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One of the most exciting times of the year at CloudPay is when we launch our Global Payroll Efficiency Index (PEI) report, which helps us give businesses like yours better insights into payroll performance than you can get from standard SLAs.
The report is compiled through detailed research into how payroll operations are performing nationally, regionally and globally, across five unique KPIs:
- First-time approvals (FTA): what percentage of payroll runs are approved first time without any changes needed?
- Data input issues (DII): what proportion of all the issues affecting payroll have been caused by mistakes in data input?
- Issues per 1000 payslips (I/1000): how many payslips per 1000 have issues in each payroll cycle?
- Calendar length (CAL): how long does it take to complete a payroll cycle from start to finish?
- Supplemental impact (SI): what proportion of all payroll runs take place outside of the usual cycle?
The 2024 PEI report, analyzing payroll data from 2023, has just been released and in this blog we’ll highlight some of the standout results and key changes. We’ll also explore changes in payment timeliness, which we introduced in last year’s report to acknowledge and track it as a crucial part of the pay process.
More change than at first glance
Many of the results in this year’s report only show incremental rises or falls compared to last year. However, diving into the regional data and comparing different metrics highlights a host of interesting changes happening in the global payroll landscape.
As an example, the First-time approvals metric (FTA) has decreased globally, and the Data input issues (DII) and Issues per 1000 payslips (I/1000) metrics have both decreased, suggesting that more issues are getting picked up through validations and checks the first time. Much of this may be down to the time-saving effects of increased payroll technology adoption, although the fact that we haven’t seen huge gains this year means there is likely to be scope for additional improvement in those areas (such as by further utilizing AI). Other innovations like alternative funding options, pay on-demand and better data analytics should also drive better results in the years to come.
Balancing this out, one of the main reasons why improvements have been limited this year is likely to be down to increasing global compliance complexity. Staying on top of payroll laws and regulations in multiple territories simultaneously is getting more and more difficult all the time, underscoring the need for technology and expertise to support hard-working payroll teams in this endeavor.
Tracking the KPIs: This year’s most notable shifts
Closer inspection of the results at a regional level – EMEA, AMER, and APAC – has also uncovered some interesting fluctuations in each metric:
- First-time approvals (FTA): for the second year in succession, the global FTA rate has dropped, although by a smaller percentage (0.55% compared to 0.87%). The global rate now stands at 73.82%. EMEA has dropped sharply again (2% last year, another 1.2% this year), but as a region with high payroll volumes and strong technology adoption, this likely suggests a more thorough approach to first-time validations.
- Data input issues (DII): this continues to decrease, and is now 10.1% lower than it was in the first edition of the report in 2019. This is likely down to a mix of factors: increased integration between HCM and payroll systems; further automation and standardization; and improved analytics. A 5.6% decline this year in EMEA is likely due to greater tech adoption, and the opposite is true of APAC: their rate remains over 70% in a region where payroll tech take-up is generally much lower.
- Issues per 1000 payslips (I/1000): this continues to fall, and is now 35% lower than it was in 2019, pointing to higher-quality data and fewer issues in payroll processing calculations. AMER and APAC have stayed relatively consistent in performance over the years, while EMEA has made great strides to improve and is now outperforming AMER. However, all three regions posted very similar results to last year, meaning innovation may be needed to generate further improvements.
- Calendar length (CAL): the global figure remains almost static compared to last year, but this masks major variations at a regional level; APAC has reduced by 1.9 days, while EMEA and AMER have both increased by 1.7. APAC now has the shortest CAL of the three regions for the first time, but in the context of increases in DII and I/1000, it may be that it’s now running payroll too quickly and that key validations are being rushed or skipped. CAL in AMER has risen by almost two days in the last three years, most likely due to moves away from weekly and bi-weekly cycles towards monthly pay.
- Supplemental impact (SI): the global rate has risen by 0.49%, but regional changes have been more significant. AMER’s rate has dropped by 0.81%, but remains the highest of the three: a major factor is the expectations of fixing even minor mistakes with supplemental runs, especially in the United States. Conversely, EMEA’s rate is lower as errors tend to be rectified in the following regular cycle.
- Payments timeliness: another important KPI is the global rate of payments made on time. This has increased from 99.02% to 99.28%, and we believe the unification of payroll and payments, expanded pay options, and wider use of technology are all helping maximize results in this area. With only small gains still able to be made, these encouraging results underline the value of innovation across pay processes end-to-end.
In summary
The one thing that brings most of these results together is the value of technology and innovation. Whether it’s enabling more checks and validations to take place, or ensuring data input is accurate and consistent, it’s clear that the organizations that have embraced payroll innovation will continue to reap the benefits of a modern pay experience.
To take a closer look at the results in detail, and discover where your organization and country ranks globally across all of these metrics, download the full 2024 Global Payroll Efficiency Index report today.