Reports are the lifeblood of the modern organization. Payroll is increasingly under greater pressure to deliver data and in volumes and categories often overlooked. While producing reports is not exactly a new phenomenon to payroll professionals, what is new is the breadth and depth of reporting now requested.
However, and this may surprise some readers, a recent survey demonstrates that almost half of organizations acknowledge that they do not track key performance indicators (KPIs) in their payroll department. Those who do keep records cover typical performance indicators such as the number of errors, processing times, and impact of voids. Of those who do keep records, there is a noticeable shift towards the employee experience. As noted in the report, almost one-fifth now measure the average time to service employee requests per day, week, and month. This is significant because a slow response to payroll requests has a direct, negative impact on engagement.
Is the fragmentation of the service the reason why payroll does not track performance?
We know that most payroll professionals understand the importance of data. The EY 2019 Global Payroll survey report highlights that apart from legislative and organizational consistency, management reporting is one of the top three concerns shared by payroll professionals.
Given that companies, on average, are using seven different providers, I wonder if this is why many payroll departments fail to document performance rates. Conducting regular and consistent benchmarking is made even more challenging when you include in-country providers who do not have established technology, despite being proficient in processing payrolls for their country.
When we asked GPA members how they accessed their payroll report, here’s how they answered:
- Service provider details on request – 3.76%
- Manual consolidation of multiple reports – 14.52%
- Real-time dashboard – 28.49%
- Service providers deliver as part of service – 53.23%
The impact of this lack of cohesion has a direct effect on reporting. While many get the results instantly, for others it takes more than a day, and in some cases over a week.
Why is it important to track performance?
There are several reasons.
- Employees want timely and accurate payments.
- They want to trust that their employer is paying them correctly and is fulfilling all tax and other legal responsibilities.
- Research shows that employees view payroll errors as a major cause for concern. One in four will look for a new job after the first payroll mistake, while another 25% will seek new employment after the second issue. We also know that salaried employees are more likely than hourly employees to look at new opportunities when they are experiencing issues with their pay.
- Finance wants to know that payroll is operating at an optimum level.
- They want insights into the workforce to ensure that staffing levels are appropriate and efficient.
- Wants access to reports to ensure gender pay parity.
- Needs insights into the global landscape to ensure the workforce is functioning at optimum levels.
- Want the capability to examine the amount of time spent on in-county queries.
- To identify blockages to improve response time -especially for employees. One of the top three challenges of the current payroll model was response time to queries.
Common KPIs in payroll departments
First of all, here are some statistics to note:
- 2%-5% of business documents get lost daily. It costs $120 to replace one missing document (on average).
- Payroll errors account for roughly 1% – 8% of the total payroll each period.
- The average payroll mistake takes 15 minutes to correct.
As noted in Making Friends with Payroll Metrics, here’s a quick overview of the top KPIs for payroll.
Are employees getting paid on time?
Most timelines are governed by either employment contract or local legislation.
Look at the number of errors or the number not issued in time or if any were not made on the correct date.
Are you in compliance?
Were statutory returns submitted by their due date?
Payments to authorities for taxes by their correct date?
Payments to benefit providers on time?
What about payroll errors – were they amended by the correct date?
How efficient are you?
What is your number of payroll errors? Overpayments?
How long do you and your team spend handling employee queries?
How secure are your processes?
What is the number of payments to an incorrect bank account? Or payslips sent to the wrong employee. What about the risk of data protection breaches? Chegg, the education tech giant, confirmed its third data breach in the past three years. In this most recent attack, hackers stole 700 current and former employee records, including their names and Social Security numbers.
How cost-effective are you?
As noted earlier, your CFO may look for the data- that demonstrates payroll expenses. Examples: Cost per Full-Time Equivalent (FTE) of providing the payroll service and/or the annual service cost per employee, cost per payslip, and cost of producing a payment.
Other indicators finance might look for are
- Payroll staffing – how over or under-staffed the payroll function is
- Travel and entertainment expense per employee
- Cost per payroll payment
Payroll professionals want better analytics
When asked, here’s what payroll professionals said they’d like to see in a payroll system:
- On-demand reporting and analytics
- Seamless integration with time and labor management to improve data quality
Give your payroll teams what they want
The bottom line is to better understand, manage, and respond to the costs associated with paying your people, your company needs access to the right information. Payroll needs advanced interactive, visual analysis so they can untangle difficult business questions and quickly get to the insights that move your business forward.