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Experts Offer Look at Creating Better Payroll Strategy

June 26, 2020, 7:01 PM

Once seen as only a tactical component of the business, payroll teams have a chance to step up to be a more strategic partner within their companies, two industry experts said June 25.

The spotlight is on payroll now more than ever as more organizations shift their efforts to measure the business impact of their internal processes, and cope with changing regulations, said Teresa Smith, senior human capital management strategy consultant with Kronos.

“When you consider from the significant changes to labor regulations, including minimum wage increases, mandatory family and medical leave, as well as FLSA overtime thresholds these changes are really putting payroll at the forefront of a company’s compliance strategy,” Smith said.

And there’s now a push to get payroll a seat at the table, said Toni Koon, director of timekeeping solutions at DHL.

“We are a vital, critical component of the overall health of our business, but we’ve always been seen as tactical by senior leadership and company owners,” said Koon citing how payroll is following in the footsteps of human resources, which recently rode a wave of acceptance into more representation in executive decisions.

There are some key things payroll teams can do to be seen as a strategic player, Koon said at the American Payroll Association’s 2020 Virtual Congress.

One of the most critical elements is to examine the system itself. A survey in 2019 by the APA of 651 payroll professionals showed that 60% of them are dealing with a system that is at least six year old and 27% are dealing with a system that’s more than 10 years old, Smith said.

Those systems often are inefficient, give a poor employee experience, and lack insights into data, Smith said. Additionally, a disparate system often keeps payroll from working with human resources, Koon said.

And the ability to track key performance indicators (KPIs) is critical for payroll to demonstrate their impact, Smith said.

“It doesn’t matter if you are doing 1 or 100. It’s the first indicator of the health of the organization,” Koon said.

Make sure you put that into perspective for your leadership teams what a critical function the technology side can be, Koon said, offering an analogy for them about using an out-of-date mobile phone.

Inefficient, older, or disparate systems also create a nightmare for payroll because it adds additional time to create checks and takes away from time to work on projects and create strategy, Koon said.

Koon recommended a time study to find how long it take a team to get through their payroll process, to highlight areas for improvement and ensure that teams have the right access to data.

“It is time-consuming, but it leads in to a wealth of information into your data processes,” Koon said. “It also gives you the data you need to go back to leadership and say I can’t start projects 1, 2, and 3 because it’s taking me for days to get through the payroll process.”

Being able to understand how the processes work, the accuracy, how many manual processes and the time it takes, it critical, she said. And look at whether your data can tell a story.

Another important element is to examine the experience your employees have with payroll. Employees now expect more than ever before from their payroll departments and making the process easy for them is important. For instance, as employees grapple with the coronavirus crisis from home, they might be having a different experience with payroll tools than they did in the office, so consider the impact of systems on them, Koon said.

Employers should weigh options for them such as a mobile experience with payroll, daily pay options, if appropriate, pushing toward more direct deposit, and financial programs that go deeper than just talking about 401k offerings, she said.

Constant improvement within the system means constant change, but it’s worth it, Koon said.

“Put processes in place to make sure your employees are paid accurately and on time and that you have KPIs and reporting to look at to see what’s happening in the organization and really mapping out the processes to see where you may be having problems and where to take action,” Smith said.

To contact the reporter on this story: Georganne Coco in Washington at gcoco@bloombergindustry.com
To contact the editor on this story: Michael Trimarchi in Washington at mtrimarchi@bloombergindustry.com

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