At CloudPay, we’re firmly of the belief that SLAs aren’t enough on their own to indicate how well a payroll operation is performing. After all, in 2020 around 99.99% of all payslips were accurate, so if you just go by that headline stat, then everything sounds fine. It’s vital to dig a little deeper and explore some interconnected Key Performance Indicators (KPIs) which, when put in the right context, can tell you much more about what you do well and where you may need to improve.

In particular, we recommend benchmarking against these five KPIs:

• First-time approvals (FTAs): the percentage of payroll runs approved without any changes needed

• Data input issues: the percentage of data errors caused by incomplete or incorrect data entry

• Issues per 1000 payslips: how many data issues are found in every 1000 payslips processed

• Calendar length: how long it takes (in days) to complete payroll processing end-to-end

• Supplemental impact: the proportion of payroll runs completed outside the normal cycle

In this blog, we’ll focus on the first of these KPIs, first-time approvals, and explore why this is such an important metric to track. We’ll also highlight the best-performing countries from around the world, according to the results from our soon-to-be-released Global Payroll Efficiency Index report for 2023.

Why first-time approvals are a good indicator of efficiency

There are two reasons why FTAs are such a strong benchmark to consider. The first is that it’s a clear indicator of the accuracy of data input processes and gross-to-net calculations; a high FTA rate requires an efficient process built on good-quality data and calculations.

The second reason is that the FTA rate can be brought down by poor performance in other KPIs. For example, high rates of data input issues are likely to lead to a reduction in the FTA rate. So while FTA can’t be used as a catch-all measurement of overall efficiency, it is perhaps the most ‘general’ indicator of performance out of these five KPIs.

Top five FTA performers

While first-time approval rates are on the up globally – rising 2.44 percentage points since 2019 – some countries particularly stand out for getting the vast majority of payroll runs right the first time. Here are the five with the highest rates:

5: Peru (90.80%)

Although Peru might not be the first country to spring to mind when thinking of business opportunities, the country makes its debut on our top five FTA performers list for 2021 with an impressive 90.80% approval rate. What’s even more impressive is that Peru also ranked third best for data input issues, with only 29.63%, just three percent higher than the lowest scorer, Hungary. The fact that paperwork and tax structures are complicated, and the chances of being audited in Peru are high may explain this attention to detail. 

4: Brazil (90.86%)

The 2020 Global Payroll Efficiency Index report found that Brazil was the best performer in first-time approval terms, so this is a somewhat disappointing result having dropped from 94.1% in our previous report. Brazilian businesses approach payroll differently compared to other countries and payroll tends to be much more fluid, with lots of different payments made on a regular basis. This is explained by its exceptionally short average calendar length (three days).

3: Russia (93.43%)

This is Russia’s first time on our top five FTA performance list, which is impressive given just how complicated it can be to run payroll in Russia because of complex rules, regulations and payroll data. Russia also has the shortest calendar length of any country, which points to high efficiency despite the high administrative burden of staying compliant with frequently changing employment laws. 

2: China (95.60%)

This result, one position higher than last year with an almost 5% improvement, is particularly impressive given just how complicated it can be to run payroll in China because of stringent requirements, which vary in different municipalities, and the need to process large volumes of data. A relatively high rate of data input issues suggests that the FTA rate may be so high because payroll teams have to be particularly diligent at the data processing and validation stage, ensuring all mistakes are ironed out as early as possible.

1: Bahrain (95.65%)

Bahrain appears for the first time on our list for 2021 with one of the highest ever recorded FTA rates at 95.65%, making it the best performer this year. The country also came in at number three for lowest supplemental impact, meaning that the payroll process is efficient and doesn’t incur lots of additional costs of doing supplemental runs. Whilst it could be considered that a high FTA in Bahrain is easier to achieve due to running a low number of payrolls, this would also make it easier to have a low FTA rate. This affluent country attracts many business expansions due to the fact that both businesses and individuals are exempt from tax, which may also assist the smoother payroll process.

In summary

The big geographical spread of countries in this top-five ranking shows that good payroll services can be achieved anywhere in the world. This includes in places like China and Russia where administration of payroll and GDPR laws can be notoriously complex. These results show that with good-quality data and the right means in place to cut out errors within that data, your payroll operation can reach its potential wherever you are.

Our CloudPay Global Payroll Efficiency Index for 2021 is right around the corner, so keep your eyes out for the all-new insights on global and regional data for first-time approvals, and all the other vital KPIs to come. Can’t wait? Download the 2020 report here.