Why Calendar Length is a Crucial Payroll KPI - a Country by Country Comparison

Greg Newns | Senior Business Development Manager, CloudPay


Good payroll shouldn’t just be accurate and efficient - it should be relatively speedy, too. In fact, running a quick payroll actually supports better accuracy and efficiency, because it frees up more time to make the vital checks and validations that iron out any errors.

The key metric for measuring payroll speed is calendar length and in this blog, you’ll learn how it works, why it’s so important, and why some countries around the world perform much better in it than others.

What is calendar length?

In a nutshell, calendar length is the amount of time needed to complete the processing of a payroll run and is usually measured in days. The clock starts at the point where the payroll run is locked and stops at the point where the run is approved. To put calendar length results in a global perspective, according to our recently released Global Payroll Efficiency Index, the worldwide average calendar length in 2020 was 5.59 days.

Because improvements in calendar length (i.e. a shortening of that time) represents time savings, it is often used as a good direct measure of the efficiency of payroll processing. As well as human efficiencies, technology and automation have increasingly played a part in shortening calendar length, including Robotic Data Validation, and system integration that enables the automatic transfer of payroll data.

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Why is calendar length important?

Calendar length is a vital performance metric for organizations to monitor for two reasons. The first is that it represents a clear picture of how long payroll takes, while being influenced by several different factors at the same time: subject matter expertise, data accuracy, and the quality of system integration all play their part in determining how well (or badly) payroll runs.

The second reason is due to payroll having a much bigger impact on businesses as a whole than is sometimes assumed or realized. Generally speaking, every 25 employees within an organization generates over 100 hours of manual payroll work per year. This means that payroll represents a large overhead to any business, and so any shortening of calendar length through better efficiency means the company is making substantial savings on their bottom line.

The best and worst calendar length performers

The latest Global Payroll Efficiency Index takes a closer look at how companies in different regions and countries perform in calendar length, and the results (taken from 2020) highlight a startling difference between one region and others.

The analysis found that the countries in the Americas region had the shortest calendar length by a substantial margin: 3.6 days, compared to 6.1 in EMEA and 6.2 in the Asia-Pacific region. A close look at the top and bottom performers at a national level highlights this trend even further: the three shortest calendar lengths can be found in Brazil, Canada and the United States (three days each), while all of the five longest are European (Denmark with the longest of all at nine days).

Don’t look at calendar length on its own

Taken in isolation, this could be read to mean that countries in the Americas run far more efficient payroll than other countries around the world. However, analyzing calendar length in conjunction with another key performance indicator suggests that these countries may be running their payroll a little too fast.

Our report also explored supplemental impact - the percentage of payroll runs completed in addition to the normal schedule. These runs often take place because of data errors, or because of employment legislation (i.e. paying severance at the time of termination), but these extra runs take up a lot of payroll teams’ time. 

There is a clear correlation between those countries with the shortest calendar length and those with the highest supplemental impact rates: Brazil, Argentina and Colombia are the top three countries globally. When calendar length and supplemental impact are considered together, this suggests that in these countries, payroll is rushed (hence the short calendar lengths) and lots of data errors are being made, requiring lots of supplemental runs to correct them.

This ably demonstrates that, while calendar length is a very useful metric for looking at payroll efficiency, the only way to get a true picture of payroll performance is to put it in context with other key performance indicators.

Explore calendar length and a host of other vital payroll KPIs in our new report, the CloudPay Global Payroll Efficiency Index. Download your copy of the report here.

 

Greg Newns | Senior Business Development Manager, CloudPay

 

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