Smarter Payroll Working in Times of Change
Payroll teams across the country have had a torrid time coping with the pandemic, the resultant furlough scheme, and its legislative requirements. They are currently managing the pay implications of flexible furlough as well as how their businesses want to respond to the current market conditions and the ways of working challenges caused by Covid-19.
So how have Payroll teams coped with these challenges? Well many have responded as they always do when under pressure – work longer, work harder.
The one thing the crisis has shown most businesses is the need to change and adapt. To reshape the way they use their workforce and become more flexible in their business model to meet customer demands. Payroll teams will need to continue to change and adapt alongside their businesses; working harder is not a long-term answer. Smarter payroll models are needed.
So how can Payroll respond differently to these challenges and work smarter rather than harder?
Payroll delivers one of the most critical weekly/monthly business processes in any business, yet it is generally regarded as a tactical rather than strategic business function in HR or Finance. Many payrolls perform this critical process in a highly manual, spreadsheet-driven way; yet payroll is often overlooked or ignored when business change programmes are considered.
To gain attention to the opportunities of improved payroll processes, visibility and understanding is critical.
Payroll is often an under-reported area and a standard set of KPI’s should be in place to measure compliance, accuracy, and the cost of payroll. Ensuring the visibility of these to the senior team is vital to build their understanding of the need for change. The potential positive impact on these KPI’s needs to be assessed when developing a case for change.
To enhance these there are additional items that are often not considered or assessed:
Due to the manual nature of the process, payroll teams require early data cut-offs and blackout periods for receiving and processing data. This can result in business teams such as HR and Operations having to limit different processes to specific times of the month to accommodate. As a consequence, payroll’s own cut-off creates risks that data and information required for an accurate pay run is missed or incorrect. If the period for payroll processing could be reduced and more data captured closer to the end of the pay cycle, then pay accuracy would increase reducing late or out of cycle payments.
Due to a lack of clarity, misinterpretation or wrong application of pay terms, payroll leakage has been estimated as anything up to 3% of a pay bill. So, if your pay bill is two thirds of total business cost it could be causing a 2% impact on the bottom line! To monitor and manage this risk requires greater controls to be established which, in a manual process, is difficult to accommodate. If the payroll team were able to move away from manual validation and checking tasks they could focus on ensuring compliance to pay terms, and legislation. The technology to support more efficient payroll processing exists – and does not need large and costly systemic solutions.
Automation of data-driven, repetitive, rules-based tasks and the identification of exceptions – the things payroll teams are doing all the time – is now becoming critical to effective business operations. Adopting this to create a smarter payroll process that is timely and accurate and gives the payroll team the space to cope with changing demands should be an objective all payrolls aspire to in the current climate.
3 tips to make your payroll work smarter not harder
1. Build understanding with a set of payroll KPIs that mean something to the board.
2. Use bots or other technology to reduce manual tasks and cycle times.
3. Focus your payroll teams on developing business/legislative compliance and flexible pay schemes for the future – not data processing.
For more information on how Adrian and the i-Realise team could help, see our payroll improvement services page.