Archive for ‘HR Management’

March 25, 2014

Best Practice for Relying on Fair Work Ombudsman Advice


I came across a press release a little while back from Senator Eric Abetz, Minister for Employment titled Small Business Able to Rely on Fair Work Ombudsman Advice. The opening sentence of this press release reads:

“In a win for small business, the Minister for Employment Senator Eric Abetz today announced that small business operators will now be able to rely on advice from the Fair Work Ombudsman without the fear of prosecution, should the information be incorrect.”

My thought on this is simply… How Ridiculous!

1. Ridiculous that you can’t get correct advice from Fair Work in the first place.
2. Ridiculous that the press release leads small business operators to think that they won’t be prosecuted for following incorrect advice, because Fair Work are reluctant to put their advice in writing, which makes it very hard to build a case on the advice they actually gave you at the time.
3. Ridiculous that a statement like this will lead small business to unrealistically expect that they can prove the content of a phone call if a case was actually made against them by Fair Work.
4. Ridiculous because my experience has shown me that you need to ask the right questions, to get the right advice from not only Fair Work, but of all payroll and employer association advice lines.

My advice to anyone seeking information from Fair Work, that involves a compliance issue that you could be later prosecuted or fined for (which in reality is very question you would ever have of the Fair Work Ombudsman), is that you get that information in writing as it may ultimately become evidence that you require to defend your actions.

To ensure you don’t venture into the grey area on seeking advice, it would be wise to follow these four best practices when seeking legislative advice:

1. Do your research – don’t go in blind.  Before you make an enquiry with Fair Work, investigate your question as much as you can via the Fair Work website and Google to understand the anomalies that may exist in relation to your enquiry, because most HR, Payroll and Industrial Relations questions rely on understanding multiple pieces of legislation and awards, and more often than not multiple clauses and sub clauses of each of these to reach your final definitive answer.

My own experience with many self-proclaimed payroll “subject matter experts” and having made more phone calls to Fair Work than I can remember, has proven time and again that misinformation is rife.

2. Beware of how you frame your questions and what questions you ask.  Asking the right questions is essential, which is an awfully hard ask if you are inexperienced and are expecting your information provider to be the holder of all wisdom.

It is better to ask ten questions than one, to ensure you and the person providing the advice completely understand the questions, the intent of the questions and the answers being offered. There are quite often “but if”, or “except in the case of” exceptions that apply to employment law and you may not be receiving all of the information you require, if your questioning is misleading or incomplete.

Again, this is why it’s important to research and have a little background knowledge on the question/s you are trying to answer and to always think “how will this advice stand up in court”.

3. Get it in writing!  Everything in payroll and HR is a potential legal issue and your best defence in a legal matter is evidence. Again, when seeking advice, utilise email where you can for a clear audit trail and ask to be directed to documented evidence of the advice you are receiving, so you can print that out as well, such as the published pay rates, or the clauses of the applicable legislative documents, or a publication on the Fair Work website.

Fair Work have made it impossible to get a direct response to a question in writing. They offer only a telephone advice line, or an out of office hours email service, from which they will ring you back within 5 days (which someone at Fair Work mistakenly thinks is customer service). They used to have an online chat facility, that enabled you to print out the conversation, but that’s been shut down. The only “in writing” response you can get from Fair Work these days is to print out information they have available on their website.

Seeking legislative advice via telephone (from any source including employer and payroll/HR associations) is a last resort and where this is your only option, you should ensure your questions are all documented and as each question is answered, document the advice you receive. The date and time of the phone call also needs to be documented, along with the full name and position of the person you spoke to.

4. Double Check the Advice…  Any advice that you receive from an individual should be verified and with the volume of information freely available on the internet, verification is not hard to accomplish. Whether that individual is your payroll officer, an accountant, a Fair Work representative or a telephone advisor from an association, you cannot be sure of their ability to correctly interpret legislation or their wealth of experience in doing so.

I’m probably not telling you anything new, by stating that employment legislation is complex, multi-faceted and relatively difficult to stay fully abreast of unless that is your full time role.

When you seek advice from an organisation who professes to be the font of knowledge you would expect that their advice should be gospel, but that is not always the case.

The law holds the owners, directors and responsible officers of the business liable for compliance and ignorance of the law is never an excuse for non-compliance. As such it is your responsibility to ensure you have full information, correct interpretation or a damn good defence case.

 

 

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

© 2014 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.

March 23, 2014

Payrollers! Are You Prepared for the New Australian Privacy Principles in force on March 12, 2014?


privacy

The new Australian Privacy Principles came into effect on March 12, 2014 and replace the National Privacy Principles and apply to all organisations (with some exceptions), as well as Australian government agencies.

The objective of the Principles is to ensure that organisations manage personal information in “an open and transparent way” and some of the key areas that relate to payroll functions include:

  • All organisations must take reasonable steps to implement practices, procedures and systems to ensure the organisation complies with the Australian Privacy Principles and to provide a system of dealing with enquiries and/or complaints
  • All organisations must have a clearly expressed and up to date policy about the management of personal information, including:
  1. The kinds of information the organisation collects and holds
  2. How the organisation collects and holds the personal information
  3. The purpose of the collection, holding, use and disclosure of the information
  4. How an individual may access personal information and correct any information
  5. How an individual may complain about a breach of the Principles
  6. Whether the organisation is likely to disclose the personal information to an overseas entity
  7. If the organisation is likely to disclose personal information to an overseas entity, the countries in which that may occur
  8. Organisations must not collect personal information unless the information is reasonably necessary for one or more of the organisation’s functions or activities
  • Organisations must not collect “sensitive” information about an individual unless an individual consents to the collection and the information is reasonably necessary for one or more of the organisations functions or activities
  • If “sensitive” personal information is collected as a requirement by law or a “permitted general situation exists in relation to the collection of the information”
  • Where an organisation holds personal information that was collected for a particular purpose (the primary purpose), the organisation must not use or disclose the information for another purpose (a secondary purpose) unless the individual has consented, or the individual would reasonably expect the organisation to use or disclose the personal information for the secondary purpose, or if the use or disclosure of the personal information is required  or authorised under an Australian law
  • Before an organisation discloses personal information about an individual to an overseas recipient, the organisation must take all reasonable steps to ensure that the overseas recipient does not breach the Australian Privacy Principles
  • An organisation must take reasonable steps to ensure the integrity of all personal information to ensure the information is accurate, up to date and complete
  • An organisation must take reasonable steps to ensure the personal information is protected from misuse, interference and loss and from unauthorized access, modification or disclosure

If an organisation refuses to correct the personal information as requested by the individual, the entity must give the individual a written notice that sets out the reasons for the refusal, the mechanisms available to the individual to complain about the refusal and any other matter prescribed by the regulations

All organisations must take reasonable steps to implement practices, procedures and systems to ensure the organisation complies with the Australian Privacy Principles and to provide a system of dealing with enquiries and/or complaints

All organisations must have a clearly expressed and up to date policy about the management of personal information, including:

If you are a Payroll Manager or hold a position of responsibility for the management, security, disclosure and use of personal information you can be fined under the Act for non-compliance, apparently up to $340,000.  I’ve not studied the Act yet to understand whether this is per offence, which could be a devastating blow for an individual who is responsible for the disclosure of a substantial numbers of employee’s information, where there is a security breach or a non-compliant business practice.

If your organisation hasn’t made a big deal out of the new Australian Privacy Principles as far as payroll is concerned, especially if you outsource any part of your payroll function, you have a couple of days to establish how your payroll function will ensure compliance.

According to this Smart Company article on 5th March 2014 “The laws will apply to businesses that turn over more than $3 million a year and collect personal data.

However, there are some small businesses which turn over less than $3 million that will still need to abide by the new legislation. For example, the laws apply if the business is a health services provider, related to a larger business, trades in personal information, or is a contractor which provides services under a Commonwealth contract.”

For more information on the changes to the Privacy Act, visit the Office of the Australian Information Commissioner (OAIC) website.

If you are unsure whether the Privacy Act applies to your business, check out the Privacy Checklist for Small Business from the OAIC.

More articles on the Australian Privacy Principles from Australian Law Firms:

Australia: Are you compliant with new privacy laws coming into effect 12 March 2014? By Dan Brush of CBP Lawyers on mondaq.com

Australia: Major changes to Australia’s Privacy Act: Why they matter for foreign IT suppliers doing business in Australia by David Smith of Corrs Chambers Wesgarth on mondaq.com

Australia: Timely Guidance from the Privacy Commissioner – APP Guildelines Released by Sophie Bradshaw of Corrs Chambers Westgarth on mondaq.com

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

© 2014 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.

February 17, 2014

Why an In-house Payroll Service Needs to Differentiate Itself from the Competition


No in-house payroll team is safe anymore.  The ever present reality is that if your organisation hasn’t already looked into the viability of outsourcing payroll production, in an attempt to realise significant cost and efficiency benefits, it is only a matter of time until it does.

Payroll BPO is a Global Competitive Market

At the local level you compete against small business operators claiming to be the most experienced outsourced provider in the market and there are bookkeeping and accounting firms, payroll associations and HRIS software providers all supplying payroll BPO services.  Then there are those businesses whose core business is Payroll Business Process Outsourcing (BPO), who vary in size and capacity enormously.  The global market has added extra dimension to the BPO market, creating massive competition in cost competitiveness.

All BPO’s are Flogging the Same Horse

Find me a Payroll BPO who is not selling the promises of:

  • The realisation of efficiencies and time savings
  • Reduced production costs and overheads
  • Continuity, Risk Management and Total Compliance
  • Superior Speed, Technical Expertise
  • Greater operational control for the business
  • Technological Superiority
  • Reduced Recruitment Costs and Staffing Flexibility
  • The ability for your business to concentrate on it’s your core business

Can BPO’s Really Achieve the Miraculous?

The ability of any BPO in the marketplace to achieve this remarkable list of business improvements relies on many interconnected factors… many of which aren’t fully understood by those in the deciding seat.  It is important to understand what real differences exist between in-house and outsourced payroll functions and whether outsourcing is really the miracle it’s sold as.

Here are just a few areas that require thorough analysis in the decision making process, rather than blind belief:

HRIS System Capabilities

The quality and capabilities of a BPO’s HRIS system will depend on the size of the BPO business.  The corporate payroller who decided to start a payroll outsourcing business will be utilising an off the shelf accounting package or a lower cost cloud based system.  National and global BPO’s will be building robust, client tested systems and will have more experience in implementations, which should guarantee a smoother transition… unless that system needs to be customised heavily to achieve your requirements, which can lead to untested and unparalleled disaster.

A true understanding of the capabilities and the shortcomings of the systems used by BPO’s will enable you to make a real comparison between your in-house system and the BPO offerings.

Business Processes

BPO’s would not survive without solid business processes and strict deadlines.  When working with a BPO you will be afforded windows of time for processing and queries and your own business systems must be advanced enough to succeed in your business relationship and to get your payroll delivered on time, every time.

If your in-house system is in chaos due to data integrity issues, receipt of late inputs and misconfiguration of your current payroll system, you will not realise some magical transformation by simply outsourcing this mess to a BPO.  Garbage in will always equate to garbage out.

Economies of Scale

The whole basis of achieving economies of scale is to define the one process that fits all, allowing for only slight deviations for individual business requirements.  If your business can fit itself into the BPO’s processes, all is well, but if your business requires deviations to the BPO’s standard business processes and has a list of required value added services, the cost of the service rises proportionately.

Cost Savings

I’ve managed two outsourcing services and it has always bewildered me why people buy in to this.  Cost savings are achieved by any payroll service, in-house or outsourced, by minimizing the time it takes to produce a payroll and the ancillary costs associated with payroll production.

If an in-house service wants to ensure their longevity, then my advice would be to get your costs down to bare minimum by implementing automations, reducing paper and payslip costs, maximizing your HRIS system and establishing if the current wages cost of the payroll team can realistically be reduced.  The people in your organisation who will be, or who currently are, looking at outsourced options, will see cost as a major incentive.

All BPO’s have a stock standard service that basically includes accepting an upload file or your business entering the data into their system; performing the payroll calculations and producing the stock standard reports.  If this is all you want from payroll, then by all means jump in and realise those cost savings.  If however, you want a little extra here and there, grab your wallet and watch those cost savings begin to diminish.

Let You Get On With Managing Your Business

This selling point is touted by every BPO provider globally, but I believe it’s a myth as the business only outsources a portion of the total end to end process.  Someone at the business still needs to create and manage the inputs; check and authorise the payroll reports; attend to the employee, management and third party enquiries; reconcile the payroll; perform the management and statutory reporting functions; and above all else ensure the compliance of the data and the process.

Additional Charges for Out of Scope Functions

Want a report that’s not in scope? Want to change the pay rates due to an award change or salary increase?  Want to retrieve historical data from two years ago? It can be quite alarming, once the contract is signed by a business owner or manager, who may have little to no concept of the requirements of payroll, just how much additional information needs to be retrieved from the HRIS system.  Much of this will be out of scope and will cost the business, either in the charges for the reporting or for the time it takes in-house to devise a workaround.

Superior Technical Expertise

This one always gets me… how can this sweeping statement be made by some BPO’s when your organisation may already employ a perfectly competent payroll person, or even a whole team of them.

Some larger BPO’s may in fact employ specialists in employment law, or IT and so on, but that may not necessarily translate well into the product or service the BPO customer buys.  Before a business buys in to the guru status, it should understand exactly how much specialist knowledge exists in its own business via its payroll team members and establish how the gurus will provide an actual realisable benefit to their payroll production, if they were to outsource the payroll.

Total Compliance

The way the compliance dream is sold to businesses concerns me, as it appears to the buyer that simply by outsourcing your payroll, you are guaranteed that every facet of your payroll all of a sudden becomes compliant, and you needn’t worry your little head about it ever again.  This is the farthest thing from the truth.

When you hand over the control of your organisations greatest expense and probably most organisations greatest compliance nightmare, you don’t cease to be liable… you don’t cease to monitor and examine… and more importantly, you should never cease to control.

The simplest configuration error, or the insufficiently tested customisation can wreak havoc on pay rates, tax, superannuation, salary packaging…everything.  Compliance in every facet and down to the tiniest detail, remains at all times the business’s responsibility, not the BPO’s.  Put simply, don’t buy in to the total compliance sales pitch.

Offering of an End to End Payroll Service

Hmmm… by whose definition?  I’ve always understood end to end payroll to be all of the processes from the receipt of new employee documentation and employee timesheets, through to the completion of all associated company and statutory reporting, and including all employee, management and third party enquiries and requests in between.

I’ve not seen a BPO yet that encompasses what my definition of end to end payroll is.  Nor have I witnessed a BPO yet that doesn’t require a designated person on the ground in the business to compile all of the data and be responsible for employee queries.

Risk Management

There are so many aspects to the risk management and mitigation of payroll that would be hard to fit into a paragraph, but a few of the main concerns to be addressed for those contemplating outsourcing are:

  • Disaster Recovery Plans and IT Risk Management
  • Risks to confidential employee and business data and bank accounts
  • Risk of BPO business failure/collapse
  • Fraud and Corruption Risks
  • Payroll Controls (including authorisations and error prevention and capture)
  • Compliance Risk
  • Quality Control Frameworks
  • Country Specific Risks

One More Reason Stakeholders Seek Alternative Solutions

Noise.  If your payroll service rings so loud in the ears of the stakeholders, consider yourself a branded target for outsourcing.  If you have a high error rate and there are constant complaints making their way to the leaders of the business, get your error rates sorted very quickly and eliminate the noise.

Understand Your Competition

The point has already been made… every in-house payroll service is in competition with the sizeable BPO market.  In any business, you must understand… truly understand… who and what your competition is and what your competitors are offering, in order to continue to compete against them.

In-house Payroll Managers who are blind or oblivious to this, need to wake up.  BPO’s are knocking incessantly on the doors of the decision makers in your business, trying to get their foot in the door.

Now that you understand more about the BPO Market and how the business you work for is on the prospect list of a gazillion BPO providers, you have two choices… start looking for a job in a BPO or start ensuring your in-house payroll service remains a viable business option for your organisation.

Differentiation is One of the Keys to In-House Survival

For any business to outshine its competition, it needs to identify or create differentiation between them and all the other operators in the market.  Their customers must be able to clearly see the points of difference and those points of difference had better be ones that draw customers in, rather than turn them away.  Your in-house payroll service is no different.

Outsourced service providers all over the world are professing how amazingly more cost effective your organisation’s payroll process will be.  They are claiming that their world standard business processes will not only enable outstanding efficiencies, but reap the rewards of economies of scale and all but ensure the organisation’s payroll compliance.

Do yourself and your payroll team a favour and start raising the bar on your service, analysing and minimising your costs, elevating your team’s capabilities and eliminating any “noise”… and start today!

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

© 2014 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.

February 2, 2014

Reading Contextually Between the Payroll KPI’s


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The Minimum Essentials Payroll KPI’s outlined the KPI’s all payroll services should have implemented and touched on benchmarking.  Benchmarking can be dangerous territory for the unitiated, because it is so subjective.

Simply comparing your end result numbers against another organisation, industry or a global best practice and deciding that your payroll service must work to achieve best practice may result in degradation of your service levels and compliance.  You must apply “context” to the benchmarking data, in order to truly achieve any level of benchmark against others.

To apply the “context”, it is essential to understand that behind every number is a complex array of factors including:

Scope of the Study

First and foremost, the scope of the benchmark study and the compilation methods of the data used to calculate the metrics, especially how the cost of payroll production has been calculated.  The cost of payroll production is a base line measurement for a major part of the benchmarking process, so it is important to ensure that everyone is compiling their costs using comparable methods and with the same definition of end to end payroll.  Company “A” may interpret end to end payroll as the process from receipt of timesheets into the payroll service to the deposit of funds into employee bank accounts, whereas Company “B” will rightly incorporate the compilation of employee timesheets and production of post payroll reporting, and include the cost of all employees involved in the process.

Automation & Integration of Systems

Automations and integrations achieved by the HRIS and related systems significantly reduce the cost of payroll production as automation plays an integral role in the efficiency of the payroll service.  If your payroll is fully integrated with time and attendance and employee self-service and the general ledger, you are half way there.  Every process that is performed manually, multiplied by the number of times the process is performed, adds up to a significant potential cost saving over the course of a year.

Volume of Management & Statutory Reporting

Management reporting and the volume of it, varies from business to business and if you have the luxury of HRIS and related integrated systems that automatically produce the reports and email them to the recipient list you are miles ahead of the payroll service that is manually compiling data for management reporting

Statutory reporting is often an onerous task and the more data you can pull down from your systems, either as data into excel spreadsheets or as completed reports from your systems to automate the reporting processes will result not only in efficiency, but should also result in greater compliance by virtue of the reduced manual intervention.  The ultimate HRIS system for me would include one with the capability of calculating the payroll tax, fringe benefits tax and other required reports with all the bells and whistles that submit the electronic returns.

Method of Pay Slip Distribution

The automation of pay slip distribution can be a giant cost and efficiency gain to organisations that is under rated and under utilised by so many organisations.  If your organisation is taking the time to print, separate, seal, collate and physically send pay slips across the organisation, it’s time to start asking your employees if they’d like to receive their pay slips via email and/or investigating the return on investment of employee self-service.

When benchmarking your payroll service against another, factor in the varying methods of pay slip distribution, especially where there are sizeable organisations with a national presence.

Business Process Automation

Automations achieved by business processes need to be taken into account when analysing one organisation’s KPI’s against others:

  • If your payroll service operates with highly manual processes and a considerable quantity of hard copy forms, you will never achieve best practice in efficiency and as a result of that, cost.  Best practice efficiency results from the automation of processes such as employee self-service to enter leave applications, supply of information to reduce employee queries and upload of information by HR/P&C or employees to minimise transactional processing by the payroll service.
  • Physical data entry of timesheets by the payroll service is another detriment to the achievement of efficiencies in comparison to payroll services that utilise excel uploads, time and attendance system integrations and other automated processes.
  • Physical data verification of timesheets and employee information is time consuming and should be minimised as much as possible.  This is said, on the absolute proviso that comprehensive audit and validation checkpoints and reports are produced and verified to ensure that all potential errors will be identified in the process.  If you cannot achieve complete automation, take what you can and implement baby steps within the various components of the payroll process.
  • The number of autopaid employees, which is usually reserved for salaried employees and those permanent employees who don’t vary their hours or work overtime greatly.  This is not a benchmark that can usually be addressed by the payroll service, as it is dictated by legislation, award coverage and organisational policy.

Complexity of the Business and Its Payroll

Greater complexity results in a higher volume of business processes and the aim should be minimise and eliminate the complexities, where possible.  Some complexities such as number of business entities or industrial agreements cannot be changed and the objective is to achieve economies of scale in the payroll processes.

When comparing organisations for benchmarking purposes though, it is useful to understand the level of complexity involved in order to truly benchmark one payroll service against another, for example:

  • Company “A” may be a single registered entity, whereas Company  “B” may be made up of fifty separately registered entities.  Company “A” runs 52 weekly payrolls per year, whereas Company “B” is required to run 2600 weekly payrolls per year, which will result in a huge disparity between the two companies cost of payroll production and their efficiencies.

The Level & Volume of Services

One payroll service that processes only uploaded timesheets, does not have payroll accounting or statutory reporting performed within the payroll service and does not have ancillary employees benefits management functions will appear to outperform and be more efficient than an organisation whose payroll service includes manual timesheet entry, a great volume of management and statutory reporting and complex benefits management.

Additionally, the service level demands on the payroll service are hard to measure but definitely come into play in one service’s ability to outperform another.  The difference between an organisation that has a dedicated support line, or a policy where employees can call their payroll representative directly at any time of day and an organisation that has an archaic policy of allowing employees to contact payroll only at certain times of the day will lend weight to the payroll service’s ability to achieve best practice efficiency.

The volume of enquiries is a standard measurement for payroll best practice and will be determined by a multitude of factors, including the level and volume of services provided plus the error rates being achieved by each service and a multitude of other organisational or industrial issues.

The Salary Costs of the Payroll Team

A big factor in the cost of payroll production is the cost of your payroll team, and again requires a multitude of considerations before simply benchmarking one company against another, such as:

  • Does your organisation pay award rates or market rates?  How do the salaries of your payroll team per FTE compare to those you are benchmarking against?
  • Where is your organisation located? A capital city centre will always demand higher salaries than a regional area.
  • What are the positions included in your payroll team?  Do you have only transactional payroll processing staff, or do you have HRIS Systems staff, analysts, payroll accountants, employee benefits administrators, multiple leaders and managers and such?  The inclusion of payroll team members in addition to the purely transactional staff is always going to show a higher payroll production cost per FTE and as such needs to be taken into consideration when comparing the data.

Additional Variables Impacting KPI Analysis

Other variables that need to be analysed contextually include:

  • The number of employees processed and/or supported per Payroll FTE should be interpreted taking into account all of the factors discussed above.  One payroll team member can quite easily produce 1500 pays per week, while another would struggle to produce 250.  This is based not only on the competence of the team member, but also on the level of automation, complexity and what portion of the end to end payroll function each of the team members are performing
  • Data Quality is of prime importance to the achievement of compliance and efficiency and where one organisation is falling behind another due to data quality, a valid argument with cost based analysis can be achieved to highlight the importance of Input = Output.
  • The volume of Out of Cycle Payments and Special Pays as a metric in a report can be read as a poor performing payroll service who clearly needs to implement some payment policies and undertake some cause analysis on these “errors”.  On the other hand, it could also be read that organisational policy or awards dictate a service standard that the payroll service has to adhere to, or that the organisation needs to support the payroll service in having all staff understand the importance of data quality and timeliness.
  • The cost of Out of Cycle Payments and Special Pays will be a key driver for management to address, where they can, the organisational policy to improve the volume and cost of out of cycle payments.  When you consider that an out of cycle payment takes, at the very least, half an hour from calculation to completed payment, this raises the cost of payroll production significantly if you have high volumes.
  • Retrospective payments are a contributor to cost of payroll production whether you have a system that automates the process or not.  Aside from the calculation of retrospective payments, they usually have to be checked as a separate process within the payroll process and cause fluctuations/variations in the payroll (employee and company totals) due to back payments that again have to be manually verified as a separate process step.
  • The employment turnover of payroll staff will add to the costs and efficiency of the payroll service, but is something that will not be understood in the realm of benchmarking.  An individual organisations turnover can only be understood by understanding the data behind the data.

There is No Like for Like in Payroll

Any comparison you make of your KPI’s to others is a subjective comparison and the contributing factors must be taken into consideration, as best you can, to make a considered judgement of your achievements against best practice.

In payroll benchmarking, there is really is no like for like due to the variances in operating systems; policies, processes and practices; complexities; and of the interpretation of “end to end” payroll.

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

© 2014 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.

January 20, 2014

The Minimum Essential Payroll KPI’s


As a Payroll Manager, you are responsible for managing what is the greatest cost of most organisations and with that comes the continued attention of Finance, C-Level Management and the Board.  You are being monitored and usually measured on cost and efficiency and you are always at risk of being outsourced to a more viable option.

As a manager of a service offering in your organisation, you need to be a “business” manager who is focused on achieving organisational goals and outcomes, on providing service to your “customers” that could not possibly be matched by competitors and on the cost of payroll production.

If you are not already measuring, monitoring and acting upon Key Performance Indicators (KPI’s) in your payroll service, you need to start NOW.

KPI’s are quantifiable indicators that reflect the organisational goals and are supposed to be drivers of change and measures of progress.

Payroll has long been viewed as a purely transactional processing cost centre, whose only organisational goals are to minimise the cost of processing and keep payroll noise to an absolute minimum.  While these are primary goals for cost reasons, many other complexities come into play as to why payroll costs what it does.

Only by measuring and taking calculated steps to improve the KPI’s, will you be able to truly reduce payroll costs, as many of the reasons for the cost of payroll are completely outside of the Payroll Managers control such as data integrity, industrial complexity and statutory requirements for example.

Personally, I have a few issues with the apparent simplicity of payroll KPI’s and the comparison of organisations against each other, or against best practices.  The measurement of cost, transaction volumes and time to complete tasks alone does not truly measure the performance of a payroll team as there are an abundance of variables coming into play for every number recorded.

No two payroll operations are like for like.  There are different operating systems, differing policies and company practices, differing complexities and differing definitions of end to end payroll.

I also believe that the global standard for compilation of payroll KPI data misses three very important categories: Service Excellence, Best Practice Business Processes and Compliance.

A payroll service’s primary function is to produce on-time, compliant employee payments… but getting the money into employee’s hands is far from the end of the payroll process.  Management and statutory reporting can be a huge portion of a payroll team’s workload, as can be the day to day enquiries of the workforce and other organisations relating to employee payments and financial matters.

Additionally, every payroll service on this earth, no matter their size, should aim to have best practice documented processes, checklists, segregations of duty and audit steps throughout the process, so this should be included in the KPI’s and be a major objective of the payroll team and the organisation.

These are the Minimum KPI’s Payroll Should Be Measuring as per global industry practice:

(HR/P&C KPI’s are excluded as the focus is solely on payroll production)

THE COST OF PAYROLL – intends to measure the cost to business of the end to end payroll process, which usually encompasses the sum total of wage and operating costs of the payroll team and the cost of implementing and maintaining HRIS and related systems.  For a true cost of end to end payroll, all people in the organisation that contribute to any component of the end to end payroll process should be identified and accounted for such as:

  • IT costs involved in implementation and maintenance of HRIS and related systems
  • Payroll Accounting costs
  • The wages cost of staff compiling timesheets for payroll input
  • Supervisors and management wages cost for time spent on payroll processing and enquiries
  • HR/P&C wages cost for time spent on the transactional components of payroll processing

The combined results of these metrics will assist you to determine the cost drivers of payroll production:

  • Cost of Payroll (Total Wage Cost All Employees) as a Percentage of Revenue
  • Number of Payroll Processes Per Annum
  • Cost of Payroll Production Per Employee Serviced  (Total Operating Cost of Payroll Service per employee serviced by the payroll)
  • Cost of Payroll Production per Payroll FTE

PRODUCTIVITY – intends to measure how productive the payroll team as a whole and individually are, by measuring the ratio of payroll people to the number of employees being serviced.  Additional metrics allow identification of issues affecting productivity.  Standard metrics include:

  • Number of Pays Processed Per Payroll Processor FTE
  • Number of Out of Cycle Payments Processed
  • Number of Retrospective Payments
  • Number of payments requiring manual intervention or follow up
  • Input that contains unclean data

EFFECTIVENESS – intends to measure whether the payroll team are achieving the required outcomes (on-time, compliant payroll production) and identify factors that may be inhibiting their effectiveness.  There are a host of metrics utilised to measure effectiveness and include:

  • Error Rate including Overpayments
  • Payroll Staff Turnover
  • Volume of enquiries and the speed at which they are responded to
  • Automations (including metrics on production time on manual forms/transactions, employee self-service, payroll processing automations, reporting, payslip production)
  • Data Integrity
  • HRIS and related Systems Integration

Additional KPI’s That We As an Industry Should Be Advocating:

SERVICE – regular measurement of the perception of service by those we serve, including:

  • A regular rating by employees to establish the current perceived level of service and identify improvement areas (perceived or real)
  • A regular rating by your internal customers and by supervisors and management on their perception of the payroll service
  • Regular ratings against the achievement of Service Level Agreements
  • Compilation of data on queries such as long term unresolved employee queries, union action as a result of payroll actions and other day to day categories of enquiry in order to identify service demands and improvement areas

COMPLIANCE – as a core function of the payroll service, measurement of the continued achievement of organisational and statutory compliance including:

  • Outcomes of audit reports
  • Compliance with company policies and procedures
  • Achievement of management reporting deadlines
  • Correct, on time and compliant statutory reporting and payments
  • Achievement against monthly internal compliance reviews
  • Breaches of employment legislation , award requirements, etc
  • Breaches of service level agreements

BEST PRACTICE BUSINESS PROCESSES – there is enough global evidence, supporting legislation and standards that demand that all payrolls should be produced utilising best practice business processes to ensure corporate governance, financial transaction security and so on.  The measurement of the payroll service’s achievement towards best practice business processes should identify:

  • All processes and sub processes in the production of payroll are documented and reviewed regularly for compliance and best practice
  • Documented checklists are utilised for payroll processes and signed off by relevant overseers at each vital step of the payroll process
  • Payroll balancing is exhaustive and each authoriser throughout the process understands the full extent of what they are authorising
  • Segregation of duties is well documented, authorisations are achieved and a process for monitoring each step of the payroll process exists
  • Error identification and fraud prevention process checkpoints are  included throughout the processes and checklists
  • Business policies are documented for information security, confidentiality, privacy, authorisations, etc and the requirements of each policy are implemented within the processes

If your payroll service is measuring and monitoring the metrics and KPI’s listed, I applaud your efforts!  If you are part way there, then I urge you to build in these additional KPI’s and identify further improvement areas for your service.  If you are not measuring, open up a new excel spreadsheet NOW! and start pumping in the numbers you need to measure your base line data.

The data on its own though is insufficient, as you need to identify targets for each of your KPI’s and monitor these as you implement your improvements, to ensure your efforts are actually achieving the intended outcomes.

Many payroll services benchmark themselves against others, or against industry, country or global best practice KPI’s.  Before deciding how you will utilise benchmarking, it is important to understand the dynamics behind the numbers.  Essential to your understanding though, is that you must drill down into the numbers to understand the measurement method of the benchmarks you apply; the complexities of the organisations you measure yourself against; the HRIS systems and processes in place; and a host of other reasons that another payroll service may be producing twice as many employee payments as your team, with half the staff.

Remembering that KPI’s are quantifiable indicators that reflect the organisational goals and are supposed to be drivers of change and measures of progress, it is imperative that you understand what the goals actually are for the payroll service and include measurements that will provide actionable data that identifies what issues exist and what improvements need to be implemented.

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

© 2014 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.

January 13, 2014

The #1 Unknown Australian Salary Packaging Consequence Your Employees Need to Know About


While business is to be commended for the efforts to share the benefits of salary packaging with employees across the board, it still confounds me that employees are entering into salary packaging arrangements oblivious to the REAL financial impact on their finances.

If you are going to offer a broad based Salary Packaging program to your employees, you MUST educate your employees, or at the very least strongly encourage them to seek independent financial advice from the ATO, their financial planner, tax adviser or accountant.  An employee will be far more encouraged to seek advice, if they understand along with the pros, that there are some serious cons.

The greatest unknown by most Australian employees is the impact of Reportable Fringe Benefits on their assessable income and the consequence of that increased assessable income on their entitlement to government benefits, multiple tax offsets, child support obligations and entitlements and HELP/SFSS repayment calculations.

Employers present calculations to the employees showing the net pay difference between a packaged and non-packaged salary, often without any reference to the potential consequences of their increased Reportable Fringe Benefits amount on their payment summaries.  Employees sign up to the salary packaging programme wholeheartedly, rejoicing in their “extra” income… until they submit their tax return.

Once their tax return is processed, many employees learn a very hard lesson.  Their windfall in undertaking salary packaging, has just earned them lost tax benefits; or an increased debt to the ATO for HELP/SFSS; or the Child Support Agency advises they now owe considerably more Child Support or will receive considerably less; or Human Services advises they owe for overpaid benefits.

While some payroll people may think that the likelihood of this consequence is minimal, consider the number of employees you have with HELP/SFSS debts; that we live in a society where almost half of marriages end in divorce; and that a majority of families with children under the age of 18 are entitled to Family Assistance.

Over the years I’ve implemented this in a few businesses and employees still come to the payroll team at year end and ask why payroll didn’t take enough tax, or why they weren’t advised, when they quite obviously were.  To counteract the employees who don’t read fine print, simply ensure this information is not fine print.  A one page document that they sign and date, prior to undertaking any salary packaging, that clearly outlines the potential consequences and that they need to seek independent financial advice, is all you can do without physically clubbing them over the head or booking the appointment with the financial planner for them.

I can only encourage you to make the effort to implement this information into your salary packaging documentation and enable your employees to ask better questions of their financial advisers and to make more informed decisions.  You will be thanked for it by the reduction in furious or devastated employees, waving their Payment Summaries around at tax time.

This is what you MUST make your employees aware of as a minimum:

Salary Packaging may (because some items are classified as “exempt benefits”) result in an increased “Reportable Fringe Benefits” value on your Payment Summary, which will be used (in addition to your Gross Earnings) to calculate your assessable income for the following:

  • Medicare Levy Surcharge
  • Medicare Levy Surcharge lump sum payment in arrears tax offset
  • Deductions for personal super contributions
  • Super co-contribution
  • Tax offset for contributions to your spouse’s super
  • Mature age worker tax offset
  • Higher Education Loan Program (HELP) and Financial Supplement (SFSS) repayments
  • Dependent tax offsets, including
    • Dependent spouse
    • Child-housekeeper
    • Parent, spouse’s parent or invalid relative
  • Housekeeper tax offset
  • Senior Australians tax offset
  • Pensioner tax offset
  • Your child support obligations and entitlements
  • Your entitlement to certain income-tested government benefits (including Family Assistance)

Before undertaking salary packaging, you are advised to seek independent financial advice from the ATO, a financial planner, tax adviser or accountant.  If any of the above income assessable items affect you, it is imperative that you seek independent financial advice on the impact of salary packaging and increased Reportable Benefits.

The Fringe Benefits Tax year is April 01 to March 31 each year.  The total Reportable Fringe Benefits for this period will be documented on your Payment Summary the following June.

Employees who receive individual fringe benefits of $2,000 or more in a Fringe Benefits Tax year, will have the “grossed up” value of the fringe benefits reported on their Payment Summary.  This is the Reportable Fringe Benefit and the “grossed up” rate is 1.8692.

Therefore, if you receive $10,000 in taxable Fringe Benefits for example, this amount is multiplied (“grossed up”) by 1.8692 and becomes your Reportable Benefits total of $18,692 on your Payment Summary.

The additional amount of $18,692 is added to your gross earnings to calculate your income tested entitlements, outstandings and tax offsets as listed above.

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.

January 2, 2014

Are Employers Missing The Mark When They Demand Particular HRIS System Experience of Candidate Payroll Managers?


This question was raised with me by an experienced and respected Australian Payroll Professional and my immediate response to the question was “Yep!  I’ve been there!”…

Why do so many employers base the position criteria around particular HRIS systems, thus eliminating many otherwise perfectly qualified payroll professionals from applying?

I would love to learn the views of both payroll managers and those responsible for recruiting them, as to whether there are valid reasons to decree specific HRIS systems experience of payroll management candidates.

Although my own resume clearly shows that I have vast experience with a diverse range of HRIS systems and I’ve achieved significant improvement outcomes with each of them, I too have been rejected from the candidate pool from the outset because I can’t tick the particular HRIS system experience box demanded by certain job advertisements.

My view is that there are certainly roles and circumstances where this demand is warranted, such as stand-alone payrolls where there is no handover time and experience is required to hit the ground running, or for some HRIS system implementations that require exemplary knowledge of a particular HRIS system to achieve the outcomes for the business (with a big HOWEVER here, because successful HRIS system implementation requires a great deal more than just expertise in a HRIS system).

The greatest considerations of employers/recruiters, in my mind, before a job advertisement stipulates that experience in a certain HRIS system is a pre-requisite, should be:

  1. What are the outcomes required of the Payroll Manager in relation to the HRIS system?
  2. Which HRIS systems are comparable to the one in place at this employer?
  3. How can candidates demonstrate their cross functional capabilities from comparable HRIS systems?
  4. How do I as a recruiter, not exclude the best candidates from applying for this position?

The experience that should be sought from Payroll Management candidates should be based purely on their ability to achieve the outcomes of the particular role they are applying for and if a candidate can demonstrate they have similar or multiple HRIS system experience, they may actually be a far better candidate than twenty others with ten years user experience of the HRIS system used within the employing business.

What are the outcomes required of the Payroll Manager in relation to the HRIS system?

The following questions should be raised in order to determine the HRIS system specific position requirements and outcomes:

  • What exactly do we require the candidate to know about the HRIS system in question?
  • Why is the candidate required to possess certain HRIS systems knowledge?
  • Will they be processing the payroll?
  • Will they be documenting business processes?
  • Will they be required to maximise the functionality and efficiency of the HRIS system?
  • Will the candidate have a handover period or will they be thrown into the fire?
  • Does the candidate need to understand HRIS system configuration?
  • Will the candidate be required to create/write reports within the HRIS system?
  • What level of skill and experience is required in HRIS Data Analysis?
  • Will the candidate be required to maximise the efficiency of the HRIS system and build automations?
  • Do we have other Subject Matter Experts in the business with the required HRIS systems knowledge?

The outcomes required of the candidate in relation to the HRIS system will determine whether the candidate really needs to have experience in a particular system; whether proven experience in a similar operating system will be suitable; or whether it is even a requirement worth asking for.

Which HRIS systems are comparable to the one in place at this employer?

Payroll Software, SaaS providers and HRIS systems around the globe offer a multitude of points of difference but essentially, payroll is payroll and if you understand payroll, accounting and HRIS systems administration, there shouldn’t be a payroll/HRIS system that can’t be learned on the run by a professional payroll manager.

For those who can’t imagine how this may be possible, here are just some of the ways that professionals manage to learn new systems on the fly:

  • There’s always a Help button and usually a fairly decent user manual
  • More often than not there is a hefty support contract that can be utilised to seek additional information
  • Utilising Subject Matter Experts within the business
  • User groups, networking groups, forums and colleagues within the industry
  • Trusty old Google provides a world of answers
  • Payrollers are hoarders and there’s always someone who has the report writing training manual, configuration documentation or other precise information you are seeking
  • Most HRIS systems have a functional test database where professionals can model and test the outcomes they are attempting to implement

How can candidates demonstrate their cross functional capabilities?

Just because a group of candidates may have worked with a single system for the last 10 years, this does not automatically validate their ability to maximise HRIS system efficiencies, create reports or undertake data integrity validation.  It is important to understand exactly what their user experience is and whether they are actually super users, if that is a requirement of the position.

Again, the outcomes required of the position are an important pre-cursor to enable the recruiter to seriously examine each candidates HRIS systems experience.  Your candidate pool may be filled with people proficient only in producing payrolls and creating a handful of adhoc reports and may never even have heard of the concept of maximising the ROI of a HRIS system.

If I was employing a person who had 5-10 years’ experience in a payroll system and in payroll supervisory or management position, then I would be expecting they should be able to demonstrate a long list of improvements they’ve implemented along the way to that system.

I believe recruiters should be asking candidates to demonstrate their experience and previous outcomes in:

  • Improving data quality within HRIS systems to ensure data integrity and compliance
  • Creating cost and production efficiencies by implementing processes, creating automations and removing duplication of effort
  • Advanced report writing experience (or excel capabilities with extracted data) to increase analysis and reporting capabilities
  • Understanding the concept of and delivering  ROI on a HRIS system

How do I as an employer or recruiter, not exclude the best candidates from applying for this position?

In simple terms, employers and recruiters must truly understand the role… especially the required outcomes, as already discussed.  Where the employer stipulates particular HRIS system experience as a pre-requisite, an honest and open discussion by the recruiter will reveal whether this is a real or perceived position requirement.

Simply raise the questions voiced in this article with the employer:

  • What are the particular HRIS System outcomes required of this position?
  • Can this only be provided by a candidate experienced in one HRIS system, or are there comparable systems or transferrable skills?
  • Is there an existing Subject Matter Expert in the business that can be utilised by a Payroll Manager candidate with superior HRIS systems improvement experience, but lacking experience in the required HRIS system?
  • How can recruiters be sure that dedicated experience in a single HRIS system isn’t more than simple payroll processing knowledge? Does the candidate know how to manipulate data, write reports, analyse system efficiencies?  How will candidates demonstrate their experience in achieving the HRIS system outcomes required?

So, it’s over to the employers, recruiters and payroll manager candidates now… what is your experience?  Do you have a view point on whether HRIS systems experience is a transferrable skill?

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

© 2014 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.

December 16, 2013

6 Simple Automations To Drastically Cut the Cost of Payroll Production


ppm logo - Edited (2)

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.

December 8, 2013

Turn Your Payroll Service into a True “Service Excellence” Centre


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The term ‘Payroll Service’ is often an oxymoron, for in many organisations where there is a payroll department, there is a complete lack of actual customer service.  Please don’t take offence, I know we all work hard and have relenting deadlines to achieve, but we as an industry need to take a good hard look at instilling service excellence, and some individuals in the industry, just need to learn to treat others as they would expect to be treated.

Almost every day of your life you have a customer service experience.  You owe it to yourself and your customers to take stock of these experiences and note how each interaction affects you emotionally and ask yourself honestly, if your customers experience the same emotions in their dealings with you or your team.  The basic emotions people experience in a customer service situation are one of: Joy; Satisfaction; Frustration; Disappointment; or Anger.  It is up to you how each customer walks away feeling.

There are a few things in payroll I am an advocate of: compliance, efficiency, integrity and service excellence.  The first three are relatively easy enough to turn the tables on with some effective management and some good business practices.  Service excellence though, is the tough cookie.  You, your team, your culture, your leadership and your business processes will determine the level of service that is achievable.

Important steps to achieving service excellence are:

  1. Understanding exactly what service excellence means
  2. Understanding the current perceived level of service – yours, theirs and the reality in between
  3. Taking a serious look at your interactions with your customers (every single person or entity you transact with) to identify your “moments of opportunity”
  4. Deciding what service excellence would actually look and feel like at each of those “moments”
  5. Setting the wheels in motion to elevate your service standards and practices

Understanding Exactly What Service Excellence Means

Service is defined as an act of helpful activity; to help or aid; to do someone a service

Excellence is defined as the fact or state of excelling; superiority or eminence

To achieve service excellence, you don’t need necessarily require a budget, you don’t need to employ a management consultant and it’s not entirely necessary to implement an enquiry management system.  You do need however, to make a decision as a team to define what the standard will be and commit to exceeding it, and you absolutely will need to build solid processes and business systems to consistently achieve excellent outcomes.

Understanding the Current Perceived Level of Service

In the standard payroll office, you usually never hear from your main customers – the employees – unless they perceive there is a problem.  You don’t have people ringing in to thank you for a pay well done.  So if your phones are ringing off the hook, you have some serious work to get through to become a service centre of excellence.

If your phone is not ringing off the hook with payroll queries though, don’t think you can sit back and relax.  Are your customers happy?  Are management satisfied with your performance?  Do people in the organisation value your work?  Just because the pays are being processed correctly, does not mean that your customers are happy with your service.

You will need to obtain some brutally honest information from employees and management, such as what they think of your service; what they would like to receive from you; where they think you could improve; and what they think could be done differently.

Going down this road can be a difficult one for some, as you will always receive some seriously negative feedback, at the very least.  Your opportunities though are endless, as you can justifiably and quantifiably turn around the service levels and increase staff morale.  If you ask the right questions, you will receive invaluable information to assist you in turning your payroll process into a valued service centre.

There are various ways to find out how your service is perceived:

  • Conduct a service survey with your management and employees
  • Conduct open feedback sessions with small groups of your customers
  • The simplest one of all – constantly listen to what people are asking and telling you in their daily queries

In addition to understanding what your customer’s perception of your service is, it is imperative to understand your payroll team’s perception of their own service.  Do they think they are providing brilliant service?  Can they identify opportunities for improvement?

As anyone in service or management should know, the key to identifying service opportunities is to understand the “pains”.  Wherever someone experiences an issue, a dissatisfaction or cries out for a better way, these are the where the opportunities to implement improvements exist.

If your customers have difficulty accessing information, this is a “pain” that can be addressed by making it easy for them to access the information they need.  If your payroll team are overwhelmed with enquiries, you can address your team’s “pain” by implementing a FAQ or building a system to ensure the common queries are answered pre-emptively.

If management are consistently seeking reports from your team, build these in to your processes as automated functions and make them available for use by management.  The possibilities to eliminate pain points are endless.

Take a Serious Look at Your Customer Interactions

Once you’ve asked all the right questions of your team and your customers to establish the perception of your service, you then have to fill in the reality between the two, by taking a good hard look at how your service is conducted.  Ask the following questions as a starting point:

  • How does your team interact with customers?  Are they helpful?  Are they respectful?  Do they welcome customer interaction or dread it?  Do they explain or blast policy or rules at them?  Is their conduct of an excellent standard?  Are customer queries an interference to their work at hand?
  • What do you provide? What is the standard of it?  Is it professional?  What purpose does it service?  Is it useful?
  • Is there quality and efficiency in the processes involved in responding to enquiries?
  • What are the commonly asked questions and requests?  Should you be pre-empting these and delivering information and resources to minimise or eliminate the questions and requests?
  • How difficult is it to do business with your payroll service?  Is someone available at all times to respond to questions?  What are the wait times or turnaround times on responses?  Do you enforce unreasonable shut off times?  Do your team members send all calls to voice mail when they are busy?

Deciding What Service Excellence Will Actually Be

You, as the Manager, need to determine what the acceptable service standards will be and what “excellence” will look like.  Based on your team members, your opportunities and constraints, based on the outcomes required of your position and based on the political arena of your organisation.

If you have a Service Level Agreement (SLA) in place, obviously you will need to ensure you continue to meet, or exceed, the service levels defined in the agreement, but in the process of transforming your service levels, this may also be a great time to revise the SLA and make it more meaningful and service oriented.

One of the things I am always astounded by is that payroll teams are happy enough to shout that payroll is a “critical” business process when it comes to requiring the support of IT and other teams to get the payroll into the bank accounts on time, but they don’t always assume the same “critical” determination to an individual employee whose pay has been missed or short paid.  This is a key area for improvement and would be one of the employee’s greatest pain points in many organisations.

Recognise that while a non-payment or a short payment to an employee may simply be perceived as a transactional error to someone in your team, who has more important tasks to achieve today, to the employee though, this may mean the difference between feeding their children or putting petrol in the car for another week.  It is never our job to judge, but to deliver on the promise of on time and in full payment of wages.

Setting the Wheels in Motion to Becoming a Service of Excellence

Implementing a Service Charter or a Service Standard would be a great starting point for determining the base line of your service levels.  As the Payroll Manager, you must start with a foundation of what you want your Customer Service Charter to be and then involve your staff to help build it.

I would recommend calling for submissions, then building a draft document for your team to work on further.  This approach shows them that you value their input and gives them ownership from the onset.  Once the charter or standard 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 and if you are really committed, hand it out to your customers.

Further to the Charter or Standard, you then need to start drilling down on particular pain points and moments of opportunity, and start working out how you can transform your service with each of these.

Included in the foundations to great customer service is creating relationships with them and respecting them.  Work on ways to get your staff to meet, to learn about and to put faces to the names they interact with on a daily basis, such as:

  • Include staff members on site visits
  • Place photos of customers and little snippets of information where your team can see it constantly and ‘get to know’ their customers
  • Keep a database on your customers and log all their calls, issues, complaints, praises
  • Have your staff take turns to ensure that every single customer is contacted on a regular basis to ask if there is anything they can do for them to improve the service.

Embed the achievement of service standards into your team’s position descriptions, performance objectives and outcomes and as a baseline measurement for salary reviews to “encourage” your team to deliver on the standards and to understand the importance of servicing their customers well.

Start building the tools, resources and processes to deliver your new levels of service.  Begin setting in motion as many small changes as you can, while simultaneously working on the larger scale improvements.  Here are just a few ideas for you:

Employees

  • One of my pet hates is “onboarding”, where there seems to be a fairly common care factor of zero that a new employee is desperately waiting on their first payment.  The number one task of a payroll service is to pay employees correctly and on time and many fail to achieve this for new employees.  New employees sometimes have no idea when they will receive their first payment.  If they were lucky enough to have completed their paperwork prior to commencing, they presume they are set up in the system.  Communicate with them and with the person responsible for their paperwork, make it easy for them, give them expectations and delight them with your efficiency
  • Attempt to be available to your employees during their working hours, which is difficult if your business has 24/7 shifts, but technology exists to stretch your opening hours beyond 9-5
  • Give them information that assists them to make informed and timely payroll decisions and submissions
  • Don’t shut off the phones because you are busy processing payrolls or having a meeting.  Always have someone available to pick up the calls
  • Make it easy for people to reach the right person, post it on the lunch room walls, post it on the intranet, print it on the pay slips, give your supervisors and managers a handbook, do what you have to do.  Let them know who is who and who is next up the line if they run into issues
  • Build an employee handbook or an intranet knowledge base to share deadlines, FAQ’s and include updates on information such as taxation changes, public and school holidays, employee benefits and more
  • Employee self-service is still unheard of in many businesses even though the benefits and ROI are well documented.  If you haven’t got it, start pushing for it and if you have, start exploiting it for all it is worth.  I know of major organisations who refuse to allow their employees to edit certain areas of employee self-service, specifically bank accounts as they believe it will cause more drama if the employees enter them incorrectly.  Make the employees explicitly aware of the format required and the consequences of getting it wrong and you shouldn’t have any major issues, considering it’s in the employee’s best interest to get it right

Internal Customers

  • Become a vital information resource for the business units you serve by understanding what the information requirements are and finding ways to consistently provide automated information that they can access, rather than continually request from you
  • Understand the deadlines that others are working to in order to prioritise the requests for information
  • Understand what business managers are attempting to do with the information they request, so you can provide it all correctly in the first instance and not have to reproduce reports or rework data and calculations

External Customers

  • Requests for information from external sources and verification of employment queries can be a relentless and time consuming exercise.  Put in a system to simplify the process, mandate internally what the target turn-around times will be and create a report in your HRIS system that automatically produces the data to make the process efficient.  If you have the luxury to do so, allocate these automated tasks to a junior level team member.

Once you start implementing service focussed improvements into your operations, your customers will see and feel the shift.  You will earn greater respect from your customers because they will know you value them.  You will enjoy stronger business relationships with people throughout your organisation and while your team may not be so thankful in the beginning, they will be once you’re on the right track and they are under much less pressure.

Service excellence is achieved by doing the thousand little things right, and working your butt off to consistently do all those little things with excellence.

If you have any questions or some thoughts 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.

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November 24, 2013

21 Essential Action Items for the Professional Payroll Manager


ppm logo - Edited (2)

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:
  1. Error rates including Overpayments and Manual Adjustments
  2. Response times for enquiries and requests
  3. Productivity & Cost per Employee or per Payroll FTE
  4. Time to Produce (whether the payroll itself, or the days it takes for leave forms to be processed, etc.)
  5. Level of Automation
  6. 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:
  1. How do you rate the service in general?
  2. Do you trust the payroll service?
  3. What issues do you currently face with the payroll service?
  4. If you request management reporting information from the payroll service, how is it presented and is it useful?
  5. What additional information would you like to be provided?
  6. What improvements would you suggest?
  7. 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?
  • Who has access to the HRIS system, payroll records and the payroll service?  What data security measures are in place?  Do you have a Privacy Policy that is compliant with Privacy legislation?
  • 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:

  1. Establish what the external perception of your service is as opposed to the internal perception;
  2. Identify value added service opportunities worth considering; and
  3. 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:

  1. How are we doing?
  2. What can we improve?
  3. What would you like us to do that we aren’t doing?
  4. What infuriates you?
  5. 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.

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

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