Posts tagged ‘payroll continuous improvement’

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.

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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.

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 20, 2012

How The Magic Payroll Button Really Works


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It’s time for a little trumpet blowing and foot stomping by payroll professionals.  Alarmingly, there are still so many managers and business leaders who think we have a magic payroll button that takes little to no skill to press. For some, the belief is that anyone with half an ounce upstairs could run a payroll! When something goes wrong, the question is raised “Why is it so hard!?”.

Sadly, it’s often the managers of the payroll team with this flawed perception.  They might serve their team and themselves well to spend a little time getting a new perspective on what I honestly and unbiasly believe is one of the most committed work groups in a company.  What other department stays as long as it takes through hell and high water to process an EFT file, again and again, without thanks.

Lets take a look at the diversity of knowledge a payroller is actually required to have… and how we get that seemingly magic button to work…

Service Excellence

We are expected to be consummate customer service representatives, with superior conflict management skills; responding to technical questions on the spot; remaining calm in the face of irate employees, who sometimes hit you with a tirade of swearing. We must be mind readers; hide our anger as we are treated as lower class citizens by people who think that God created us unequal; hide our laughter at the ridiculous requests; and empathise with the employee who needs their money yesterday because they can’t feed their kids or put petrol in the car to get to work.  We solve problems day in and out and its’ when we can’t, or don’t, that others in the organisation begin to hear about it.

Business Relationships

Payrollers liaise with employees, managers, the finance team, the human resources team, solicitors, workers compensation insurers, auditors, the Child Support Agency, medical funds, unions, employer associations, banks and finance companies, social security, superannuation funds and the taxation office.  These people and organisations make demands upon us and expect the same service excellence that our employees expect from us.  It doesn’t matter if we have a Service Level Agreement stating when we will respond to requests, because most of these relationships are bound by law and so are the timeframes in which we have to jump.

Time Constraints

Payrollers actually performing the payroll process are under constant stress during the time between the receipt of the input data, to the time the funds are transferred to the bank.  If we are lucky enough to have all the data provided correctly and on time, its a fairly calm payroll day, but that is not a standard practice in the world of payroll.  There’s usually a pretty tight timeframe, a whole list of queries awaiting resolution by people who won’t return phone calls and emails. Achieving a zero error rate demands a great deal of validation and questions.

Policies & Procedures

Apart from having to know the company policies & procedures intimately, there is usually a fair amount of time spent by pro-active Payroll Managers referencing policies or documenting and updating payroll procedures as innovations are implemented and best practices are discovered.

Employee/Industrial Relations

We have to be constantly mindful of the consequences of our actions on employee relations and foresee human resource management issues that may emerge, or are already in effect. Every interaction with an employee and every payslip is a potential ER/IR disaster if not managed well.  This is a top of mind issue for all payrollers.

Accounting Principles

In order for payrollers to competently process payrolls, we must understand accounting principles to effect many of the transactions we do in our standard day.  Debits and Credits run deep in the simplest of payroll general ledgers, multiplied by the complexity of organisations with numerous companies and differing cost account structures.

Advanced MS Excel

Ask any Payroll Manager what their major reporting tool is and the answer will invariably be MS Excel, so add advanced Excel to the list of tricks a professional payroller has.

IT Systems Administration

Unless you have dedicated reources for your payroll, HRIS or time & attendance system, many payrollers are tasked with this function.   Report writing in some payroll systems is an acquired skill from years of practice and often the only avenue for extracting decent data from the payroll system.

Project Management

At any time, there will be multiple payroll projects in the pipeline.  System upgrades, new EBAs, legislative changes to address and more.  Payroll Managers and their staff are juggling diverse management needs, moving target dates, sometimes a lack of resourcing, shifting management priorities and insufficient hours in the day to keep their projects from falling over.

Legislative & Industrial Framework

We are expected to have in-depth working knowledge of the endless legislation that affects the organisation: Fair Work Act and its’ predecessors, Workers Compensation by state, OH&S, Payroll Slips Regulations, Annual Leave, Long Service Leave and Public Holidays by state, Superannuation Guarantee Acts … phew!

There are those of us to have to be more than familiar with Sarbanes Oxley, Immigration Act, Australian and International Standards and the legislation surrounding corporate governance. Added to this is each of the Industrial Instruments an organisation works under. We must know how the binding legislation or award modernisation system works in with these awards and which bits count these days and which bits don’t.

Complex Taxation System

An absolute imperative is intimate knowledge of taxation for every possible payment type paid under every fathomable scenario. Payrollers contend with legislation, calculation and queries on income tax, fringe benefits tax, medicare, student loans schemes, GST, payroll tax by state…another phew! …and that’s not all of it.  If the business employs expats or has overseas operations then international tax issues become prevalent.

Remuneration & Benefits

Payrollers worth their salt understand Salary Packaging and its complexities. We have to, to apply it correctly in the system, tax it correctly and ensure the benefits are applied correctly.

Global Best Practice

It is expected that effective validations have been performed to minimise or eliminate errors.  It is imperative the payroll is delivered on time.  It is expected that it is 100% accurate. It must be time and cost efficient. Process and metrics must compare to global best practices.

HR/Payroll Analysis

On top of ensuring the company and statutory reporting is delivered on time, there”s those constant ‘little’ urgent queries. The ‘little’ queries that require considerable time investigating or pulling information to answer the original, simple question.  Then there’s the analysis, budgetting, forecasting, scenarios, cost impacts, etc that come with frequency, but never enough warning.

All of the functions and requirements listed above are only a part of the skill based that Payrollers must have to be successful in their roles.  Understanding a day in the life of a payroller may go a little way to explaining the personality of some of us as well.  Payroll people are renowned for being…let’s say frank… and that’s partly because a decent majority of us haven’t got time for flowery and fluffy. There’s so much work to get through and often we simply want the facts, the required outcome and a timeframe.  To achieve 100% accuracy, a service excellence rating to die for and a reputation to be proud of takes a wealth of knowledge, committed effort, resilience, many tears and mastering the art of juggling tasks and priorities.

In all of this, the only buttons that I’ve ever witnessed possessing some kind of magical powers are the shutdown button on my computer, the light switch button and the elevator down button at the end of a tragic payroll day.

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

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

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 10, 2012

Why HR and Finance Must Both Hold Payrolls’ Hand


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One ongoing political battle in many organisations is who the Payroll Service should report to. Finance wins over mostly because of the sheer expense that is payroll. Then there are those organisations that see the payment of their most valued assets as an integral function of the Human Resources team, so the Payroll Service sits under HRs’ wing. Politicking aside, if organisational leaders actually sat down and measured the pros and cons on either side, it would be evident that the Payroll Service must have a solid working relationship and open communication lines with both the HR and Finance teams.

An important consideration in the #HR-v-#Finance pull of the #Payroll Service is to attempt to understand the mentality of both players, in the most general sense. Pull out your organisations’ HR and Finance mission statements and try to find commonality between them… I dare you!

Human Resources people are typically “people people” whose purpose in life is to implement strategies and programs to recruit and retain proficient, nurtured, engaged and empowered employees and to keep them safe and well in the process. In HR, grey lines exist at every turn: special circumstances and impacts of decisions with on flow effects to other employment relation issues and/or future strategies. HR people regularly have to consider the bigger picture, often for what are seemingly the minutest of details to outsiders.

Finance people are typically “numbers people” who usually perform comfortably within the predetermined and unwavering confines of accountings’ legislated rules, local and international standards, authority levels and organisational policies. They are comfortable with black and white. Being very generalistic, the purpose of Finance is to compliantly account for and report on all financial transactions within the designated timeframes.

Picture putting your HR and Finance people in a room and performing a group personality test. The room would separate into three distinct groups. In one corner are the “creatives” and “counselors”, most of which happen to work in HR, and in the other corner are the majority of the Finance team who are the “methodicals”. Polar opposites in the personality spectrums.

Left standing in the middle of the room are the in-betweeners: a mix of bewildered people who may be wondering if they have chosen the right career path, and conversely, those people whose personality types allow them to move comfortably amongst the HR and Finance personalities. (Just a note… seriously consider the latter for Payroll Management positions.)

Back in the organisation, sitting in the middle of the HR and Finance personalities is your Payroll Team, a complex mix of all the personality types. Every sizeable payroll team seems to have at least one member who cannot function outside the documented rules, without exception and at least one who spends all their time bending over backwards to ensure the staff are kept happy, possibly at the expense of some of the rules.

One of the hardest tasks for Payroll Managers is to have their team provide outstanding service within the confines of such a regulated employment, taxation and accounting environment and in the timeframes established in the majority of industrial agreements. The primary objective of a payroll service is to consistently deliver fully compliant, on time, best practice, and cost and time efficient payroll processes at a minimal cost per employee, with a zero error rate and zero impact on employee relations. To achieve this in unison with the grey areas of HR, and the black white of Finance, is a constant struggle.

While it is important to understand the differences in personality and objective between Finance and HR, Payroll does not get to sit in the middle as an innocent pawn. Payroll Managers need to understand (and teach their team to understand) HR strategy and to know the impact of their service to employee relations, with the same veracity a Payroll manager will have their team understand the legislative, accounting and compliance issues.

While ever the conflicting requirements between HR and Finance continue on either side of the payroll function, this will not be achieved with any consistency. Your HR, Finance and Payroll Management need to come together and devise a workable strategy that keeps everybody working towards their common and individual goals. HR has to come to the party on the black and white deadlines and compliance, while Finance needs to work into to their authorisations and policies some of the grey HR requirements.

Only by understanding the personalities and the objectives of each of the business units and combining these into a workable solution for the benefit of the whole business, can the payroll team then begin to provide a consistently outstanding, service excellence focused and fully compliant payroll service. The absolute one certainty in all of this is that it doesn’t matter who the Payroll Team report to in the organisational chart. It matters that there is a solid working relationship between the HR, Finance and Payroll Teams so the best of both worlds can be achieved.

Food for thought for your organisation? I welcome your feedback!

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

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

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 1, 2012

You Absolutely Must Measure Payroll Error Rates!


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

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

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

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

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

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

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

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

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

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

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

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 31, 2012

What does Payroll Management really mean?


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Whether you manage a payroll of 20 or 20,000 people, the fundamentals remain the same.  Large or small, the payroll function must always include the same integral functions.  There are also certain personal qualities, attributes, skills, experience requirements and abilities that are required of Payroll Managers.

The typical position requirements of a Payroll Manager are to:

  • Continually adapt the payroll function to remain legislatively compliant
  • Lead, motivate and manage the payroll team
  • Develop and implement effective policies, procedures and business systems
  • Lay solid audit trails
  • Identify and manage risks associated with payroll production
  • Identify, report and assist in managing employee relations issues that arise
  • Interpret awards and legislation and inform management of changes
  • Understand basic accounting and general ledger concepts and complete monthly general ledger reconciliations
  • To assist with or manage salary packaging
  • Liaise with internal and external customers
  • Complete all company and statutory reporting including PAYG, Payroll Tax, FBT, etc
  • Manage the organisations’ superannuation funds
  • Manage Workers Compensation Claims and associated policy renewals
  • Support the senior management team

The typical personal skills and attributes required of a Payroll Manager are:

  • Professional in conduct and presentation
  • Exceptional communication (written and verbal)
  • High attention to detail
  • Progressive and dynamic
  • Pro-active problem solver
  • Change manager
  • Proven supervisory experience
  • Hands on management
  • High exposure to and ability to manipulate relevant payroll system
  • Advanced computer skills, usually requiring Excel or Lotus advanced abilities
  • Autonomy and initiative
  • Tenacity
  • Analytical

To successfully manage a payroll function means to achieve and exceed all of the positions requirements of the position utilising all of the skills and attributes listed above (and those of your particular position description).

A good payroll function lays good audit trails, through the use of finely tuned business systems that incorporate processing check points, explicit procedures manuals and organisational policies, which are legislatively compliant.  You will be consistently evaluating and pro-actively moving your payroll function forward towards ‘the ultimate payroll service’.

A professional Payroll Manager consistently identifies risks, reports those risks to management and addresses them within the scope of their role.  Risks in payroll management are ever-present, far-reaching and potentially damaging to cash flow, the share price & public perception, yet can be easily managed.

Properly managed and systemised, each payroll process can result in zero (or close to it) errors and be systemised to ensure it is produced in the most time and cost efficient manner possible.

Senior management will view a professional payroll function with the respect it deserves.  They will seek information from you and value what you provide.  You, as a professional, will have taken the time to understand what management require and how they intend to utilise the information.

The employees of your organisation will feel that they are respected.  They know you will be doing your best to respond to their queries.  They will hear the smile on your voice when they are talking to you and your team.  No matter how inane the enquiry may be, you and your team will treat them with the utmost respect.  Your external customers will be treated with the same respect, urgency and professionalism that you bestow upon your internal customers.

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

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

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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