The Ultimate Guide to Payroll Integrations (Updated for 2024)

Almost half (49%) of HR professionals use seven or more different software products every day to manage their workforce. These systems are rarely able to communicate with each other, which means the data often differs slightly in each database—unless the HR team manually updates each system daily—making it difficult for employers to get a comprehensive overview of their workforce. Fortunately, there’s a better way: payroll integrations. 

From streamlining pay to keeping retirement benefits up-to-date and efficiently managing benefits enrollment and deductions, payroll integrations enable the faster, more accurate workflows that HR professionals want. 

In this guide, we’ll look at payroll integrations in detail—including common use cases, benefits, and challenges—as well as how they’re commonly built and maintained. 

What are payroll integrations?

Payroll integrations are a means of connecting payroll systems to the other HR, benefits, and fintech solutions HR teams use to manage their workforce. Built on APIs, payroll integrations automate the exchange of data between the employer’s primary source of truth (the payroll system) and other applications, so the information held in each system is always accurate and up to date.  

As payroll processing becomes more complex, API payroll integrations offer a range of benefits, including easier access to accurate data, automation, and more intuitive workflows.

Common use cases for payroll API integrations

From managing 401(k) plans to streamlining tax compliance, payroll API integrations optimize various HR and administrative functions, enhancing efficiency and accuracy. Typical use cases for these integrations include:

401(k) and retirement

By integrating with payroll systems, 401(k) recordkeepers and third-party administrators (TPAs) can streamline sponsor onboarding, automate retirement plan enrollment, easily manage deductions, and access all the information required for yearly record-keeping audits. 

Real-world success: How Human Interest Streamlines 401(k) Operations and Onboarding with Finch

HR tech

HR tech platforms are supposed to integrate with a company’s existing systems—but with so many payroll providers, that’s not always feasible. With an API-based payroll integration, there’s no need to update employee data across systems—it’s synced automatically.

Employee benefits

Benefits platforms rely on frequent, manual updates, often leading to errors and delays. Using a payroll integration helps employers onboard new hires, enroll them in any benefits programs, and automatically manage deductions.

Real-world success: How Lane Health Helps More Employees Afford Medical Expenses 

B2B fintech

By connecting payroll and HRIS data, API integrations allow employers to quickly and easily access insights around pay data, operational expenditure, compensation benchmarking, and more.

Real-world success: How Rillet Stood Up 40 Payroll Integrations in Just 5 Days 

Insurance

Insurance carriers need accurate and up-to-date company and employee data when providing quotes, underwriting policies, and managing claims. Integrations allow carriers to access the data held in employer systems of record. 

Tax and compliance

Up-to-date information is also crucial for tax and compliance platforms, but collecting this data is labor-intensive and manually sharing that data can often produce errors. Payroll integrations allow instant access to critical employee data in near real time. 

Benefits of payroll integrations

Payroll integrations bring numerous benefits, from saving time and eliminating data silos to enhancing the employee experience. Here's a closer look at how they benefit various stakeholders, including app developers, employers, and payroll providers:

Benefits for application developers

• Improves access to high-quality data: Your potential customers have had enough of dealing with out-of-date, inaccurate data. But they also want to know that their data is in safe hands. Payroll integrations can reduce compliance risks by only collecting strictly necessary data directly synced from employer systems of record—not via email or other unsecured channels. By pulling the data automatically, your application can build automated workflows to expedite payroll processing, increasing the likelihood of meeting Service Level Agreements (SLAs). 
• Simplifies workflows: Streamlined onboarding and an intuitive user experience help your customers achieve a faster time to value. Since they no longer need to manually enter data or switch between multiple applications, they can operate more efficiently and realize a return on their investment much faster. 
• Increases total addressable market (TAM): HR teams don’t want more solutions that can’t integrate with their existing tech stack—they’ve got enough of those. Integrations are now table stakes for them. For employment tech SaaS tools, ensuring your solution integrates with as many payroll systems as possible significantly increases your potential customer base—and ultimately, your revenue.

Benefits for employers

• Reduces administrative burden: Payroll integrations streamline HR tasks, saving valuable time. With 84% of HR professionals emphasizing the importance of tech stack integration, it's clear they spend too much time—up to 10 hours a week—working in disparate employment systems. Integrations free them from mundane data entry, allowing them to focus on HR tasks that require a human touch.
• Improves employee experience: Payroll integrations make it easier to create a comprehensive experience for the employee across all the systems they use to log hours, review pay statements, and manage their benefits, like health insurance and retirement plans. When all of this data is synced across platforms, employees can make changes—like updating their 401(k) contribution, for example—and rest assured that it will be accurately reflected in their next paycheck. 
• Removes data silos: Instead of toggling between multiple applications, integrating payroll systems with other HR applications creates a centralized system for managing employee data. This kind of integrated experience isn’t just more user-friendly—it’s more accurate and efficient, too.

Benefits for payroll providers

• Efficient, reliable connections: Payroll providers are the gatekeepers of mission-critical employee data. Integrations allow these systems of record to freely exchange data with the other applications their customers use. That creates a better experience for the employer and further cements the provider’s role as the primary source of truth for their customers.

3 ways to build payroll integrations

Payroll integrations can be split into three main build options—building a direct (custom) integration using the payroll provider’s API, using a unified API, or using an iPaaS solution. Here’s a closer look at the pros and cons of each method—and when they are most appropriate to use:

Custom API integrations

Custom API payroll integrations are usually created in-house, connecting the application to a single payroll provider. These are best suited for organizations that require a high level of customization and that have significant development resources.

Unified payroll APIs

Building payroll integrations with a unified API like Finch means organizations only need one integration to seamlessly connect with any one of hundreds of payroll providers. A unified API is an excellent choice for organizations with limited customization needs that don’t have the time or resources to build custom integrations in-house. Choosing a unified payroll API also allows for rapid scalability and data standardization across multiple providers.

iPaaS solutions

Integration Platform as a Service (iPaaS) solutions help internal development teams create custom 1:1 payroll integrations. iPaaS solutions are best suited to organizations with limited in-house technical capabilities that don’t need to move quickly. That’s because they are fairly low-code solutions as compared to other approaches and provide the basic rails for building an integration but still require a decent amount of internal development work to customize the integration to the particular application using it. iPaaS solutions can be difficult to scale because they’re often tailored to specific, well-defined use cases.

Challenges of building and maintaining payroll integrations

Building and maintaining payroll integrations can pose significant challenges, from varying data quality standards to ongoing maintenance demands. Common challenges include:

Data quality and standardization

The format and quality of data often vary significantly between payroll providers, so applications building a custom 1:1 payroll integration need to ensure the data is standardized to match their internal field names and formatting. Otherwise, the Operations team would need to manually map each data field, costing precious time and making it more difficult to build automated workflows. Establishing data standards can help standardize the quality, accuracy, and consistency of data from a wide range of sources. 

Gated APIs and partnership requirements

Payroll platforms don’t often have public APIs, which means partnerships with providers are required to access API keys, documentation, and other essential information. Getting these agreements approved can take a significant amount of time, on top of the additional burden of security checks and fees. This can be challenging to overcome for start-ups looking to integrate their products with the broader market.

Cost of building and maintaining 1:1 integrations 

The cost of building just one custom integration can quickly run into six figures—our research shows that just one in-house integration typically costs upwards of $187,000. In the highly fragmented payroll market, where the top three providers only account for about 45% of employers, applications need to build dozens or even hundreds of in-house integrations to support all of their customers, which is rarely cost-effective. 

Source: Finch’s Guide to the U.S. Payroll Landscape

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Ongoing integration maintenance requirements

Building 1:1 integrations is one thing—maintaining them is another. Even after they're built, these integrations need ongoing maintenance—including updates as and when required—which can be costly and resource-intensive. 

Lack of scalability 

Scaling in-house payroll integrations is expensive and requires significant time from software development teams. From accessing the API and developer documentation for each payroll provider to creating custom code and untangling data intricacies, it’s a massive amount of work. Multiply that by the number of integrations required—and it’s an untenable option. 

Get started with payroll API integrations

For businesses looking to simplify payroll integrations, Finch’s Unified Employment API streamlines connectivity across hundreds of payroll providers. Only Finch offers secure, standardized, and comprehensive two-way integrations with the largest network of payroll and HRIS systems. 

Our experience makes Finch the best choice for developers working in employment tech, too: we’ve got the integration know-how, data depth, granularity (down to individual employee pay statements), and SME knowledge you need to succeed. Finch also uses assisted integrations to significantly expand data coverage—particularly important for niche or “long-tail” providers with only a small market share—and Finch Flatfile for organizations that want the benefits of a unified API without the need to build an integration to Finch.

If you’re ready to tap into the power of payroll integration, we’re here to help. Try Finch for free or schedule a consultation with our team.