What is a system of record (SOR)

A system of record (SOR) in human resources (HR) and payroll refers to an authoritative data source that stores and manages all employee information and employment-related data.

What are the primary functions of a system of record in HR?

An SOR helps keep information accurate, makes data management easier, and supports legal compliance. By bringing together details like employee personal info, job history, job titles, salaries, benefits, and performance reviews, HR teams can securely store and manage everything in one accessible spot.

For example, instead of using separate spreadsheets for payroll, benefits, and performance reviews, an SOR combines all this data. Authorized HR staff can easily access and update records, ensuring everyone works with the most current information.

Also, SORs help with legal compliance by keeping detailed records needed for reporting and audits. They assist organizations in following labor laws and industry regulations by maintaining accurate records of employment contracts, tax documents, time-off balances, and more.

How does a system of record improve data accuracy in HR?

An SOR improves data accuracy by centralizing all HR information into one platform. This reduces the risk of mistakes that can happen when data is spread across multiple systems or managed manually. For example, when an employee gets a promotion or salary increase, updating their profile in the SOR automatically updates the information in connected systems like payroll and benefits.

By cutting down on duplicate data entry and automating updates, an SOR minimizes human errors and ensures consistency. This means all departments—from finance to management—access the same accurate and up-to-date information, which is crucial for good decision-making and efficiency.

See also: The Case for Global Payroll Consolidation

Using an SOR in global hiring

Managing employees around the world can be complicated due to different labor laws, taxes, and cultures. An SOR makes global HR operations easier by providing a central place to store and manage employee data from different countries.

An SOR supports standard processes for onboarding, payroll, and benefits management across various regions. For example, it can handle different currencies for salary payments, adjust for various tax requirements, and manage country-specific benefits—all while keeping HR practices consistent.

Also, an SOR helps with moving employees between countries by keeping all necessary information in one place, making transitions smoother. It ensures compliance with local labor laws and international regulations like GDPR, helping organizations avoid legal issues and fines.

Ensuring legal compliance when using SORs

When using an SOR, organizations need to be careful about data privacy, protection, and following laws. They must comply with data protection laws like GDPR in Europe or CCPA in California, which control how personal data is collected, stored, processed, and shared.

For example, under GDPR, employees have the right to access their personal data and request changes or deletions. An SOR must be able to handle such requests efficiently. Industries like healthcare must also follow specific laws like HIPAA, which requires strict control over sensitive health information.

To ensure compliance, organizations should implement strong security measures in their SORs, like encryption, access controls, and regular security checks. Training employees on data protection policies and staying updated on regulatory changes are also important steps to reduce legal risks.

How can a system of record be integrated with other HR systems and tools?

An SOR can connect with other HR systems using APIs, middleware solutions, or data connectors. These technologies allow smooth data exchange between the SOR and other HR applications like Applicant Tracking Systems (ATS), Learning Management Systems (LMS), and performance management tools.

For example, when a new employee is hired through the ATS, their information can automatically be added to the SOR, eliminating the need for manual data entry. Similarly, training completed in the LMS can update the employee's profile in the SOR.

This integration provides a complete view of employee data, streamlines HR processes, and improves data-driven decision-making. It allows HR teams to efficiently manage the employee lifecycle, from hiring and onboarding to development and retention.

Benefits of having a system of record for payroll management

An SOR is very useful for payroll management because it ensures calculations are based on accurate and up-to-date employee data. Any changes in an employee's salary, tax status, or deductions are updated in the SOR and automatically reflected during payroll processing, reducing errors in paychecks.

By automating data entry and calculations, an SOR simplifies the payroll process, saving time and reducing the chance of human error. It also helps organizations comply with tax laws and labor regulations by keeping detailed records needed for audits and reporting, like payroll histories and tax filings.

Using an SOR to enhance employee experience and engagement

An SOR can greatly improve the employee experience by offering self-service features. Employees can log into the system to update their personal information, view pay stubs, request time off, and manage benefits enrollment.

This empowers employees to take control of their own data and reduces the administrative work for HR staff, increasing satisfaction. Additionally, an SOR can facilitate personalized communication, like sending company announcements or collecting feedback through surveys, creating a more engaged and connected workforce.

Challenges of implementing a system of record in an organization

Implementing a new SOR can present several challenges. Moving existing employee data requires careful planning to ensure data stays correct and may involve cleaning up outdated or inconsistent records. Technical challenges may arise when connecting the SOR with existing HR systems, needing IT expertise and possible customization.

Getting users to adopt the new system is another hurdle. Employees and HR staff need training to use the new system effectively. Change management strategies, like workshops and ongoing support, are essential to address resistance and show the benefits of the SOR.

The cost of purchasing, implementing, and maintaining an SOR can also be significant. Organizations must consider the return on investment by looking at factors like improved efficiency, fewer errors, compliance benefits, and long-term scalability.

Using an SOR in succession planning and talent management

In succession planning and talent management, an SOR provides a complete view of employee skills, performance reviews, training histories, and career goals. HR professionals can use this data to identify high-potential employees ready for leadership roles or those who might benefit from development programs.

For example, an SOR can generate reports showing employees who consistently exceed performance targets and have completed leadership training. This data-driven approach helps organizations plan for future leadership needs, address skill gaps, and maintain a strong talent pipeline.

See also: Employee Succession Planning Template

How does a system of record contribute to strategic HR decision-making?

An SOR contributes to strategic HR decision-making by providing reliable, real-time data that informs various HR initiatives. For instance, analyzing trends in employee turnover can help HR leaders develop effective retention strategies.

By offering insights into workforce demographics, skill sets, and performance metrics, an SOR enables HR to align hiring and development programs with organizational goals. This alignment helps improve workforce productivity, allocate resources effectively, and support overall business growth.

Using data from an SOR allows organizations to make informed decisions about hiring needs, identify areas for training investment, and plan for future changes. Ultimately, it transforms HR from an administrative function into a strategic partner within the business.

Leveraging Deel as your HR system of record

Implementing a system of record is essential for modern HR management, especially for organizations with a global workforce. Deel offers a comprehensive solution that serves as an effective SOR, streamlining HR, payroll, IT, immigration, and other processes while ensuring compliance across multiple countries.

By centralizing employee data, Deel helps improve data accuracy, enhance employee experience, and support strategic HR decision-making. With a user-friendly platform, you can integrate Deel with other HR tools seamlessly, making managing the entire employee lifecycle seamless.

Book a demo today to learn more.