Why You Need a New People Platform in the New Year

The end of the year is thought of as a festive time. For HR teams, it's often anything but: Benefits enrollment, performance reviews, tax compliance, and year-end reporting make the fourth quarter the profession's most challenging season.

In the market for an HR tool? Year-end is busy as it is — don't make it harder on yourself by procrastinating a purchasing decision. If you’re in the process of evaluating, purchasing, or renewing HR software, here’s why you should act now to ensure you have a platform in place by the start of the year.

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1. Budget is on the line.

For plenty of tech purchases, the timing is simply a matter of the calendar. In many companies, the fourth quarter is when new-year budgets are approved. Now is the time for Human Resources departments to seek funds for HR software.

“Whether it’s HR software or anything else, people are making their case for [next year's] budget now and going toward the end of the year,” said Jessica Donahue, founder of HR consulting firm Adjunct Leadership Consulting. “If you’re in a company that functions that way and you wait until March, you’re not going to get the capital approved for that project in time.”

Another reason to put down money on a People management platform or HRIS ASAP is if you have money that was earmarked for the year that’s left over. If you don’t spend it now, your department’s budget might get cut for the coming year. 

“If, as a manager, you leave some unspent budget at the end of the year, your supervisor will think you asked for too much, so next year, you’re going to receive less,” cautioned Dragos Badea, CEO of Yarooms, a hybrid work platform.

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2. It’s a natural time to set plans.

The end of the year is a natural time to take stock of which goals were met and set new objectives. “Any management process starts with planning and ends with monitoring and closure,” said Nevena Sofranic, CEO of recruitment platform Recrooit. “It’s the same thing with HR. The strategic HR planning process begins with assessing current staffing, then projecting future staffing requirements based on company goals.”

In the first quarter, HR teams might be focused on assessing current conditions, such as 401(k) limits, vacation days, and other administration tasks, Sofranic said. By the fourth quarter, they’re reviewing key performance indicators (KPIs), employee performance, hiring plans for the coming year, and other new objectives, including determining which HR tools will help them attract, engage, and retain talent going forward. 

“The end of the year is the opportunity to use data to create goals and make demands for any department, especially for HR,” Sofranic said. “At the end of the last quarter of activities, you can see the results of the lack of investment and the rise of new needs from within the company.”

3. You’ll save money, especially if you’re leaving a PEO.

Leaving a professional employer organization (PEO) to implement your first HRIS is a major milestone. PEOs handle compliance, payroll, and benefits administration for smaller businesses that might not have an in-house HR team. For many organizations, the decision to leave a PEO marks a turning point — it’s when companies declare that they’re ready to evolve their HR strategy beyond compliance and brass tacks.

But one doesn’t simply leave their PEO on a whim. It takes a time investment, requiring people teams to gather employee documents, tax records, and much more. Further complicating matters — depending on when you move, a botched migration might cost you more than just time.

That’s because of something called “double taxation” in the PEO industry. Here’s what that means:

• Many state and federal payroll taxes are paid by both employees and employers.
• Some of these taxes “turn off” after employees have been paid a certain amount of year-to-date (YTD) wages. This is referred to as a wage base.
• For example, individuals (and employers, on their behalf) no longer need to pay Social Security taxes for the year once their YTD wages cross the $168,600 mark (as of 2024).
• The wage base resets at the start of the year — or each time an individual changes employers. When the latter happens, the above taxes are owed all over again, regardless of what's been paid.

That last point may be the most important. Because PEOs are considered your employees’ employer-of-record, joining or leaving one midyear could effectively trigger an employee wage base restart. “Could” is the operative word here — the federal government exempts specific PEOs from this wage base reset, and legal battles between PEOs and the IRS have created a climate of uncertainty for organizations looking to offboard their PEOs midyear.

4. Give yourself time for implementation.

Buying HR software isn't simply a financial a transaction or matter of executing a contract. Once you've signed on the dotted line, you need to focus on actually implementing the tool. Depending on what kind of HR tech you're purchasing, implementation timelines vary greatly: For example, expansive, all-in-one suites like Workday can take months or even years to implement. And that doesn't include time you'll need to take to communicate and roll out the new software to the rest of the company.

Overall, most Lattice implementations (75%) take a month to complete, depending on your company size and the number of modules used. Implementation for enterprises can take up to eight weeks. That shorter timeline means you can reap the benefits of our software within the same quarter, not to mention a 195% ROI over three years. It also potentially means heading into the new year without having to sweat implementation — a true fresh start for the year ahead.

5. You’ll build a full year of insights.  

With new-year software launches, HR teams can begin to execute against any newly defined processes on day one, Donahue said. At the same time, at the end of 2024, they’ll gain a full year of data to evaluate their own progress and how well employees across an organization have done. Those metrics will help HR teams determine if their own KPIs have been met and what pay raises employees have earned.

“Typically, merit increases, which are based on reviews, are decided on and given in December and then they hit everyone's paychecks in January for that new year,” said Donahue. “You want and need a full year of performance data to look back on to inform your merit increase decisions.”

It’s possible, of course, to implement a performance management system in the middle of the year. But Donahue noted that the cascade of tasks that are triggered when new goals are set makes the beginning of the year the optimal time to implement a new system. 

“When you think about goal-setting, the organization should set its high-level goals with everyone for the year,” said Donahue. “They should share those with managers. Managers should set team goals and share that with their people, so that their people can set their individual goals...It’s just cleaner to do it in January.”

6. Drive better employee adoption. 

Plenty of us plan for a “fresh start” at the beginning of a new year. And just as we set New Year’s resolutions to exercise more or start a new hobby, we also may be more receptive to new workflows and initiatives on the job. 

“Traditionally, this is the time of year when new sweeping initiatives are planned for the upcoming year and when old and underperforming initiatives are shuffled off,” Badea said. “It makes sense that you’d want to lock down any major HR purchase at the tail end of the year, so you can roll it out fresh in the new year while everyone is still in their New Year’s resolutions phase.” 

Donahue agreed that teams and individuals are in the mindset for change when the new year turns. “It’s that time of year where everybody is expecting something new,” she said. 

7. It’s never been easier to show ROI.

Attrition is costly. According to a Gallup report, US businesses were losing $1 trillion a year because of voluntary turnover.

“Anything that you’re doing as an HR person that affects how people are paid, recognized, [and] rewarded [and] how they are communicating with their manager over the course of the year — all of those things increase engagement and are part of performance management,” Donahue noted.‍

People success platforms can help employers respond to these challenges. They provide templates for managers to give constructive and continuous feedback during the review process and throughout the year. They offer a single portal where employees can find their reviews, manage feedback, and store their OKRs and goals, so they can monitor their progress and look for ways to advance. And People success platforms facilitate an ongoing dialogue with employees through employee engagement surveys and one-on-one feedback, giving managers all the information and metrics they need to identify flagging engagement that might signal an employee’s desire for a career or job change — so they can take action to improve the situation before the employee leaves. 

It’s no surprise that among the best-performing HR teams, according to Lattice's State of People Strategy Report, 60% were using performance management software in the last year to support employee performance reviews, goal-setting, and feedback.

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Looking for your own fresh start? On average, it takes companies six to eight weeks to select HR software. Get a head start in your search by scheduling a Lattice demo today.