Whatever the driver for implementing the new payroll solution – cost reduction, better statutory compliance, headcount redeployment, or in-house control of the payroll function – the fact is that from a time and money standpoint maximizing the payroll software investment is critical; and savvy organizations will be looking for a suitable ROI. What shape that return takes will depend on the business goals for the software introduction and the key features and functions adopted in operation. However, selection of a best-fit solution and a successfully managed implementation are just the first steps to ROI. How an organization manages the post-implementation early usage and embedding of the new system will directly influence its worth. This article suggests five key steps to driving up the ROI and minimizing the time-to-value.
Payroll ROI Step #1: System Performance
Despite rigorous testing and parallel running prior to go-live, the likelihood is that once the new system is being used organization-wide, numerous issues will arise. An early evaluation of the software’s functioning is a crucial exercise to coordinate feedback and address problems. Put simply, to what degree is the software working as expected? By referring back to the goals in the original business case, user experience, technical operation and outputs can be measured according to expectations. One possibility for measuring bottom line functioning is the set of measures recommended by the Aberdeen Group. In the 2011 report, Time and Attendance Strategies – Beyond Compliance and Payroll Accuracy, four areas are identified as key indicators of ‘Best-in-Class’ performance on payroll:
The rate of payroll errors goes down and the time and cost of corrections is correspondingly lessened.
Timesheets are more accurate and the cost saving is twofold – first, the time and cost of corrections is reduced, and second, opportunities for time theft and buddy punching are restricted.
Less errors in paid time off accrual calculation reduces the instances of employees taking unearned time off.
Up to date compliance with relevant national and local labor laws avoids fines and legal action.
The report also concludes that the use of software automation for payroll should result in an improvement in these areas.
Payroll ROI Step #2: System & Support Features
Part of the selection process will have been the mapping of organizational payroll requirements against the functionality offered by the software. This early stage, during the first few pay cycles following go-live is an ideal time to revisit the requirements and the inevitable compromises that were made in the selection. Decisions made concerning which features would be activated and in use can be reviewed for their impact on payroll accuracy and the user experience. The basic acceptable service might be a system that pays employees on time, pays taxes on time, and files tax forms on time. However, in retrospect, does the organization require more, such as handling different state and federal taxes, 401(k)s and other deductions, or a non-standard pay cycle? Similarly, early attention should be paid to the level of operational support from the software vendor and the degree to which it matches agreed (and contracted) service levels. What is the user experience of the vendor’s helpdesk, FAQs, user manuals, ongoing training, etc. Is the partnership shaping up as hoped?
Payroll ROI Step #3: Reporting
It is never too early to start using the software’s reporting functions. Partly because the organization needs data to assess key factors such as payroll accuracy and other automation impacts, and partly to test out the reporting features themselves in a live situation. According to Personnel Today magazine’s Buyers Guide, payroll reports can be categorized in three levels. The first are standard, ‘out-of-the-box’ outputs covering costs, payments and deductions, pension schemes, etc. The next level up would be ad hoc or customized options according to user-defined filters (such as salary thresholds or particular benefits packages). Finally, the top level is the integration of payroll data into the business intelligence dashboard, allowing an almost real-time reading of the state of play. By reviewing whether the software is meeting reporting expectations at these three levels, feedback can be taken and early adjustments to functionality made.
Payroll ROI Step #4: User Input
The best and most immediate source of feedback concerning the new system’s functioning is the users. The managers responsible for time and attendance data, the payroll team, the C-suite that relies on system reports – all are in the prime position to spot and notify regarding issues, problems and glitches. By creating easy-to-use channels for transmitting this feedback to a central point and then closing the loop by communicating regularly (about updates, FAQs, and system hints and tips), the body of users can be utilized to rapidly enhance system performance. Additionally, to the extent that every employee receives a paycheck, every employee can be classed as a user of payroll software and should have access to a feedback channel. However, it should be noted that this is a step that goes hand-in-hand with payroll post-implementation training and other strategies; after all, providing feedback channels with no follow-through can be just as bad as never even offering the chance for input to be provided.
Payroll ROI Step #5: Ongoing Engagement
The selection and implementation phases of the payroll software project should have been supported by a proactive engagement strategy, with targeted communication and consultation activities aimed at various stakeholder groups. During the crucial post-go-live period, continuing this engagement strategy can ensure ongoing buy-in from system champions and early adopters, help drive up usage of additional features such as employee self-service, and ensure that the activities outlined in steps #1 to #4 are focused on differing stakeholder needs and are effective in surfacing points of detail that might otherwise go unheard.
The Payroll ROI Bottom Line
Careful selection of the right system and a seamless implementation project are the foundations on which the ROI from a new payroll solution can be built. However, the foundations alone are not enough. Organizations should by all means celebrate a successful implementation; but then the focus of the project must shift—to the system’s performance and features, efficient reporting, and engaging with users and stakeholders. Only then can it be ensured that the new payroll software will achieve its fullest return on investment.
The best and most immediate source of feedback concerning the new system’s functioning is the users. The managers responsible for time and attendance data, the payroll team, the C-suite that relies on system reports – all are in the prime position to spot and notify regarding issues, problems and glitches.”