What Payroll Data is Missing From Your Company’s Analytical Insights?
While still some way behind the analytical maturity of HR, payroll is steadily playing catch-up - with previously unexplored salary data now increasing its presence in HR analytics.
Yet in most organizations, the use of payroll data for insight remains basic, typically limited to identifying remuneration trends and comparing employee costs.
Greater value can be gained by drilling down to a more granular level, using detailed payroll information to augment other elements of financial and HR reporting. And there’s also a whole host of data that can provide insights into how pay is processed, helping improve performance of the payroll function itself.
In this blog, we’ll identify the valuable payroll insights you might be missing out on, and how to start unlocking payroll’s true potential.
While payroll can leverage its own underlying process data to improve performance (more on that shortly), the bigger picture remains the strategic use of payroll information across the business. Here are just some of the businesswide benefits on offer for organizations that fully embrace payroll analytics:
- Risk Management and Fraud Identification
The identification of fraud is one of the most common uses of payroll data analysis, and an argument in itself for ensuring that granular payroll information is accessible and well managed.
Where data is clear, singular and well categorized, auditors are more easily able to spot tell-tale signs of malpractice - such as the presence of ‘phantom employees’ receiving payments by deception.
The integration of payroll data also supports risk management and compliance endeavors across the organization, for instance in the identification of SoD (segregation of duty) risks, and adherence with an increasing raft of data privacy laws, such as the GDPR in Europe.
- Informed Expansion Plans
For international organizations expanding into new territories, the cost of growth is inextricably linked to the labour costs and associated tax liabilities in each new country. Greater visibility on your payroll data helps illustrate the viability of every move, informing your global growth strategies, and off-shoring and on-shoring plans.
- Profit Margin Analysis
With payroll typically accounting for between 50 and 60% of business overheads (SOURCE: HRMagazine.co.uk), the ability to analyze staffing costs against sales revenue plays a key role in maintaining a healthy profit margin.
For business facing increasing pressure due to the digital disruption of their industry (the legal industry being one such sector at the time of writing), such output vs input analysis is essential in the redesign of their profit model.
- Succession Planning
By 2020, millennials will make up the majority of the global workforce (Link to millennials blog) - and with research suggesting this younger generation are more likely to change jobs more frequently, succession planning is taking on fresh importance.
It’s no longer just senior directors and business leaders who should have succession plans in place. By using payroll data alongside HR analytics, you can understand the other critical roles in your business that are likely to require filing - and the true cost of doing so.
Insightful Analytics to Improve Payroll Performance
Just as salary data can help to inform organisational strategies, other data residing in the systems used to run a payroll function can provide great insight on payroll performance.
Leveraging this data can help payroll teams build a best-in-class department, with a reputation for efficient, effective and on-time delivery.
Here’s a few ways you can use process data to enhance payroll performance:
- Identifying New Opportunities for Automation
While timesheet data is used by HR to track team productivity, it can also afford payroll a vital perspective on the efficiency of the payroll process.
A ‘deep dive’ on the records held within timesheet apps and related tools can shed light on how long the end-to-end payroll process takes, and which tasks within that cycle are taking the bulk of the time.
Can bottlenecks be identified? How much time is being lost to heavily manual processes? Can some of these processes be automated to relieve the burden on payroll teams? (Read more on the robotic process automation of payroll here).
With the right data, you may be able to spot ways to streamline the payroll process.
- Simplifying the Reconciliation of Data
It’s fundamental to maintaining payroll accuracy, but the reconciliation of data is undeniably one of the department’s most painful processes.
Looking into your systems to analyze the process behind it can help, enabling you to see how and when it’s being done, and the impact this has on your ultimate measure of success - the accuracy of delivery.
In many organizations, data reconciliation is carried out too late and too close to the pay run - and it’s this that can cause mistakes to be made.
- Experimenting With ‘Real-Time’ or ‘On-Demand’ Pay
In the era of the gig economy, the make-up of the global workforce is evolving. The lines between employees, freelancers and contractors are becoming more and more blurred, and organizations depend increasingly on swathes of contingent workers.
Many businesses in this position recognize that a one-size-fits-all approach to pay may no longer work. Some are investigating the potential for ‘on-demand’ pay that entitles gig workers to faster remuneration for their work.
Payroll data, in tandem with HR, can help identify suitable candidates for these alternative payment methods, as well as providing insight on the levels of contingent staff across the organization.
Accurate identification of your contractor workforce also helps ensure compliance with tax legislation, such as IR35 in the UK, and the 1099 v W2 classification question in the US.
And, just as payroll data may be used to assess the viability of on-demand pay, it could also be leveraged to explore the potential of other alternative pay methods, such as Blockchain.
Of particular interest to global businesses operating across multiple territories, a Blockchain-based payroll system sees international employees paid via Bitcoin - negating the need to deal with multiple banks and fluctuating exchange rates.
- Building the Case For Self-Service
Few payroll professionals would consider their case management platform as a valuable source of strategic information, yet ticketing systems can provide an important insight on the efficiency of your HR service.
Mining the system for data will show how many tickets are raised, how quickly they are dealt with, and what the most common employee queries are.
This can help you streamline the helpdesk system through the creation of FAQs, or the implementation of smarter solutions such as chatbots, allowing employees to get answers without the need for human intervention.
It also allows you to monitor your response times against SLAs, to ensure you’re living up to your promises.
Find out more on improving the global payroll process through analytics in our previous post.
Want to find out what insights you may be missing? Start by doing an audit of the data residing in your payroll systems - then draw up a list of the new insights that would help your payroll dept and business most.