How to encourage efficiency in Payroll

The problem with talking about Payroll efficiency is that Payroll is generally a small department (but large cost) relative to the entire company and therefore you may think it is a restrictive area for efficiency improvements.

That’s why instead of trying to make it more cost-efficient, consider the general efficiency of processes and procedures.

Efficiency in Processes

When was the last time you validated that your documented processes actually align with what your employees are doing?

Process documentation is rarely proactively on display. They’ll most likely be lying at the bottom of a drawer somewhere or hidden away in desktop files, and that’s if the processes were ever documented in the first place.

The danger is that if a Payroll employee leaves, you either won’t be able to easily access that documentation or worse, you won’t even know what the correct process was!

Validation of processes is important because this is the stage at which you double-check to make sure that your documentation is a true reflection of what you’re doing.

Ask yourself, “How often does Payroll execute a pay run? How often does our pay run require manual intervention? And does our Payroll window include a buffer?”

Organisations generally have a small window of time to run the pay. After Payroll teams spend half a day getting everyone to close their timesheets, they then must clean up the data.

For example, if it says that someone has worked a 50-hour shift, it’s apparent that they forgot to clock out. They can also cross-reference against last week, fortnight or last month to make sure that the figures seem reasonable.

It’s only after all that’s been done, they can push a button and send the payment instructions to the bank. The best CFOs and Payroll teams ensure that they’ve a buffer in that window and that they’re regularly finishing with at least 25% of their time to spare. That way, if something goes wrong and delays the process, they’re still able to finish on time.

Another question to ask is, “are our manual interventions documented?”

Manual interventions are normally needed for edge cases. In some cases, however, they exist to make up for gaps in the base functionality of the Time & Attendance or Payroll systems. Manual interventions are bad since they invite mistakes and may not be executed the same way each pay run.

There will be less chance of errors and inconsistencies as long as there is thorough documentation.

The last thing that you want is to have a pay run where you have no idea what processes and steps were actually executed.

Efficiency in Systems

As part of a vendor’s implementation of a new system they’ll typically ask a bunch of questions about what you want, and then interpret how their technology needs to implement that requirement.

The problem is that no matter what you say, they’re going to come up with a response that’s based on what their system can do, not necessarily exactly what you asked for.

That’s why we’ve founded a company called Payroll Standard that aims to ensure that these systems are configured based upon a source of truth, and from your side, not the vendor.

The idea is to create a set of rules that are written in plain English and describe how the system will pay people in all sorts of different scenarios. You need to be able to hand that over and to say, “I don’t want to talk about your configuration. This is how I want to pay people. It’s your job to configure your system to do it”.

This way you can know that the system’s implementation exactly fits with your requirements and are standardised by a third party to fit as closely as possible with the wording of awards.

Being aware of the possible areas where inefficiencies can pop up, and finding ways to mitigate them, can do wonders for your Payroll. It will make your team’s job easier, and help reduce the risk of issues appearing in the future.

---

Businesses can email contactus@payrollexpertsaustralia.com.au or call 1300 287 213 for free first-step advice on how to ensure your Payroll processes can safeguard your Payroll compliance. Follow us on LinkedIn or sign up here to receive our articles direct to your email inbox.