2 Feb 2018
The first record of a payroll system can be traced back to Babylonian times where timesheets recorded on stone have been unearthed. Since the earliest days, payroll has been evolving, either by choice or necessity, to be the highly regulated complex beast it is today. Yet through this innovation, great strides have already been made and have paved the way toward the achievement of true payroll mastery.
The impact of payroll mastery on the bottom line can be considerable. At the most basic level, people are probably the greatest cost to any business – anywhere from 50-70% depending on who you ask. At less tangible levels, payroll is a major contributor to employee morale, is impacted by a changeable regulatory system and is either empowered or encumbered by technology. Regardless, every organisation today needs to ensure it delivers accurate payroll on time, securely and efficiently.
But mastery cannot be achieved without compliance. From a regulatory perspective alone, payroll calculations are either impacted or regulated by rules around taxation, superannuation, leave accruals and terminations.
And that’s before you need to consider things such as Modern Awards, National Employment Standards (NES), EBAs and individual contracts. Such regulations require employers to meet a minimum standard of entitlements and benefits, with substantial penalties for those employers who disregard them. As such, getting compliance right represents potential cost savings.
With compliance in hand, the path to mastery requires some analysis of the three items that together form a solid tripod on which to base your quest for innovation - people, processes and technology.
Not so long ago, the best people were born of experience. However today that experience can be underpinned by Diploma and Certificate qualifications which ensures your payroll team is equipped with both knowledge and practical ability. The good practitioners seek constant refinement and improvement. But they also “know things” such as how leave rules or terminations work or what is usual and reasonable overtime. Truly great payroll people do not come cheaply and it’s a false economy to opt for a cheaper resource if the trade-off is less experience and education. Your people mix objective is to marry demonstrable experience with a willingness to learn and an appetite for innovation.
Processes also need to be stringently evaluated. Organisations must be able to map and document every step in the payroll process and identify where each step connects with other processes to understand their interaction and co-dependence.
If your payroll is operating with a great number of manual processes and copious amounts of hard copy forms, then you will never achieve best practice efficiencies. In fact, your costs are more likely to increase. Best-practice efficiency comes from automating, wherever possible, processes to minimise, if not eliminate the need for transactional processing by the payroll team. Even if you can’t achieve complete automation, make changes where you can and ensure your audit and validation checkpoints are sound.
Technology perhaps offers the greatest value-add opportunity. Technology is first and foremost an enabler with the potential to cut costs. If built correctly, technology doesn’t get sick, have personal issues or resign. Also, it effortlessly stores and archives your data for as long as required.
At the very least, in payroll terms, a modern payroll system means:
- a compliant, country-specific payroll engine
- a web-enabled self service capability
- available via desktop and mobile device
- hosted on your own infrastructure or in the cloud at your choice.
And even if you have these things in place, you’re still not best practice until they are fully integrated.
No payroll software application is an island. It’s vital that your payroll system integrates to other systems that comprise your solution. Automation and integration eliminates duplicate data entry, reduces the possibility of errors and ensures both timeliness and consistency.
The intersection of technology and integration permits the organisation to mine the data retained within the HCM ecosystem. BI and Predictive Analytics transform the payroll function from an isolated silo to a centralised data source from which powerful business insights can be derived. Insights around costs, by department or division, retention in relation to remuneration and benefits, or turnover statistics can be compared against data such as the duration and frequency of use, of self service tools. Alone they are informative, but together they provide a high level of insight that senior management can use to base their decision making and strategic direction. The tripod is a powerful combination.
In considering the potential cost of not mastering your payroll, consider the antonym of the word, ‘mastery’. It is stagnation. You cannot tell what lies within a stagnant pool, or whether what you extract is of any value. You may not even recognise it as a pool in the first place. Suddenly perhaps, innovation and mastery seems like the right course of action, yes?