Friday Feature: You can't manage payroll issues you can't measure

You've probably heard and maybe used the expression "you can't manage what you can't measure".  Leaders pay a lot of attention to staff expenses, but may not pay as much attention to the payroll function until there is a problem.  And the costs associated with not getting payroll right can be significant.  The Wage and Hour Division of the United States Department of Labor reported that in fiscal 2017 they recovered more than $270 million in back wages from employers who weren't compliant with wage and hour laws.

Yet, research we did earlier this year focused on labor law compliance revealed that 66 percent of payroll professionals and 51 percent of HR practitioners say their organization occasionally cuts corners that may jeopardize compliance.  This is true for more than two-thirds (69 percent) of all respondents whose systems are more than five years old.  Beyond the costs associated with labor law violations, there is an adverse impact on employee experience and loyalty when paycheck errors occur.  Research we did in 2017 indicated that more than half of American workers had experienced a payroll error during their careers. Thirty-seven percent indicated that they'd had to make a late payment on a bill due to a payroll error by their employer.

Despite these well known costs of insufficient payroll practices, in newly published research that Kronos Incorporated conducted with the American Payroll Association, nearly half (49 percent) of all organizations surveyed admitted to not tracking key performance indicators (KPIs) in their payroll department.  This study polled nearly 1,000 payroll professionals from small, mid, and enterprise-size organizations across all industries.

For nearly a third (29 percent) of survey respondents, their payroll solution is 10 or more years old.  The findings suggest outdated, manual processes and legacy payroll solutions limit a payroll department's ability to track and report KPIs.  Approximately half (49 percent) of respondents admitted that their payroll team does not regularly track and report on KPIs, a possible side effect of using older solutions.

For those who do track KPIs (51 percent), the most common metrics added over the last decade include measuring the impact of manual/voided/stopped payments (31 percent), payment errors as a percent of total payroll payments (23 percent), and total processing time per pay cycle (18 percent) - all of which are direct indicators of payroll performance and accuracy.  Progressive payroll departments are also focusing on their impact on the employee experience: about one-fifth (19 percent) now measure the average time to service employee requests per day, week, and month. This is significant because a slow response to payroll requests has a direct, negative impact on engagement.

Payroll professionals know they need better tools to manage and measure KPI's.  This newest research reveals a wish list of capabilities that our respondents would like to have in order to address both compliance and employee satisfaction:

• To make their own role more effective, payroll professionals want their next solution to have on-demand reporting and analytics (87 percent), seamless integration with time and labor management to improve data quality (81 percent), and the comprehensive ability to track multiple worker classifications (76 percent), such as seasonal and temporary employees in addition to full- and part-time.
• With an eye on the employee experience, an intuitive user experience (80 percent) and employee self-service (77 percent) scored highly as “must-have” features.
• Almost all survey respondents (90 percent) say a solution that grants security-access levels based on position is critical. This would empower others within the organization - such as finance, operations, or executive leadership - to incorporate payroll data into their own reports for a more complete look at performance without exposing sensitive employee personnel information.

How confident are you in your organization's capabilities when it comes to managing the payroll function?