The Hidden Costs of Using Multiple HR Systems (and Why Consolidation Matters in 2026)

At work, organizations have filled their HR tech stacks with some of the most advanced tools available. They’ve learned how to automate payroll, simplify benefits enrollment, eliminate time-consuming tasks and connect employees with their data faster than ever before. But more tech doesn’t necessarily equal better tech, given many organizations have brought in multiple HR systems, too.

While it might not seem obvious, those disparate systems cannot manage core HR processes in a way that makes work easier. Instead, they’ve unintentionally increased HR data errors, working against the simplicity, automation and compliance peace of mind employers should expect from HCM software.

To uncover how to accelerate our HR operations and keep your workforce thriving, let’s explore:

• how using multiple HR systems works against businesses
• why you should manage HR processes with single-database software
• what steps to take as you eliminate fragmented systems and invest in the right HR tech

The reality of fragmented HR tech stacks today

Organizations ensnared by using multiple HR systems doesn’t necessarily start that way. Think about a company that was once a small startup. Maybe the organization began with just one hourly employee. Eventually, it invested in a true sales team, as well as a marketing professional and an HR professional. This HR professional realized that, at least for some processes, the business needed backup.

So the startup’s CEO invested in payroll software. It worked well at first, but the organization quickly realized it needed separate tech for recruiting and onboarding, too. Since its payroll vendor didn’t offer that kind of software, the org had to search for additional tech. After landing on an option, the company then realized it needed a learning management system (LMS) to help administer, streamline and report on required compliance training. Neither of the organization’s two existing providers offered an LMS, so it had to find a separate provider for that, too. As the business — and its HR needs — grew more complex, so did its tech stack.

Eventually, the organization invested in different tech providers for not just payroll, hiring and training, but also:

• benefits administration
• background checks
• employee self-service
• time and attendance
• performance management
• scheduling
• ACA, COBRA and other compliance needs

Yet as the organization purchased more software, its efficiency didn’t actually grow. Instead, it started to encounter operational bottlenecks, multiple logins and passwords, inconsistent automation and time-consuming workarounds.

In other words, the specialty tools and systems the company bought might work for its specific processes, but that doesn’t translate to effective workforce management. Why? Because no HR process operates in a vacuum. Onboarding relates to training and taxes. COBRA compliance relates to payroll and benefits. Time-off requests relate to scheduling and labor allocation.

Ultimately, everything is connected, and dividing core workforce processes across multiple HR systems works against the overarching issues tech should solve. Instead of operating seamlessly within one software, these disparate tools create equally disparate processes that organizations may attempt to patch with:

• Excel and other spreadsheets
• disorganized text or email correspondence
• other “shadow systems” that don’t guarantee accuracy or security

It may seem far-fetched that an organization would depend on so many separate systems, given how many HR tech stack problems they cause. But it’s more real than you might think: A commissioned study conducted by Forrester Consulting found that HR and payroll professionals use an average of 6.17 HCM providers.*

The study also revealed that among those professionals, 77% store data across multiple HCM databases, and 71% can’t transfer or share that data across databases.

The fact that organizations often adopt multiple HR systems and regularly wrestle with issues they create highlights a more significant, systemic problem: Employers may not view these challenges as issues at all, but just the price of doing business as usual.

Luckily, it doesn’t have to be this way. Finding a better path forward, however, first takes realizing how costly having multiple HR systems really is.

The true cost of operating multiple HR systems

Unsure how HR inefficiency relates to an uncontrollable HR system cost? Keep the following issues in mind as you consider the cost of multiple HR systems in your organization.

Manual data entry and duplicate work

When multiple HR systems don’t communicate with each other, HR professionals may have to manually complete tasks that separate tools can’t. This doesn’t just create excess work that consumes HR’s time; it also produces a measurable cost. According to EY, a single manual data entry made by an HR professional without self-service technology (such as when that tech fails) carries an estimated cost of $4.86. Of course, specific tasks carry a higher price, such as:

• $12.85 to record Form W-4 and other tax form information in an HR system
• $15.06 to review and approve shift swaps between employees
• $17.54 to verify the accuracy of employee timecards

Any task HR performs that can be automated by software creates HR inefficiency and a drain on an organization’s bottom line.

Inconsistent or outdated employee data

If your HR tech stack can’t ensure a seamless flow of data, any piece of employee info could be incorrect. In turn, leaders could rely on reports that don’t provide an accurate analysis. Or an organization won’t be able to conduct meaningful self-audits, let alone address an actual compliance audit should one be required. This issue is more common than you might think, given Forrester Consulting found 80% of HR and payroll professionals said disparate or duplicate data makes it difficult to create accurate reports.

Knowing how inaccurate employee data accumulates doesn’t prevent an endless cycle of repetitive work from forming just to fix it. That inaccurate data could trigger a time-consuming and resource-draining scenario that, even then, doesn’t guarantee accuracy.

Compliance risks across systems

With inaccurate data across multiple HR systems, organizations could find themselves at a disadvantage when it comes to compliance. According to a separate study from EY, an average of 1 in 5 payrolls have errors, and a typical issue costs $291 to fix.

Beyond simply fixing those rampant mistakes, EY found 14% of companies were involved with payroll litigation in the previous year. Those sued received an average of 32 legal complaints annually. But even that doesn’t paint the full picture, as EY found one company spent as much as $50,000 annually settling payroll litigation issues.

As data incorrectly transfers between multiple HR systems, it misinforms payroll and beyond, making it nearly impossible for any organization to proactively navigate its compliance requirements.

Reporting delays and inaccuracies

Since workforce data may not seamlessly transfer across multiple HR systems, it could take longer to generate — and likely correct — key reports. So much so, HR professionals may need to manually aggregate data for those reports themselves. This introduces not just a delay from a lack of automation, but the potential for human error, too. In this way, multiple separate systems introduce HR inefficiency and inaccuracy as organizations meticulously piece together the data they need.

Employee frustration with multiple logins

When the data employees need to access exists across multiple HR systems, they may need to remember multiple different logins and passwords. This could cause delays, inaccessibility and a significant amount of frustration. In fact, a study conducted by OnePoll and commissioned by Paycom revealed nearly 80% of employees get frustrated with outdated tech at work.

Bigger than a minor annoyance, this unchecked issue could quickly lead employees to blame their organizations. The same study found nearly 70% of employees don’t believe their company prioritizes digital transformation. And if an employee doesn’t think their employer cares about their experience, why would they consider referring someone to work there? They likely wouldn’t, and the root cause can be traced to their organization’s multiple HR systems.

How fragmented systems hurt every business leader

We’ve examined how multiple HR systems negatively impact employees and the organization at large, but they also derail organizational leaders and executives. Let’s dive into how disjointed tech harms the positions that likely steer most businesses.

For HR directors: Increased workload and rework

Fragmented systems limit automation and produce inaccurate data, grossly reducing HR’s impact on business. By extension, they prohibit HR directors from leading their teams to work that truly moves the needle. Rather than focusing on engagement, compliance or recruiting, HR’s capacity is capped by issues that could — and should — be avoided with single-database software.

Fragmented systems also limit an HR director’s ability to be a true, strategic adviser to the C-suite. After all, what impact can HR really demonstrate if so much of its collective time is consumed by making up for where its organization’s HR tech stack falls short?

For CFOs: Unreliable labor cost data, cost of rework and noncompliance

Multiple HR systems harm a chief financial officer’s (CFO’s) role on two fronts: First, inconsistent and inaccessible HR systems drain HR of work that truly adds value. It’s forced to focus on menial tasks that, as EY estimated, take a constant toll on an organization. If the cost of reworking this data wasn’t enough, multiple HR systems could also produce data that isn’t reliable, even if it isn’t initially obvious that the data is wrong at all. This means a CFO could make a decision based on a misleading report or analysis, which could result in long-term consequences that can’t be undone.

Second, multiple HR systems are ripe for noncompliance and could lead to even more unnecessary costs due to fines, audits and other penalties. Unresolved noncompliance could even hinder an organization’s ability to legitimately operate, which, of course, would be detrimental to a CFO’s role.

For CIOs: Security risks and integration maintenance

Multiple HR systems can become vulnerable, especially if they require an admin to manually transfer data between them. A chief information officer (CIO) would have to accept the risk to overall data integrity this error-prone process could bring. Either scenario could cost a company, and both detract a CIO from looking toward growth and scalability.

Additionally, more HR systems also bring a greater need to meticulously manage the integrations they require. This creates more labor for the IT department — and it doesn’t even guarantee that those multiple HR systems will operate flawlessly.

For CEOs: Organizational inefficiency, reduced agility, employer brand and a damaged legacy

True, multiple HR systems create inefficiency and inaccuracy that block quick and reliable insights. For a CEO, this could lead them to make the wrong business decision, setting them behind their industry’s competitors.

But beyond that, employees inevitably blame someone for a culture of HR data errors, and they’ll likely turn their ire to the leader who authorized the investment. Give it enough time, and people may see a CEO as synonymous with inefficiency, inaccuracy and outdated tech. This doesn’t just damage a CEO’s individual legacy but could also tarnish the brand they carefully built, deterring talent before they have a chance to experience the company’s culture.

Why consolidation matters in 2026: The shift to true HCM platforms

The solution to the problems caused by multiple HR systems isn’t more tech, but less. Understandably, you might think, “If these systems are connected, then what’s the issue? Wouldn’t they work just as well as one software that encapsulates every HR process?”

Unfortunately, it’s not that simple. Because software that appears as one unified experience could rely on multiple systems on the back end that still require:

• multiple logins
• browser redirects
• workarounds from inconsistencies between systems
• long waits for necessary reports due to a lack of accurate, real-time data

It’s worth noting that not every HR software provider approaches human capital management (HCM) the same way. Certain tech may be built on a legacy established by human resource information systems (HRIS), which only account for the most basic processes, like payroll, time tracking and benefits administration. HCM, on the other hand, encapsulates all workforce processes, including:

• hiring and recruiting
• compliance management
• workforce reporting and analytics
• employee engagement

If a provider started with HRIS and built its current, supposedly HCM tech on top of the software it already had, it could still trigger the issues plaguing organizations using multiple HR systems. Single-database software, however, is built entirely in-house with the full spectrum of HCM in mind. The result: Every workforce process exists within a truly single, seamless experience.

With single-database software, all employee data flows seamlessly among tools, eliminating the need for HR to enter and reenter data across multiple systems. This also ensures real-time data accuracy, as data is entered once — and only once — without the need for transferring between systems.

The accurate, real-time data created by single-database software also helps improve compliance, as reduced data reentry also lowers the potential for human error. At the same time, single-database tech allows employers to produce compliance-related reports in real time, so they can be proactive with their regulatory prep and strategy.

Using a provider with single-database software also simplifies workflows, as HR won’t need to be the expert on multiple HR systems to successfully manage core processes. Additionally, neither HR nor regular employees will have to juggle multiple passwords and navigate complex systems just to access the data they need, improving the experience for both.

Finally, single-database software can also reduce an organization’s overhead costs. Yes, fewer errors provide their own financial benefit, but the cost savings from single-database software are even simpler than that. Using one HR tech provider means an organization only has to pay one vendor, not multiple, which could quickly add up to a higher cost than any individual provider.

7 signs it’s time to consolidate your HR processes

If using multiple HR systems holds your organization back, you should consolidate all your HR processes into a truly single HR software. Not sure if that’s the right call? Keep this list of HR consolidation signs in mind to help inform your next move.

1. Frequent data errors

With multiple HR systems, you’ll likely see errors and discrepancies across all your workforce data. Do you regularly lose time producing ultimately inaccurate reports? Or do you constantly need to correct time-off balances that rarely reflect your employees’ actual accruals? If your systems don’t automate these processes, forcing your HR team to regularly correct mistakes, no amount of work will fix the root cause.

2. Increased payroll exceptions and corrections

Errors that force post-payroll corrections may seem routine, but how much more could your HR team accomplish if it never had to retroactively fix payroll? If mistakes in payroll have only seemed to increase as your organization has grown, it likely means your multisystem tech is creating more exceptions. Remember, growth doesn’t have to come at the cost of payroll’s accuracy. In fact, it shouldn’t.

3. Employees missing updates

Any change made to an employee’s profile — from an address change to a compensation increase — should reflect across your entire software. With multisystem HR tech, however, HR may have to manually ensure changes are reflected elsewhere. If your HR team has to routinely update accruals and verify changes with managers, it’s probably because your current HR tech stack can’t pick up the slack.

4. Slow approval cycles and missed approvals

Has a manager at your organization approved an employee’s time off, only for that decision to never show up in payroll? (Would you even know?) Or has an employee submitted a request that was never seen outright? If you’ve encountered either scenario, it’s because your multiple HR systems can’t directly communicate with one another. With single-database software, all approvals seamlessly flow across every relevant tool. Plus, a truly single software unlocks the potential to consistently automate time-off decision-making based on your organization’s policies, coverage needs and compliance requirements.

5. Compliance notices

Have you ever been blindsided by a COBRA deadline or missed completing a legally required report? If you’re tired of cutting it close to the wire, then multiple HR systems could be the culprit. Single-database software has the power to automate processes based on specific events, such as notifying HR of an employee termination, thus prompting action for COBRA coverage, so you have an extra layer of protection against noncompliance.

6. Reporting taking hours (or days)

We live in an era of HR automation. But when you have to wait excessive amounts of time for reports to generate, you revert to the HRIS days. Unfortunately, slow report reconciliation is inevitable when multiple HR systems don’t communicate seamlessly. With single-database HR software, you can instantly generate automated reports since your reporting tool only has to pull from a single database — not separate, disparate sources with duplicate and contradictory data.

7. Too many vendors and contracts

With multiple HR systems, you could be juggling multiple providers and complicated billing. While this could produce a headache for your finance department, it’s even worse when you need support. For instance, if two separate vendors respectively provide your time-off and payroll tech, who do you call when an approved request doesn’t automatically populate in payroll? This is just one of myriad hurdles you’ll have to cross when your HR “solution” is a patchwork of providers.

How to start an HR system consolidation initiative: A step-by-step guide

Now that you’ve determined you need to assemble your core HR processes under a single-database software, it’s time to kick off your HR consolidation process. Follow these six steps to help your organization transition to a simpler way of operating.

Step 1: Map all systems

Identify every separate system that makes up your HR tech stack. Keep in mind, no process is too granular. After identifying your systems, determine which of your current providers cover each. Chances are, you’ll have to leave them for a single-database provider, but it’s still important to account for what functionality you appreciated so you can hold your next vendor to the same standard.

Step 2: Identify overlap and shadow tools

Once you’ve identified your multiple HR systems, examine where they fall short and outline the processes your organization has to take to make up for it. For example, does your HR team spend a significant amount of time adjusting time-off balances through Excel? Any process that HR has to complete with shadow tools serves as a clear indicator of where your current HR tech stack falls short.

Step 3: Document risks and inefficiencies

This will come somewhat naturally through the previous steps, but it’s important to note any potential risks multiple HR systems pose to your organization’s efficiency and compliance. Payroll errors, inaccuracy, missed approvals and more should all be considered. Ultimately, your organization’s ability to operate confidently, efficiently and within compliance helps ensure its long-term success.

Step 4: Define the ideal future state

Once you’ve determined where your current HR tech stack fails, you can envision what the ideal software would accomplish. Account for the direction of your organization, projected growth and the needs of your employees. All will help you define what the best scalable and single-database software for your organization is.

Step 5: Evaluate HCM systems that unify data

Once you understand the kind of support you need, you can easily eliminate tech providers that don’t meet it. Ensure every HR tech vendor you consider offers a truly single database it can prove. Many providers will claim to offer an “all-in-one” experience, but that doesn’t mean they don’t rely on multiple HR systems hiding behind an interface as a disguise.

And don’t just take a potential provider’s word for it. Look into reviews, case studies and client testimonials to determine how clients have used the software and where it’s succeeded. This should help you spot a vendor with a truly single database to support your long-term reliability and scalability.

Step 6: Score vendors against business priorities

Determine your organization’s top priorities for the near and distant future. Then consider how the ideal single-database HR software could best support them. You should land on the vendor that addresses all your priorities. For example, if a provider supports growth but offers no means to assist in compliance, move on. Investing in a partial solution defeats the purpose of your HR consolidation process. In your research, the obvious choice should become clear. Don’t settle for anything less than a provider that supports all your organization’s priorities.

Download our HCM buyer’s checklist to evaluate vendors

Consolidation isn’t about IT — it’s about eliminating work

Yes, housing your core HR processes within a truly single software will make work easier for IT. But it’ll also transform life for your:

• employees
• managers
• HR team
• executive leadership

And by eliminating the menial tasks that too often consume your HR professionals’ workdays, you help them unlock their maximum potential — and your organization’s maximum efficiency.

Explore Paycom’s truly single-database HR software to learn how it eliminates multiple HR systems and simplifies work companywide.

*Forrester Consulting, Single-Database HCM Solutions Drive Cross-Business Success, a commissioned study conducted by Forrester Consulting on behalf of Paycom, May 2025.