Posts tagged ‘Employee Self Service’

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.

December 16, 2013

6 Simple Automations To Drastically Cut the Cost of Payroll Production


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

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

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

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

1. Automate masterfile changes by implementing employee self service

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

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

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

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

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

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

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

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

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

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

1. Implement Employee Self Service

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

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

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

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

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

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

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

6. Automate Manual Processes & Calculations

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

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

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

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

Total Savings per annum = $164,075

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

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

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

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

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