our sales team.

It’s no secret that the employee experience is critical to an organization’s ability to attract and retain talent—according to a 2023 SHRM survey, employee experience influences about 49% of all job satisfaction. To reduce employee turnover, organizations are increasingly investing in employee recognition and engagement software; but these tools are only effective if they’re frequently used. 

If you sell an employee engagement application that requires too much manual intervention, you run the risk of low employer adoption and customer churn. To maximize your product’s ROI, you need to make it as easy to use as possible—and the best way to do that is by automating employee recognition and rewards through HRIS integrations.

Benefits of automating employee recognition and rewards

Typically, employee recognition involves rewarding employees based on milestones (work anniversaries, birthdays), performance (meeting goals, promotions), and peer recognition. Employee engagement tools typically include basic automation tools that will send rewards to employees based on the data in the application (like automatically sending a digital gift card to an employee on their birthday or work anniversary). 

But this only works if the data in your application is up to date, which means the employer has to manually update the system constantly as employees are hired or terminated, promoted, reach quarterly or annual goals, and so on. At small companies where the HR team may be a single person, they likely don’t have the bandwidth for such work. And at enterprise companies, there are far too many employees to keep up with.

By integrating your application with your customers’ HRIS, you can enable the seamless flow of data from their source of truth to your application. Whenever the data in the HRIS is updated, it’s automatically updated in your application, creating a hands-off experience for employers and greatly increasing the value of your product.

Step-by-step: Automating employee recognition and rewards in your product

When you rely on data directly from a customer’s HRIS platform (their source of truth), you can ensure that your product contains accurate, up-to-date employee information and eliminate the need for manual updates.

1. Identify the required HR data

Depending on your application, you’ll need specific data from the HRIS. At a minimum, you’ll probably need the employee’s name, start date, birthday, and employment status.

You may also need the employee’s address (if sending gifts) and manager (if your rewards require manager approval). If your platform supports sending rewards or gifts for employee promotions, you’ll also need the employee’s current job title or level.

2. Access the HRIS data

One way for employers to get employee data into your product without an integration is through a bulk upload. They could extract data from their HRIS into a file (like a .csv), and you can build an upload tool that maps the fields in the file to the fields in your app. The uploader will need to recognize any changes, such as an employee status change from active to inactive or an employee promotion.

While a bulk upload is certainly faster than manual data entry, it’s still a multi-step process that needs to be repeated on a routine basis. Employers would need to create the extract from their HRIS and initiate an upload. Depending on the size of the company, this might be necessary quarterly, monthly, or even weekly.

Integrations between your product and the employer’s HRIS are the alternative. Integrations are mostly “hands-off” for the employer and automatically transfer data between two systems. 

3. Build HRIS integrations

Integrations between products can happen in several ways, but the most common are a Secure File Transfer Protocol (SFTP), an integration platform as a service provider (iPaas), or APIs. 

SFTP

SFTP is a secure file transfer that automatically moves your customer’s extracted HRIS file to a specific location and ingests it into your product. However, SFTP integrations are often a source of friction for customers as they are very finicky and can cause errors. APIs are a more direct connection to send/receive data between two products. 

Either way, you need to build an integration. If you do this internally, it can require significant development resources. Ideally, your product supports multiple HRIS systems, and each integration will be unique. More than likely, you’d have to form relationships with the HRIS vendors to ensure your integration can “talk” to vendors.

iPaaS

Another option is an iPaaS provider, or Integration Platform as a Service. iPaaS solutions are low-code options that allow companies to build workflows to connect different products. iPaaS relies heavily on APIs.

While they’re designed to be low-code, iPaaS solutions still require development efforts to initiate connections to new HRIS providers, map data fields, and manage workflows and triggers, putting a strain on internal resources. iPaaS connections act like middlemen that require your team to instruct the tool on which data fields to pull from the HRIS and where to map them in your product, so you’ll need to take care to ensure that all the fields are accessible and mapped correctly. And you’ll need to maintain those integrations and workflows every time there’s a change in the underlying HRIS or when you want to partner with a new HRIS platform. 

PerkUp, an employee engagement platform to send gifts and swag to employees globally, considered using an iPaaS provider. However, PerkUp realized that creating and managing workflows would still burden internal resources, so they opted for a unified API instead.

APIs

APIs connect two systems using a set of standardized protocols. They offer users a seamless data exchange, refreshing your application with the employee data from the HRIS on a daily or weekly basis.

If you build API integrations internally, you’ll need to dedicate technical resources and plenty of monetary investment to the project. The work would be ongoing as you support additional HRIS platforms. For many companies, building and supporting APIs takes focus away from their core product—and by our estimates, a single integration can cost upwards of $187,000.

Alternatively, you could opt for a unified API. Unified APIs like Finch act as integration aggregators. By building one integration between your application and Finch, you can access seamless API integrations to hundreds of HRIS providers, ensuring you can offer a fully automated experience to any customer, regardless of the HRIS system they use.

You can also use Finch Flatfile, a solution for organizations with limited technical resources. Flatfile relies on existing integrations with HRIS providers to pull data from their systems in a standardized file. That file can then be delivered to an SFTP server, rather than building to the Finch Unified API. 

Let employers focus on retention, not data management

Much as employers may want to offer employee engagement tools, data might be a sticking point. They need a seamless integration that simply runs in the background, without any manual processes or difficult setup.

Finch is the way to scale—both for you and for your customers. With Finch’s Unified API or Finch Flatfile, your customers don’t need to put in any additional work to use your platform, even as they add more employees. And since Finch connects to more than 200 HRIS and payroll providers covering nearly 90% of U.S. employers, you’ll be able to offer your product to more customers and expand your market potential. 

By leveraging HRIS integration through Finch, your employee recognition platform becomes more efficient and valuable to your customers. It will allow them to truly take advantage of automated employee recognition.

To learn more about Finch, you can try it for free or schedule a call with our sales team.

Inflation and rising costs have made tax advantaged savings accounts more attractive for employees, since contributions reduce their taxable income. Whether it’s a doctor’s visit, paying for mass transit, or saving for a kid’s future college expenses, these accounts make it easy to set aside money for expenses they would incur anyway. 

Inflation and rising costs have made tax advantaged savings accounts more attractive for employees, since contributions reduce their taxable income. Whether it’s paying for a doctor’s visit, saving for an emergency fund, or commuting expenses, these accounts make it easy to set aside money for expenses they would incur anyway. 

For employers, tax advantaged accounts make their benefits packages more attractive, plus it saves money on the employer’s share of payroll taxes. However, such accounts come with administrative overhead and strict requirements to meet IRS guidelines. 

Employers might be more inclined to offer such benefits if technology makes the benefits easy to manage. Payroll integrations are critical for benefits providers since they enable a seamless experience without additional strain on HR teams. 

What is a tax advantaged savings account?

Most employers are familiar with tax advantaged savings accounts like health spending accounts (HSAs), flex spending accounts (FSAs), and retirement plans like 401(k)s. Employees can take advantage of setting aside pre-tax dollars in these accounts to pay for qualified expenses, such as out-of-pocket medical costs and dependent care, or to save for retirement.

However, other types of tax advantaged savings accounts have become popular in recent years — commuter benefits, Individual Coverage Health Reimbursement Arrangements (ICHRAs), and student loan assistance. Each of these can come with tax advantages, saving money for both the employer and employee. 

For example:

• Employers can offer a commuter benefits account, which allows employees to make pre-tax paycheck contributions to pay for commuter expenses.
• ICHRAs are employer-funded health benefits that provide tax-exempt funds for employees to pay for their own health insurance plan. 
• Employers may contribute to their employees’ student loan balance to help them get out of debt faster, either through the employee’s paycheck or by making direct payments to the lender. The first $5,250 in annual student loan assistance per employee is tax-free for both the employer and employee through at least 2025.

Related: Read more about how technology has enabled a rise in employer-sponsored benefit programs in our white paper: Unlocking Scale: The Revolution in Employer-Sponsored Benefits. 

Key steps to administer tax advantaged savings accounts

In addition to offering tax advantaged savings accounts, employers have to be prepared to administer such accounts. 

For employers, these steps can create additional administrative burden. Technology has substantially changed the game with products that make it easy for benefits providers to manage most of these steps on the employers’ behalf. In order for this to work, however, you as the benefits provider need to be able to access data from the employer’s HRIS or payroll system and make changes to those systems.

Step 1: Enrolling eligible employees

HSAs, FSAs, and ICHRAs have specific enrollment windows: when an employee joins a company or during the annual open enrollment period. 

Some commuter benefits accounts have very specific criteria, requiring employees to work at least 120 days before they are eligible. After the waiting period, employees can enroll at any time. 

It’s critical that employees are invited to participate in these benefits as soon as they become eligible. 

Step 2: Managing account contributions

The complexity of managing contributions to a tax advantaged savings account varies depending on the benefit. Since HSA and FSA enrollments are limited to new employees or the open enrollment period, the contributions are easier to manage — the contribution is determined once during open enrollment, and can only be changed with a qualifying life event (such as the birth of a child). 

But other benefits, like ICHRAs, are more complicated. The amount the employee receives with each paycheck will vary based on the insurance plan they’ve chosen, and in some cases, the employee can pay for costs that exceed their reimbursement limit through payroll deductions — an amount that can vary from month to month, meaning the deduction amount needs to be adjusted frequently. 

Then there’s the added complexity of employer contributions: HSAs and commuter benefits allow employers to contribute to the account. In this case, employers need to factor that into the contributions, as well as determine when the contributions will occur. Contributions might occur with each paycheck, or be offered as a lump sum one or more times per year. Additionally, since HSAs and commuter benefits have legal maximums, an employer contribution may change depending on how much the employee contributes to the account. 

With commuter benefits, employees can opt to change their contribution amount at any time, resulting in more updates to the payroll system. 

You have to capture any changes that employees make to their contributions and ensure the changes are reflected in both your product and the employer’s payroll system. 

Step 3: Managing payroll deductions

Employee contributions to most tax advantaged savings accounts are deducted from the employee’s gross pay. The employer needs to know how much to deduct (pre-tax) so both the employee’s and the employer’s payroll taxes are calculated appropriately.

If the employee’s contributions change, the employer needs to make timely updates to the payroll system to ensure the changes are reflected in the employee’s paycheck. If you don’t get the changes written to the employer’s payroll system, the employee’s deductions, payroll taxes, and net pay may be incorrect, leading to a poor customer experience and potentially fines or penalties.

Note: Some other types of accounts have tax advantages, but aren’t included in this article because the contributions are made post-tax. For example, Emergency Savings Accounts (ESAs) can be tied to a retirement plan, but aren’t subject to the same withdrawal penalties because the contributions are made on a Roth (after-tax) basis.

Step 4: Creating year-end reports for tax reporting and auditing

Since tax advantaged savings accounts have implications for an employee’s taxable income, some contributions have to be reported on the employee’s W-2. HSA and FSA benefits are reported, since employees can claim medical and dependent care expenses as deductions.

For all benefits, employers need to maintain accurate year-end reports for compliance and potential audits; but the actual filing is typically outsourced, meaning the employer needs to send a year’s worth of granular data to a third party, which can be difficult if they don’t fully understand what data is necessary.

How payroll integrations benefit tax advantaged savings accounts

Benefits providers need timely, accurate payroll data in order to administer the accounts properly. HR departments need to know how much to withhold from each employee’s paycheck, as this impacts the employee’s net pay. Since contributions are pre-tax, they also impact the amount of the employer’s share of taxes.

Without payroll integrations, HR departments and benefits providers would be making a lot of manual changes — particularly if the company has a lot of employees or if the contribution amount changes. Payroll integrations automate this process with a seamless connection between the payroll system and the benefits provider. 

1. Better, more reliable data access

Without payroll integrations, employers are manually moving data between systems. Data can quickly fall out of sync, and human intervention makes the data prone to errors. Changes such as employee hires, terminations, or changes to monthly contributions are constantly in need of updates when offering benefits such as tax advantaged savings accounts.

For smaller companies, the administration of such benefits can be prohibitive. For larger companies, the burden is overwhelming. 

With Finch’s unified API, your benefits solution can securely connect to an employer’s HRIS and payroll system, allowing you to access the most accurate and timely employee data. Because the connection refreshes the data every day or week, you can automatically identify employees whose eligibility or contributions have changed and invite them to enroll, rather than relying on the employer or your Operations team to flag these changes.

2. Automated payroll contributions

Since contributions to tax advantaged savings accounts impact the amount of taxes paid by both the employer and the employee, it’s critical that contributions are accurate within every pay period. Whether it’s new employees enrolling in benefits for the first time or contribution changes to a commuter benefits account, changes to contributions have to be timely. 

With payroll integrations, contributions and deductions are updated automatically between your product and the employer’s payroll system. A bi-directional integration captures any changes and writes the appropriate amount back to the employer’s payroll system for the proper deduction, all without involving the employer. 

That way, payroll taxes are calculated automatically based on the after-tax wages or salary. This greatly reduces the risk that payroll isn’t calculated correctly due to a delay or human error, and reduces the administrative burden on the employer.

3. Greater efficiency

Payroll and HRIS integration makes it easy to enroll new employees into tax advantaged savings accounts, a process that can otherwise be cumbersome, especially for companies with a lot of employees. 

Lane Health uses Finch to enroll employees into HSAs and additional benefits like Health Payment Accounts (HPAs). Before Finch, administrators within Lane Health’s customers would spend 8-12 hours keeping information in sync. Employers would manually update employee information in Lane Health or export and import flat files between the two systems. Now, Lane Health uses Finch to provide secure access to employee data and track contributions to HSAs and payroll deductions for other benefits. 

If it’s easy for HR teams to enroll employees in HSAs and manage their HSA deductions, more employees will be likely to participate — a benefit to any employer looking to offer HSAs and similar accounts. 

4. Compliance and tax management

Tax advantaged savings accounts are regulated by the IRS, including when employees are eligible for enrollment and how much they can contribute with pre-tax dollars. You have to monitor and enforce annual contribution limits outlined by the IRS and ensure employer contributions don’t exceed these limits. 

Payroll integrations make it easy for you to maintain compliance because you can verify when employees are eligible to participate and maintain compliance without a lot of back-and-forth with the employer. 

Integrations also allow you to easily pull year-to-date data at any time, ensuring the information you have for year-end reporting is complete, accurate, and delivered on time. Without integrations, employers may struggle to pull the data for year-end reporting — they may not understand all of the information that is needed, putting a burden on your team to help them.

Seamlessly integrate with hundreds of HR and payroll systems with Finch

Even if you build your own payroll integrations, they can be costly and difficult to maintain. You’re forced to integrate with multiple HRIS platforms and payroll systems to have the biggest market reach, which can be a drain on your internal resources.

Finch’s Unified API for HRIS and payroll has done the heavy lifting for you. With Finch, you need to build only one integration to our API, which connects you with hundreds of HRIS and payroll systems. Our integrations cover the systems used by nearly 90% of U.S. employers. 

To learn more about Finch, you can try it for free or schedule a call with our sales team.

Many companies rely on a secure file transfer protocol (SFTP) integration to move data from one platform to another, yet the process is notoriously finicky. Setting up the initial connection can be tricky and time-consuming, but the headaches don’t end there — SFTP errors are common and confusing.

The integration between your customer’s HRIS and your application relies on timely data, so it’s important to identify and resolve SFTP errors quickly before the systems become out of sync. This might mean working directly with your customers to troubleshoot — even if the root cause is within the data from your customer’s HRIS and not your application. But from your customer’s perspective, your application “doesn’t work,” and they will often look to you for a resolution. 

Whether it’s a data issue or connection error, you’re left trying to troubleshoot — often without an obvious way to pinpoint the problems. You might have access to error logs, but they’re difficult, if not impossible, to understand. Meanwhile, your customer is frustrated, and you have to meet compliance and SLA requirements.

If you’re not sure where to start, we’ve listed some common SFTP errors and how to identify them. We’ve also provided some information about an alternative that eliminates the need for SFTPs with a more stable, streamlined approach. 

Related: SFTP vs. API: Which integration method is best for employment data?

SFTP file errors

With SFTP, you’re relying on the extraction of data from your customer’s HRIS into a file. That file is securely moved to a specific directory, which is then “picked up” and imported by your application.

First and foremost, the file has to exist in the specified directory at the time the other application looks for it — whether that’s with each payroll run or on a different cadence. If your customer’s data doesn’t import as expected, that’s the first thing to check. 

Assuming that the file was in the correct location at the right time, you should next look to make sure that the file is in the right format. While it was probably configured correctly when you first set it up, changes in your customer’s HRIS might unexpectedly modify the file, causing the data import to fail. 

File type and format

Files are usually in a delimited format. Delimiters are special characters that indicate the separation of different pieces of data, like commas or tabs. You should check to make sure that the file has the right delimiter and that the delimiter is the same as it was in previous formats. Applications are typically coded with a delimiter in mind, so a file can’t switch between comma- or tab-delimited.

You should also check the file type to ensure it’s as expected. A comma-delimited file, for example, could be a .csv file or a .txt file. If the extension changes, your SFTP integration could fail.

Fields included 

SFTP imports rely on an exact match of columns in your customer’s file to fields in your application. While some applications may be coded to ignore extra fields, others may not. You’d either need to have your customer remove the extra fields in your file, map those fields in your application, or tell your application to ignore those fields. 

If you’d previously mapped a field and the field is removed from your file, that can also cause SFTP errors since the application is now receiving fewer fields than expected.

If your customer has created a custom field in their HRIS and wants to send it through your SFTP integration, make sure you or the customer create a matching custom field in your application before you start sending the data in your file. SFTP integrations will not create new fields in your application. 

File name and field names

Your SFTP integration might be looking for a specific file name (such as “dailyintegration.txt”). If the file name has changed, the import might not work. Sometimes, extracts from your customer’s HRIS might include a date and timestamp at the end of the file (such as “dailyintegration20240831.text). If so, you’d need to determine if your application can handle the changing date and timestamp, or if you or your customer will need to remove it before the import can occur. 

Within the file, some SFTP integrations are looking for exact field name matches between your file and the destination system. For example, if the name in the application is “First Name,” the name in your file must also be “First Name.” In some cases, the field is even case-sensitive, so if the field name is “first name,” the transfer will fail. 

File corruption

If something interrupts file creation (such as an unstable network), your customer might end up with a corrupted file. This can also happen if there are problems during the transfer process itself, such as memory issues.

You can usually detect file corruption if you open the file and it is blank or contains odd characters. 

UTF-8 encoding protocol

Unicode transformation format - 8 bits (UTF-8) is a common encoding protocol used by SFTP servers. If files contain special characters, UTF-8 ensures that data is accurately transmitted and received without corruption. If a file doesn’t follow a UTF-8 format and your application requires that format, the transfer will fail. The reverse can also be true: your customers are sending the file in UTF-8 format and your application can’t handle it, so it corrupts the file. 

SFTP data errors 

While file errors are tied to how the files are created, data errors are contained within the file. Sometimes, issues within individual records are enough to cause your SFTP integration to fail. 

Unless you’re getting clear error messages, the only way to find data errors is to open the file and search for the data that could be causing the issue. Given the size of these files, this can require a massive amount of effort.

Field mapping

You have to establish field mapping before you can complete a successful transfer. For example, in your customer’s HRIS, you might have a field “Start Date” and you need to map it to “Hire Date” in your application. 

If not mapped correctly, the SFTP integration might not work. If your customer incorrectly maps a field “First Name” to a field “Hire Date,” the data types are a mismatch (one is text, and one is a date field). Some SFTP integrations will reject this type of mapping and cause error messages or an SFTP failure. 

Duplicate data 

Your file integration will rely on a unique identifier for each record from your customer’s HRIS (such as the employee’s social security number or email). This is how the application can tell one employee record from another employee record. 

Unique identifiers cannot be duplicated in files. Some SFTP integrations may skip the duplicate records, but in other cases, it may cause the sync to fail. 

Data format

Mapping fields often requires a very specific format. Dates might need to be in either YYYY/MM/DD or MM/DD/YYYY. If your customer is sending any fields with numbers, a field may accept or reject decimals. 

If the SFTP integration fails, check the formatting of each field to make sure it matches the application’s requirements. 

Special characters

Some applications may be unable to handle special characters (like & or $). If your fields contain these characters, they will cause SFTP errors. Special characters may not cause complete SFTP errors, but may cause the specific fields not to be populated within your application, so your sync would be incomplete. 

Your customer would need to remove these characters so your data can sync properly. 

Terminated or inactive employee data 

Many applications that sync from an HRIS want only active employee data. You’d need to ensure that your customer filters the HRIS files to remove terminated or inactive employee records before they’re sent via SFTP. 

If your customer sends a file containing terminated or inactive employees, it can cause a lot of issues. Your application may not be able to handle the records or it can create “junk” records in your application that you’d need to clean up. 

SFTP connection errors 

SFTP failure can also happen when there’s a connection issue between the source (your customer’s HRIS) and the destination (your application). You may need to involve someone from your customer’s technical support team to troubleshoot these issues. 

Destination folder

When your customer sends a file from their HRIS, it has to be placed in a destination folder for the application to ingest. If the destination folder doesn’t have the correct permissions (such as being read-only versus read-write), the file won’t transfer.

Your customer may also have issues within the folder itself. In some cases, the destination folder has to be left blank to ensure that data is ingested. Additionally, if your customer sends too many files at once — especially if they have the same file name — the sync may fail. 

Permissions

The file transfer itself may be set up as a scheduled job, which your customer needs to run with administrator access. If it’s run with a specific employee’s account, and that employee leaves without granting access, it can be difficult to transfer permission for the scheduled job to a new employee. 

Additionally, your customer’s firewall may prevent sensitive data from leaving any internal systems. Your IT department may need to disable the firewall to allow the SFTP sync to occur. 

SSH key pairing

SSH key pairing is an authentication method for SFTP that’s more secure than using a password. On your customer’s SFTP server, your customer will have a public key that acts like a “lock.” During the connection, a private key is used to authenticate and “unlock” the server. The combination of keys — the public key and private key — is the key pair. 

SSH keys can be tricky to manage, especially if your customer is doing this manually. Keys are stored in .ppk files, which may require downloading additional software to generate the files. Keys can be “orphaned” if they’re issued to employees who leave the organization and IT staff forgets to terminate the keys. Keys can also be blocked by firewalls, permissions, or server configuration. 

Erroneous actions

SFTP has many operations, such as “put” (upload), “get” (download), “rename” and more. Your customer’s SFTP needs to use the “put” action only. If you include something else (like “rename”), it may cause the sync to fail. 

Unsupported SFTP protocol

Unsupported SFTP protocol errors happen when there’s a mismatch or incompatibility between the source and the destination. Your customer’s server may only accept certain configurations. 

SFTP has multiple versions, and they’re not all compatible with each other. Additionally, SFTP runs over SSH which also has multiple versions (SSH1 versus SSH2), which can cause incompatibilities. Your customer’s security settings may also cause protocol issues. 

Related: Improving Business KPIs with SFTP Scalability and Automation

HRIS integrations: An alternative to SFTP

Even after you’ve set up your SFTP (which can be difficult by itself) and it’s running as expected, you can experience issues down the road. If there are changes in the underlying technology, such as your customer’s HRIS or in your own application, it can cause SFTP errors. You have control over your own app, but changes to your customers’ various HRIS systems are unpredictable, meaning maintaining a healthy SFTP connection is an ongoing, intensive effort.

To make matters more difficult, each HRIS has its own quirks and data schemas. Each customer will require the configuration of their own SFTP connection, but these connections can’t follow a routine protocol because each HRIS will have different data formats and connection requirements. 

By contrast, HRIS integrations powered by APIs offer an automated, standardized alternative to complex SFTP connections and a way to avoid common SFTP errors altogether. With Finch’s Unified Employment API, you can build a single API connection to access your customers’ data across hundreds of HRIS and payroll systems. 

Finch: The HRIS and Payroll Integration Solution

With Finch’s API integrations, your application can seamlessly connect to the various HRIS and payroll systems your customers use, without having to build individual SFTP connections for each customer. Better yet, the data is automatically standardized, meaning it is delivered to your application in the appropriate format, regardless of how it’s configured in the HRIS or payroll system. The data is also sent daily or weekly, as opposed to just once per pay cycle.

Finch’s integrations can be accessed in one of two ways — either through an API integration with Finch, or through Finch Flatfile, now in beta. Flatfile provides all the benefits of our API, but still delivers files via SFTP.

Finch has access to the largest network of HRIS and payroll systems, providing deep integrations without the headaches of SFTP. Companies using Finch can take advantage of Finch’s Unified Employment API and allow their customers to integrate their HRIS and payroll platforms seamlessly. 

Learn more about Finch by signing up for free or scheduling a call.

First impressions matter—which makes your user onboarding experience critical. A smooth onboarding process gets your customers up and running quickly and helps them realize value faster. Automated user onboarding is the fastest, most efficient way to create an unparalleled user experience.

With automation, you can free up resources both on the customer’s end and internally, onboarding customers with almost no manual effort. It also enhances the overall user experience since your customers can self-serve during onboarding. 

However, onboarding can be challenging in the employment sector, since your product needs to import the data held in the employer’s HRIS or payroll platform. Employee information like job titles, employment status, pay statements, or demographic data needs to be securely transferred before your customers can begin using your product. Without direct access to the employer’s system of record, moving this data to your platform requires costly SFTP setups or cumbersome manual work.

Rather than relying on a lot of back-and-forth with your customer, HRIS and payroll integrations enable you to automate onboarding by securely transferring information from their source of truth — without a lot of manual intervention. 

What is user onboarding automation?

Broadly, user onboarding automation streamlines the process of bringing customers onto a new platform with minimal manual effort. In the employment space, that means importing required employee data automatically from the employer’s source of truth.

Manual onboarding requires a lot of effort of both your team and your customers. All of the relevant employee data—whether that’s census data or individual pay statements—has to be manually imported to your platform. At best, that requires configuring a custom SFTP connection or downloading files from the HRIS or payroll system and uploading them to your platform; at worst, it requires your customer to manually add each of their employees one by one.

By contrast, automated user onboarding is much faster and easier. The use cases are broad, but the core functionality connects an application to the source of truth for employee data, whether it’s an HRIS or payroll database. Once connected, data seamlessly transfers between the two systems almost instantly. Plus, the systems are able to continually communicate, meaning data is updated in your system as it’s updated in the HRIS or payroll system.

5 Benefits of automated user onboarding

Whether your customers are SMBs or large companies, automated onboarding provides a better customer experience. 

1) Improves data quality 

Manual onboarding opens the door to human error. Your customers provide files that must be mapped and imported into your system. Customers may struggle to get files with the correct fields in the correct format. Additionally, manually exported and imported files are always point-in-time and may not reflect the current workforce in the system of record. 

Automated onboarding connects two systems using predefined rules and mapping. Customers can be assured that their data syncs are accurate. In regulated industries, this also ensures all steps for compliance are handled correctly.

Automated onboarding also sets the stage for ongoing integration between systems — which is what your customers need and expect. In fact, 84% of HR professionals say integration is “extremely important” for any tool added to their tech stack. 

2) Saves customers time

With automated onboarding, customers won’t spend time creating files or otherwise importing their employee data from one system to another. They won’t be forced to manually enter employee data if they don’t have the resources or technical expertise to create files.

This reduces the time spent onboarding and also saves time as customers continue using the product. The integration used during onboarding keeps HRIS or payroll data synced between the two systems, automatically adding new employees, de-provisioning employees as they leave, and updating information based on changes to salary, role, and other employee data. 

3) More secure

If your customers have to transfer files for manual onboarding, they risk exposing sensitive employee data. Someone internally may email the files rather than share them securely or download them to a directory that doesn’t meet internal protocols. To transfer files on an ongoing basis, they would need to set up an SFTP connection, which needs to be monitored and managed.

Automated user onboarding securely collects your customers’ credentials to connect their systems. Customer-permissioned access lets users stay in control of what data is shared through the integration. 

4) Delivers value faster

Whether manual onboarding takes days or weeks, it delays your customers’ use of your product. Some initial excitement can wear off, and it takes longer for customers to realize value — both as a company and for their employees. 

Human Interest sees integrations as a competitive differentiator. “We’re always looking for an opportunity to improve our value offering,” says Drew Obston, Manager of Product Operations. “With integrations, we’re able to go above and beyond and say, ‘You don’t have to upload payroll data. You don’t have to be provisioning someone on our team to log in to your payroll.’”

Automated onboarding takes minutes and allows your customers to focus their efforts on configuring and integrating your product into their processes. 

5) Scalable for your organization

If you’re relying on manually onboarding your customers, you need employees to work with them. Your employees may import files on behalf of customers, assist with data mapping, or make ongoing updates to keep data current. 

Manual processes will always be limited by employee bandwidth. Automated user onboarding, on the other hand, has no limits. You can onboard more customers without compromising the onboarding experience. You can focus your resources on relationship management or customer support rather than customer onboarding. 

Examples of automated user onboarding

HRIS and payroll integrations can serve a wide variety of industries, including 401(k) and retirement administrators, employee benefits solutions, insurance, HR technology, fintech, and more. 

Here are a few examples of how automation can streamline onboarding.

401(k) and retirement administrators 

With HRIS and payroll integrations, 401(k) administrators can pull employee information like employment status, start date, and date of birth directly from the employers’ system to automatically verify employees’ eligibility. The eligible employees can then be automatically enrolled in the plan, pursuant to SECURE Act 2.0, with the choice to opt out. Even better, these integrations provide evergreen access to the employer’s payroll system, so new employees can automatically be enrolled once they’ve met the sponsor’s eligibility requirements. 

Use Case: 401(k) provider Saveday uses automated user onboarding to let its customers set up plans in 15 minutes or less. Customers grant access to their payroll systems within minutes, eliminating the need for the Saveday team to manually download files and validate data. 

Employer-sponsored benefits providers

Integrations allow employers to import data for all existing employees so they can enroll in employer-sponsored benefits like ICHRAs, Earned Wage Access, and Health Payment Accounts. The provider can automatically import data for each employee, like individual pay statements, company contributions, pre- and post-tax deductions, and employment status to immediately identify eligible employees, enroll them in benefits, and manage payroll deductions on a recurring basis. 

Use Case: Exhale provides a suite of financial wellness benefits to hourly employees. By integrating with employers’ payroll systems, Exhale is able to enroll employees in benefits up to 2 weeks faster because the company doesn’t need to wait until the next pay cycle to view employees’ pay statement data.

Employee engagement and learning management systems

To effectively train employees and reward them for their efforts, engagement and learning management tools need to have a record of each employee and relevant census data like their hire date, job title, tenure, and more. Integrating with the employer’s HRIS allows these platforms to automatically create accounts for each employee and enroll them in rewards or training programs that are relevant to their specific role. As employees join or leave the company, they can automatically be enrolled or deprovisioned.

Use Case: Trainual uses HRIS and payroll integrations to instantly onboard and offboard employees as necessary, without asking customers to update their user data. That automation is critical for a platform that prides itself on scaling with its customers.

Fintech solutions

B2B fintech solutions rely on current employee data for headcount cost analysis, compensation management, or equity management. With HRIS and payroll integrations, you can securely pull in company, department, job title, and payroll data to enable pay and operational insights. Integrations keep employee data updated so your customers can see analysis and pull reports in real time.

Use Case: Mosaic has built a next-gen financial reporting and forecasting system that relies on seamless data integration from a company’s HR and payroll data. With this information, Mosaic provides detailed insights into employee costs so organizations can strategically plan their headcount. 

How to automate user onboarding

Some companies, recognizing the need for automated user onboarding and ongoing syncs between HRIS and payroll platforms, build their own integrations. For customers, this certainly improves the experience by removing the manual work on their end and keeping data up-to-date. 

However, building integrations comes with its own challenges. With so many HRIS and payroll platforms on the market, companies are faced with two paths: expend resources building a significant number of integrations, or limit your potential customers by only building a few integrations.

No matter the number of integrations you build, you will need developers to work with the APIs of different platforms. Even though integrations improve your end-user experience, building and testing them takes resources away from your core product.

Unified APIs allow companies to launch hundreds of integrations at once. As a single, standardized way to connect systems, unified APIs enable developers to work through a single interface. Your developers don’t have to work through the complexities and variations between each HRIS or payroll platform’s APIs. 

Finch provides secure and comprehensive two-way integrations with over 200 HRIS and payroll systems in the US, covering 88% of employers. 

With Finch, your end user’s experience is seamless and relies on customer-permissioned access to connect their systems to your product. 

With Finch’s unified APIs, you can automate user onboarding and rely on verified, real-time data to keep the systems in sync. 

Empower your customers from the beginning

The best user onboarding is forgettable: it is so easy that it takes almost no time or effort. Manual onboarding and ongoing updates cannot meet customer expectations, so companies need to rely on integrations. Efficient and automated user onboarding builds trust and serves as a prelude to your ongoing partnership. 

Finch’s powerful unified APIs allow companies in HR tech, benefits, insurance, and related industries to access the largest network of HRIS and payroll systems. 

Learn how Finch can benefit your organization by scheduling a call. You can also sign up to try Finch for free.