You Absolutely Must Measure Payroll Error Rates!

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“More people would learn from their mistakes if they weren’t so busy denying them.”  J Harold

A critical function of the Professional Payroll Manager is to minimise, if not eliminate, error rates. Payroll errors occur for a myriad of reasons and if you spend your days fire fighting, rather than investigating, you will probably see a compounding increase in the ongoing error rates.

  • High error rates are detrimental to a service excellence focussed payroll team for so many reasons:
  • It is a reputation destroyer
  • Highlights compliance issues and attracts the attention of auditors
  • Interferes with industrial/employment relations
  • Inhibits efficiencies and blows out costs of payroll production

By implementing an effective measurement system, you can identify the volume of errors and the resultant root causes of each one, in order to execute solid corrective measures to eliminate reoccurrences. The root causes are easily identified and usually fall into one of the following categories:

  • Payroll staff require retraining or instruction in a particular area
  • Employees, Line Managers or HR staff require learning or instruction
  • Effective processes and checklists are not in place
  • Incorrect parameters (or a bug) in the payroll system
  • Input information is not supplied correctly
  • Fraudulent activities may be occurring

When building your error measurement system you need to record and analyse the following data as a minimum:

  • The affected employees and the rate of incidence
  • Dates of occurrence, identification and resolution
  • Who was involved in the end to end process
  • Who identified the error and how
  • Why it was not identified in the payroll process
  • The reason for the error
  • The re-occurrence risk
  • The corrective action required to eliminate further similar errors

Remind yourself and your team that error reporting is not about counting and allocating mistakes, but is about implementing systems and checkpoints to minimise errors and to improve capabilities, service and efficiencies.

An effective error measurement system makes good business sense, shows your commitment to service excellence and continuous improvement and goes a long way to ensuring compliance and efficiency.

If you have any questions you would like to raise personally, please email Louise Vidler at The Professional Payroll Manager.

© 2012 Louise Vidler T/As The Professional Payroll Manager.  All rights reserved.

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2 Comments to “You Absolutely Must Measure Payroll Error Rates!”

  1. Your comments on the Novopay situation in New Zealand would be
    interesting. Is there a reason why the cost of working around an error
    until fixed and the cost of correcting it are not listed as things to measure?

    • Hello Richard, Sorry, as you may appreciate, I cannot comment on particular organisations as an employee of Talent2, subjected to a confidentiality agreement. My article was a summary of things to look at and not an exhaustive list of all factors involved in measuring the cost of errors. Your point is a valid one, as the cost of work arounds is can be high, depending on the length of time required by payroll staff, the employee/s and all other organisational team members involved in the process. Thanks for your feedback.

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