Today’s blog post comes from Workforce Institute board member Simon Porter, NGA Human Resources
I’ve worked for years and it wasn’t until I started working for a payroll services company that I ever considered how my salary arrives at my bank account each month. I just assumed that my correct wage, with all additions and deductions made correctly, would be in my account, ready to spend as the clock struck payday. Had it not been, this might have been the only time I ever questioned the process.
For most of us, the only reason we work is to be paid. Before we accept a job, we negotiate our total rewards and payroll benefits. We discuss bonus programmes and the parameters to pay-out. However, once we’re onboard, few of us ever consider the people and processes that sit behind the transfer of funds from our employer to our banks. Even fewer of us ever think to recognize the complexity of the processes.
You will rarely, if ever, hear a payroll administrator say is; “Oh it was great to receive so many recognitions of thanks this month from the 1,000s of colleagues I paid accurately and on time, as I always do.” In this blog, I set out to provide a snapshot of the role of payroll department.
Processing payroll is a complex process
Payroll is not just a case of calculating numbers. It is a legislative minefield. Each country, and in some countries, each region, have their payroll nuances. These all need to be addressed and factored into each payroll run. And, you can’t assume that there haven’t been changes made. Some countries, especially in emerging economies, adjust their income tax rates almost monthly.
There is no margin for error. And. If you thought GDPR was going to simplify the HR data challenge in Europe, this is not so. Most countries still have layers of PII legislation on top of this. Challenging enough? It keeps getting more so. Still the majority of multinational organizations use legacy processes or a chaotic set-up, the result of years of M&A activity to process payroll.
This means that each country has its own way of “doing payroll”. Dozens of local payroll providers, different systems, workflows, data storage, etc. Such a decentralized payroll model is not sustainable long-term. It can’t grow with the business; there is no room for innovation; there is zero transparency; it can’t provide single-source data, essential for business planning; it can’t be centrally managed and, it’s an expensive, high-risk approach to payroll.
Only by taking a unified approach to global payroll can organizations ever deliver the effectiveness and economics needed for the payroll function.
It’s for this reason that so many of the world’s major brands have their payroll services managed by or even outsourced in its entirety to NGA HR. We remove the risk and ensure payroll is compliant, data-safe, on-time and correct -every run.
This is far from a simple process in one country. The more countries there are employees, the greater the payroll challenge becomes and the higher the personal risk that we might not get paid! This said, there are many more organisations that for now, press on with managing their own payroll, to varying degrees of success.
Global Payroll Complexity Index addresses payroll processing challenge
Many of these organizations use the biennial Global Payroll Complexity Index (GPCI) to decide which of the countries they will continue to manage in-house and which they will outsource. This is also a well-used tool for business transformation teams who are mapping the full challenge of expansion into a new territory.
We’re at the research stage of the 2019 GPCI report. This will be published in late May. To be highly accurate, it requires the input of international payroll professionals. Already, 1,000s have shared their experiences, from every corner of the world.
We’d love to add your payroll team’s experiences to this. They can take the GPCI survey here and feel proud that they’re providing the intelligence needed to ensure we all continue to get paid on time every payroll run, in whichever country we work. In return, you will receive a complimentary copy of the report.
What happened in the payroll department?
So far in this blog, I have outlined payroll and I expect for many this has presented a very different view to that most of us have about the payroll process. We’ve moved so far on from cash in a brown envelope.
Payroll is now data driven. In most organizations, the payroll department is a highly secure environment. The payroll teams work in very controlled conditions to ensure our personal identifiable information is kept confidential.
Inside, the payroll team calculates employee compensation in return for hours worked and ensure the payments are made. There are many steps and processes to be followed, but in summary, it takes 15 steps to ensure we are all paid on time, accurately and knowing that all the right deductions have been made for us, each payroll run. This is a huge burden they carry for us. I think we should all take a moment to spare a gracious thought to the teams of people who ensure our salaries make it to the bank.
The 15 steps to payroll success…. and this is not all
- Creates and maintain payroll policies, procedures and best practices for the organization.
- Maintain payroll information through data collection, calculation and entry.
- Keep employee records up-to-date for benefits eligibility, insurance coverage, exemptions, changes in role/department, job changes, savings deductions, etc.
- Process new employees and temporary workers for financial or tax purposes during onboarding.
- Calculate taxes (federal and state income tax and social security taxes)
- Report on taxes, social security, deductions, leave, disability, non-taxable wages, etc.
- Keep educated on changes to laws and company policies.
- Update the business on these changes.
- Issues pay checks to employees according to the payment structure of the business.
- Provides payroll information to employees and resolve any issues.
- Keep up to date with cyclical dates and deadlines.
- Calculates payments for employer’s social security, unemployment, worker’s compensation, and benefits coverage.
- Prepare management reports on a monthly, quarterly, and year-end basis.
- File appropriate tax forms.
- Communicates regularly with HR and finance.