Whether you are in your first role as Payroll Manager or a seasoned Payroll Manager in a new role, then this list should be your starting point for your action plan moving forward. For those who have been in service at their organisations for some time, you may find value in reassessing where your payroll service stands against some of these action items.
As a veteran Payroll Manager myself, I have amassed a substantial collection of spreadsheets, master forms and checklists that I’ve created over the years and keep improving upon in each new role. My “Action Plan” is one of those well-worn documents, and each time I commenced a new role, I created a fresh plan of attack for the new organisation. Following the 21 essential action items I’m sharing with you will enable you to:
- Derive and process all the information you will require, in the shortest timeframe possible, so you can hit the ground running;
- Clearly understand the issues and opportunities ahead of you and be able to prioritise them against the corporate goals; the political agenda; the team’s capacity (in expertise and time); how much cash you have to play with; and obviously against the severity of any compliance issues identified; and
- Enable the payroll service to start hitting easy targets and immediately motivate the team to continue improving on larger scale cost, efficiency and service improvements.
While this list may appear to be exhausting, it is by no means exhaustive. This is a blog article written within time constraints with the objective of giving Payroll Managers an ideas list of important actions to tak, to truly understand their business, their team, their customers and the issues and opportunities ahead of them. Understand, that each step you take will unearth another quantity of action items to add to your list. Keep stepping, keep adding and keep attacking each item one at a time, in order of priority for your organisation, to achieve major transformation.
If you see any major gaps or would like to contribute ideas, I would be very pleased to include them in the eBook that will be resulting from this article at some point.
So are you ready to start rocking your payroll boat? Here we go…
1. Stop! Look! Listen! And Learn Everything You Can!
- Whether or not you are new to the position, keep your eyes and ears open to everything that goes on in your payroll team and within the service itself
- Ask yourself a few questions. What is the culture? What corporate politicking exists? What are the company goals, mission and stated values? Do the payroll team members know what the goals, mission and values are? Do they operate within the values and towards the mission and goals? How does payroll set and achieve goals in alignment with the corporate goals?
- How do the payroll team interact with each other and with customers, internal management and stakeholders?
- Learn to understand the existing business relationships, especially between HR, Payroll and Finance (and if you don’t know why this is important, read my article on Why HR & Finance Must Hold Payroll’s Hand).
- Get to know your team, individually and as a team dynamic. Who are the stars? Who is toxic? Who are the real leaders (for better or for worse)?
- Do any Codes of Practice exist in writing or do your team operate under an informal code? Evaluate their team and individual ethics, privacy standards, personal and professional conduct, service standards and ongoing complaints or compliance issues with individuals or the team as a whole
2. Perception Points
From what you seen, heard and learnt from Action Item #1, you should now be building up a fairly decent list of your own action items to address. Now to add a few more action items…
Ron Kaufman is a master of service excellence, so please do yourself a massive favour and jump on to his website or read his books. His long ago published book “UP Your Service!” ** introduces and explains the concept and value of “perception points”, whereby every interaction, and throughout each stage of the service cycle, customers have crucial moments when they see, hear, touch, taste, smell and experience you and your organisation. Each of these moments are “perception points”, and influence your customers’ service experience and their perception of you service as a whole.
Your mission is to view your payroll world from your customers and stakeholders perception. What do they see? What do they hear? What do they touch? What do they experience?
- How long does it take for the phone to be answered? How are messages taken and transferred? What is the practice for returning calls? Are you available to take enquiries from your customers out of payroll business hours? What is the standard of your team’s verbal communication? What is the standard turnaround time for queries? What volume of queries remain outstanding? Is there a query log?
- Are the payroll team members knowledgeable? What questions are being asked internally by team members? What information is being passed around the office?
- Are written communications up to standard by all team members? Do protocols or pro-forma written communications exist? Are calculation and report requests presented professionally or are crumpled, hand written calculations provided on recycled payroll reports?
- Can your customers and stakeholders understand the reports you are providing them or is it all secret payroll codes? Do employees clearly understand their pay slips?
- What is general appearance of office? Is it professional and orderly or is it cluttered and chaotic with piles of filing and archive boxes covering every spare space?
- What is general appearance of staff members? Are they dressed corporately or casually? Do the team members take pride in their appearance and in their workspaces?
- Do the team members care about their customers, their work?
- What noise can you hear? What do your team spend their day talking about? What is their focus?
** UP Your Service by Ron Kaufman © 2000, published by Ron Kaufman Pte Ltd. ISBN 981-04-2132-X
3. Start Measuring!
- Identify the KPI’s, benchmarks and indicators that you want to monitor and get the team to start compiling the numbers for you. For example:
- Error rates including Overpayments and Manual Adjustments
- Response times for enquiries and requests
- Productivity & Cost per Employee or per Payroll FTE
- Time to Produce (whether the payroll itself, or the days it takes for leave forms to be processed, etc.)
- Level of Automation
- Data Quality of Inputs to the Process
- Determine if you will measure your numbers against best practice by industry, country, global or payroll service type (e.g.: shared services comparison)
4. Schedule Meetings With Key Stakeholders
- It is good practice to request scheduled meetings with stakeholders early on in your new role, but set the dates of the meetings a month or so out so you have sufficient time to truly understand the issues from the payroll teams perspective and are fairly well versed on what kind of issues the stakeholders will raise.
- Tell your key stakeholders (HR, Finance, Department/Business Unit Managers, Union Representatives, etc.) exactly what you are aiming to achieve and that you need their support to achieve it
- Create a simple stakeholder questionnaire that is sent to them prior to your meeting to give them sufficient time to give you valuable feedback. Your questionnaire should ask simple questions such as:
- How do you rate the service in general?
- Do you trust the payroll service?
- What issues do you currently face with the payroll service?
- If you request management reporting information from the payroll service, how is it presented and is it useful?
- What additional information would you like to be provided?
- What improvements would you suggest?
- What feedback do you get from your team on the payroll service?
5. Review Your Budget Against Your Actuals
- Is the budget reasonable? Is there room to move?
- Salaries: Are staff paid well? Is there excessive overtime? Are there anomalies between staff member’s salaries? Is your budget wearing the costs of staff who you have no management control over such as HRIS Support, IT or Payroll Accounting?
- Training: Is the training budget sufficient for the knowledge requirements of a payroll team? How much training will the budget actually be able to buy?
- Rent/Lease: Are the charges fair and how do they compare to market costs? Can they be reduced in any way?
- Telephone: How do your expenses compare to your actuals? Are they excessive? What formula is used to determine your expense (actual costs or a percentage share)?
- HRIS Maintenance: Is it exorbitant? What does it consist of? Are you paying for modules that have not been installed? Are the support costs reflective of the support you actually receive? Are you being over charged support costs based on the number of employees you may have had five years ago?
- Printing & Stationery: Can your printing costs be reduced? What is the price per pays lip? Can you be supplied at a better price or can you argue for automated pay slips?
- IT Lease or Recharges: What are you being charged for? Are you paying the equivalent cost of leasing brand new computers when your team are struggling on ancient equipment? Are you being charged a standard IT support fee when you have your own internal IT support personnel?
- Interdepartmental Recharges: What are you being charged for as a standard interdepartmental fee? Can these be reduced in any way?
- Bank Fees: Calculate what the bank fees should be based on the average number of payrolls and employees processed are and determine if you are wearing excessive fees due to out of cycle payments and adjustment pay runs
- Late Fees, Penalties & Legal Fees: based on the value in your expenditure, is there a problem or two in this area that needs to be addressed?
6. Create a Running Totals Payroll Reconciliation Spreadsheet
- Each payroll process should be reconciled within a global spreadsheet to provide running MTD and YTD totals to ensure the payrolls are continuously reconciled and no end of financial year surprises occur. Incorporate not only the Gross, Tax and Nett Values, but every amount calculated for Superannuation, Deductions, Payroll Tax, Fringe Benefits Tax and so on to cross balance all totals every single pay for the This Pay, Month to Date and Year to Date values.
- This aides General Ledger Reconciliation by identifying variances immediately enabling them to be rectified immediately and not remain on the reconciliations as carried forward items until someone is forced to make the time to reconcile the variance three minutes before year end
- Global balancing ensures errors in MTD and YTD totals are picked up prior to rolling over incorrect totals in your HRIS system and it eliminates the potential issues with rollbacks and restores
- If global payroll reconciliations are compared against standard payroll or prior payroll totals it also minimises the risk of undetected overpayments or underpayments of wages, taxes, superannuation or deductions
7. Review Your Team
As a manager you would love nothing less than to lead a knowledgeable, competent, efficient team of individuals who are working to their abilities and strengths and are motivated to deliver compliant, efficient and service excellence focussed payroll services. Living the dream? Now back to reality…
- Review the position descriptions for each role to ensure they are up to date, are best practice standard, are comprehensive and cover all requirements of the position including service standards, deadlines, required tasks, outcomes and encourage personal development of each individual
- Individually assess the competencies and capabilities of each team member against their job description. How can you up skill or cross train to ensure all employees are meeting or exceeding the base competencies of their position?
- Establish whether there are existing Performance Targets? Are the targets realistic? Have they achieved them? Do they correspond with the strategy of the payroll service?
- Review the salaries of the team members, if you didn’t already in the budget review. Are they equitable within the organisation and within the industry? Do they reflect the competence of the individuals? Are there any stand out disparities?
- What is performance management process? Are salary reviews tied in with performance objectives? Review them, align them and implement them
- Meet with each team member individually and have them explain the functions of their position, the issues they face, the resources they require and what improvements they think should be implemented
- Perform a time study over the course of a payroll period, or a month if there are month end demands on the team member. What do they spend their days doing, compared to the rest of the team? Understand the variances and the reasons for them. Are there team members not working to capacity? Are there stand out team members who produced significantly more than others? Are these anomalies justified by manual processes; continually poor or late inputs into the payroll; additional tasks; or do they simply not have the skills or resources required to perform efficiently?
- Compare the workloads of the team members. Are they comparable? Who is outperforming or underperforming and why? Is there disparity in the number of employees assigned to each team member?
- Assess the attitudes and efforts of your individual team members towards service excellence, prioritization, compliance, innovation, values and team work, etc.
- Do you have staff turnover issues? If yes, you obviously need to understand why and if no, why are these people so content in their jobs? The answer may not necessarily work in your favour
- Discuss with HR any ongoing personnel issues that you need to be aware of for your team
- What does service excellence mean to each team member individually? Are all team members on the same page or do you have to redefine “excellence” to them?
- Analyse the culture of your team. What cliques exist? Do you have toxic employees? Is anyone being bullied? Who are the wanna-be’s, the divas and the superstars? Who are the assigned leaders and are they effective?
8. Start Identifying and Listing The Issues
From all of your work and your stakeholder meetings to this point, you should have documented everybody’s perceived issues and identified many more based on the facts. Normally when a new payroll manager arrives at the helm, people are jumping over each other to make contact with the new manager to have their outstanding issues resurrected and resolved.
On top of the possibly endless list you have amassed to this point, now would be a great time to review the last auditors’ report and conduct an extensive compliance review of your own. Conduct data integrity reviews; check that tax, leave, superannuation, payroll tax, workers compensation and accruals and such are calculating correctly and so on.
Don’t be too concerned that you have an action list with 8 gazillion items on it and have not had a chance to allocate target dates for the longer term projects or tasks. Allocate as many of the little tasks as you can amongst the team members to get through the little stuff, which is usually what makes the most noise. Customers and stakeholders will see action taking place and perceptions will begin to shift.
A word of warning on allocating issues to team members: if poor response times and unanswered queries is endemic in your team, allocate one task at a time, approve the final resolution or response and then allocate the next task.
9. Implement an Error Measurement System
Instead of re-writing the ‘whys’ and ‘hows’ of Implementing an Error Measurement System, please refer to my article You Absolutely Must Measure Payroll Error Rates!
10. Establish Your Overpayments Situation
Overpayments of any kind are a risk to the organisation. Overpayments highlight the extent of the flaws in your payroll process, are a debt recovery issue, can raise Fringe Benefits Tax issues, add to the cost of payroll production due to the retrieval efforts and can cause further payroll errors in the recalculation or entry of the ensuring adjustments into the HRIS system.
- Document every overpayment that is currently outstanding in a spreadsheet and establish what arrangements have been made for the recovery of each overpayment
- Investigate how each overpayment occurred and implement process steps to eliminate the risk of further overpayments for the same reason/s
- Work on reducing the unrecovered overpayments as a matter of urgency
- Build a compliant system for managing employee overpayments incorporating legislative and HR policy requirements
11. Review Current General Ledger Reconciliations
- What state are they in?
- What outstanding issues exist?
- Who is currently responsible/accountable?
- Are they reviewed and authorised by Payroll Management?
- Are the Segregation of Duties requirements met with the General Ledger Reconciliation process?
12. Review All Documentation
To ensure your team are working with compliant and effective resources, it is imperative to assess what tools and resources they are utilising. Additionally, all team members should be following the same best practice procedures for payroll production and its associated responsibilities. Review the following as a minimum:
- Are all staff utilising the most current (and the same) awards, payment rates, tax rates, calculation tools and such
- Does a Payroll Operations Manual exist? Is the best practice payroll process documented? Is there an accompanying payroll processing checklist tailored to each payroll processed in the HRIS system? Are your team actually using the checklists and following the procedures?
- Review all applicable HR and Payroll policies to ensure the policies comply with payroll legislation, are consistent with best practice and are aligned to both the payroll team’s and the organisational goals
- What is the standard of communication by each team member? Do you utilise pro-formas to ensure a consistent and professional image is conveyed? Is communication timely and courteous and does it use thought out responses?
- Are all payroll master forms designed with both the completer and the data enterer’s ease of use in mind? Is all information being retrieved compliantly? Do they look professional?
- Are standard processes and formats utilised for adjustments, back pays and terminations? Are your team members using automated spreadsheets or HRIS system functionalities or are they resorting to paper based, manual calculations?
13. Review System, Data & Transactional Securities
- Are secure levels of authorization in place?
- Are appropriate segregation of duties in place?
- Where is your data stored? Is it secure? Who can access it?
14. Review IT Policies and Procedures
- Is there a Disaster Recovery Plan in place? Is it comprehensive and include varying disaster scenarios? Are contingency plans mapped out? Are contingency plans communicated to your team?
- Is there a Service Level Agreement between IT and Payroll? Is Payroll defined as a business critical operation? What level of service will Payroll receive in times of payroll emergencies or out of business hours?
- What backup systems are in place? Are these systems sufficient to recover lost systems or data in peak periods? Are they sufficient full stop?
- Are all electronic payroll files stored in a central location and accessible by all personnel authorized to access them? Are naming conventions utilised by all payroll team members? Do team leaders and managers have access to each of their team member’s files?
- Do team leaders and managers have constant access to all corporate email accounts of their team members? If one of your team members is absent, how will your team continue to access and manage their emails? What IT process exists for terminating employees? Do they simply de-activate the accounts, thus losing access to historical emails by the payroll team?
- Do team members have personal emails streaming through to their corporate email addresses? Do team members understand that work email addresses are not private?
15. Analyse Potential Cost & Efficiency Gains
- Perform a wastage analysis
- Identify every conceivable cost and process efficiency and analyse what benefits could be gained by pursuing alternative solutions
- What manual processes can be automated, preferably within the HRIS system or alternatively automated with available programs or developed applications
- Always propose an alternative project or area to expend the savings, or you may simply have your budget reduced for the next operating year
16. Create a Reporting Calendar
Document absolutely every function that is required to be performed on a regular basis; the owners; the approvers; due date; completion date and share the document with the whole team. This keeps everyone on track with due dates and allows team leaders and managers to liaise with team members on upcoming requirements. Configure your automated reporting calendar to red flag incomplete work when the due date is nearing and monitor it religiously to ensure service standards are maintained at the very least.
17. Define the Payroll Service Standards
This should be done after you have a clear understanding of what the current service standards are and should take into consideration:
- The ethos of your payroll service and those that work within it
- the practicalities of the processes involved in the payroll service and your ability to deliver on the service standards
- the predefined service standards in SLA’s, EBA’s, HR policies, legislation, company policy and historical practices
- inclusion of HR and Finance in the consultation process, if your revised standards are going to cause industrial or financial issues
It doesn’t matter whether you name it a service standard, a credo or a charter, as long as you and your team own it. As the Payroll Manager, you should start with a foundation of what you want your Payroll Service Standards to be and then involve your staff to help build it.
I would recommend calling for submissions, then building a draft document to give to your staff to further work on. This approach shows them that you value their input and gives them ownership from the onset. Once the charter has been established, have it printed and have all team members sign the document. Post this document in a prominent position in your work area.
This is your team’s promise on how they will do business with their customers, their colleagues and their stakeholders. Ensure you review the draft Payroll Service Standards against corporate policies, award or legislative requirements, defined service standards in SLA’s and have analysed the practicalities of meeting and exceeding the service standards you’ve stated. Involve HR and Finance in the review of your service standards to predetermine any industrial or financial issues that may ensue.
18. Become a Knowledge Resource
A knowledge base, for those that haven’t seen one previously, is exactly what it sounds like: a base point where knowledge is stored, to be accessed by those who need to understand information, requirements, policies, procedures and so on.
If you are in a large organisation, there has probably been a great deal invested in the design and creation of an intranet to service as a knowledge base for all the business and support units. Smaller organisations may not even have an intranet, in which case your knowledge base can be provided in print format in the form of Employee Handbooks, New Employee Packs, Information Handouts, Administrator & Manager Guides to Payroll and internal Payroll Operations Manuals.
For more details refer to Creating a Knowledge Base
19. Create a suite of exception reports for compliance and data integrity
- Data Integrity: create a new employee report that can be checked for data integrity either manually by your payroll team members or preferably dumped into an excel spreadsheet that with the use of formulas, will automatically validate and cross check data to highlight any anomalies
- Fraud: Duplicate employees, duplicate bank accounts, unterminated employees who have been paid termination components, nett pay matching from payroll reports to bank deposit files and report casual employees who remain unpaid for a defined period in an attempt to have them authorized to be terminated or suspended to eliminate chance of payment by error
- Fraud: Create a head count report that shows running month to month balances to monitor current, new hires, transfers and terminations
- Manual/Offline Payments: produce a listing of all offline entries to reconcile to manual/offline payments processed in separate EFT files or cheque runs
- Overpayments: report on all payments in excess of a specified amount or utilise a formula based on the employees rate of pay and standard hours
- Superannuation: automate the checking that all employees have a fund, contributions equal the correct percentage, identify exclusions such as under age of 18, worked less than required work hours per month, compliant funds review, maximum contributions have not been not exceeded
- Cost Efficiency: produce leave balance reports to highlight excessive or negative leave balances to business management
- Terminations: produce a report of all termination payments made and the system termination dates, termination flags and autopay flags of these employees to ensure no terminated employees are overpaid by having incorrect flags in the system
- Where minimum wages exist, produce a report to highlight those not receiving the minimum wage (ensure you include a column to show if the employees are trainees, apprentices, volunteers or under the adult minimum wage age)
- Autopay Flag Review: to ensure only necessary staff are flagged to be autopaid. Casuals or terminated employees at the very least should not have autopay flags.
- Tax File Number Expiry: In Australia, employees have a minimum time frame to submit their tax file number to their employer, after which time they are to be taxed at the highest marginal rate. This report can be utilised not only to advise payroll when the tax rate is to be raised, but also to advise the employees that they have not yet advised their tax file number and they face tax consequences if they don’t wiggle their tails
20. Invite Your Payroll/HRIS System Provider in for a Review and Demonstration
- If you aren’t a super user of your HRIS System, ask your HRIS provider to meet with you to review your licence and modules and explain how you can maximise the full potential of your HRIS system
- What can the system actually do?
- What automations are available?
- How much are we currently utilising?
- What add-ons are available?
- What is our current maintenance cost? Are we achieving ROI?
- Can we create tailored reports?
- Can we create tailored screens?
- Can we automate reports to be produced on schedule and be automatically emailed to recipients?
21. Conduct a Customer Satisfaction Review
A customer satisfaction review should enable you to:
- Establish what the external perception of your service is as opposed to the internal perception;
- Identify value added service opportunities worth considering; and
- Provide evidence to support adapting your service standards and offerings, or the perception of these, to achieve service excellence.
A simple survey with the least possible questions, should be created to ask the following questions:
- How are we doing?
- What can we improve?
- What would you like us to do that we aren’t doing?
- What infuriates you?
- What pleases you?
Phew! There’s your next year mapped out for you! Even though this article has resulted in excess of 4,600 words, I truly believe as a Professional Payroll Manager, that these 21 Action Items are the absolute minimum effort required by an incoming manager to build an efficient, compliant and service excellence focussed payroll service.
If you or your organisation need assistance with knowing where to start or requiring tools to guide you through any of these processes, please email Louise Vidler at The Professional Payroll Manager.
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