6 Simple Automations To Drastically Cut the Cost of Payroll Production


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It is generally taught that there are three way to increase your profits in business:

  1. Increase your customer base
  2. Increase your prices
  3. Sell more to the customers you have

Perhaps because it’s not related to sales & marketing, one very important way to increase your profits is usually missing from the list – reduce the cost of production.

Whether your Payroll Service is a pure cost centre or an income generating shared services centre or  BPO, there are key areas where significant dollars can be saved by implementing automations.  Here are my top few:

1. Automate masterfile changes by implementing employee self service

  • Allow your employees to change their own addresses, voluntary deductions, bank accounts and so on to minimise the volume of work, eliminate late or non-submitted forms and alleviate the need for a close off period days prior to the payroll process date

2. Automate manual timesheet data entry by creating excel upload templates or entry & approval via employee self service

  • If your payroll team is still entering individual timesheets into your payroll/HRIS system, it is time to reconsider your process and/or your payroll/HRIS system and the cost to the business of the practice of manual data entry

3. Automate the payroll report production process by producing batch reports rather than manually creating each report, each step of the way

4. Automate payroll data validation by csv data dumping your payroll reports into an excel balancing sheet filled with delightful cross checks and validations to completely automate the balancing of payroll reports. No red pen or calculator required.

5. Automate payslip delivery by emailing payslips or uploading them to employee self service.  The practice of printing and delivering payslips by hand or post is antiquated and a complete waste of business revenue.  In a world where the average person owns 2.38 mobile phones (not precise science there), the argument that people won’t be able to access their payslips is almost a redundant argument

6. Automate & minimise employee enquiries by providing employees with the information pre-emptively, on their payslips or by implementing employee self service

  • If you analyse your enquiries you will be able to substantiate your calculations and understand exactly what information should be pre-emptively provided to employees
  • If you can, create reports/forms for your employee self-service for each of the requests that are usually a time consuming, manual process in the payroll service, such as employment and earnings verifications for employees, reproduced group certificates or year end payment summaries for tax, forms required for Centrelink/Social Security.  All the data is accessible by the system and just needs to be configured to magically appear in each report/form.
  • For those enquiries that cannot be resolved with employee self service, such as adjustment or termination payment calculations, simply create excel based auto calculators in excel.  If you get a little tricky you can have a multiple sheet workbook that you manually enter the required data into, then it calculates the termination payment in full, populates the termination advice to the employee and populates any associated forms that would be required with a termination payment

Based on a smallish payroll of 1,000 employees, the cost savings can be quite astounding as you will see from the sample calculations below (no amount of manipulation would allow me to insert a spreadsheet):

(Based on a Payroll Officer earning $50k p.a. + 25% Oncosts)

1. Implement Employee Self Service

* Automate Employee Masterfile Amendments (Average of 10% of total employees requiring record changes each pay, therefore 0.05 mins for 10 transactions per week = 26 hours saved per annum

* Automate Leave Form Processing (Based on 4 leave forms per employee per year, therefore 0.05 mins for 76.92 transactions per week = 200 hours saved per year)

* Automate Employee Enquiries (Based on 20% of employees enquiring each pay, therefore 0.17 mins for 200 enquiries per week = 866.67 hours saved per year)

2. Automate Time Sheet Data Entry (Based on 80% timesheet/20% autopaid, therefore 0.05 mins for 800 timesheets per week = 1,872 hours saved per year)

3. Automate Payroll Report Production (Based on 5 payroll reports per pay, reducing the time by 50% = 6.5 hours saved per year)

4. Automate Payroll Report Reconciliation (Based on 5 payroll reports per pay, reducing the time by 50% = 6.5 hours saved per year)

5. Automate Payslip Delivery (Based on 0.03 mins per payslip, 1000 payslips per week = 1733.33 hours saved per year)

6. Automate Manual Processes & Calculations

* Adjustment Payments (Based on 0.2% Error Rate, 1 hour per adjustment handling time from calculation to payment = 52 hours saved per year)

* Termination Payments (Based on 1% Turnover Rate, 1 hour per termination handling time from calculation to payment = 260 hours saved per year)

Original Cost of Manual Activities Listed Above – $203,146 plus payslip purchase price @ $0.10 per payslip = $208,346

Savings Realised – 1399.67 hours, plus payslip purchase price @ $0.10 per payslip (additional cost gains may be made from the printing & distribution costs)

Total Savings per annum = $164,075

As you can see from the massive cost savings available for 1,000 employees, it is well worth investing your time to analyse your payroll production costs and discover a wealth of cost and efficiency opportunities.  Ensure you take into account the potential cost savings against the required investment in employee self-service, but there should still be a pile of change left over.

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

© 2013 Louise Vidler T/As The Professional Payroll Manager.  All rights reserved.

All materials contained on this web site not otherwise subject to copyright of other parties are subject to the ownership rights of Louise Vidler T/As The Professional Payroll Manager. Louise Vidler T/As The Professional Payroll Manager authorises you to make a single copy of the content herein for your own personal, non-commercial, use while visiting the site. You agree that any copy made must include the Louise Vidler T/As The Professional Payroll Manager copyright notice in full. No other permission is granted to you to print, copy, reproduce, distribute, transmit, upload, download, store, display in public, alter, or modify the content contained on this web site.

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