The Top Strategies for Getting the Most out of Your Payroll Software
As a 2011 report from the Society of Human Resource Management (SHRM) points out, “One of
the earliest areas of HR to be automated was compensation, and today, virtually all organizations
use technology to automate payroll processes”. However, while adoption may be at an all-time
high, the pressing question that remains is: how effectively is this payroll technology used? Indeed,
selecting and implementing payroll software is merely the first step in a continuous process of
benefits accrual; especially as the requirements of the organization and the available features
grow more aligned over time. Inevitably though (as the SHRM report points out), effectively
implemented HR and/or payroll software will lead to changes (both great and small) in existing
processes. As such, maximizing the return-on-investment (ROI) for a new payroll application
means striking a balance between configuring the software to fit the organization's processes/
practices, and reviewing how those same activities could themselves be changed in a way that takes
further advantage of the new payroll system. Here we outline 4 specific strategies that organizations
should look to when considering these changes.
Following a structured payroll software selection methodology (i.e. baseline, future state, and gap analyses), all payroll application features (from payslip access to the pay cycle itself) canand should be examined. Within this examination process, specific attention should be paid to comparisons against future organizational requirements—redesigned as necessary with automation in mind. It should be noted however that a strategic approach to this process is required. Namely, while potentially every feature is a candidate for this re-design, factors such as time of year, organizational priorities/resources, and even corporate culture may influence the order of review.
Indeed, as SHRM notes, "when an organization adopts any [new system], that solution may have built in processes and procedures that are not compatible with existing practices and corporate culture”. By reviewing existing processes in tandem with the payroll software’s feature set, clash points can be determined and set as clear priorities for review or change. As a recent Sage report, Top 10 Considerations When Changing Payroll Software, recommends: there should be an initial period of side-by-side processing or parallel running as a way of testing the accuracy of the new system. This practice is also an opportunity to test out new processes or changes in a safe environment; with the old system acting as a safety net to pick up any early bugs or glitches.
Payroll Software Maximization Tactic #2: Apply New Features
Equally as important as reviewing outdated and encumbering processes, organizations should
leverage the fact that today’s e-compensation and payroll technologies offer capabilities that extend
far beyond the simple automation of the payroll cycle. Even if the primary driver for acquisition
is the streamlining of the process of paying salaries, newer payroll applications may afford
additional opportunities. For example, as the aforementioned SHRM report points out, these wider
functionalities may allow organizations, “to streamline and automate the compensation planning
process, to model proposed changes in compensation plans, to track employee compensation
history, to allocate incentive pay and bonuses, and to provide higher quality information to decision
makers”. Even if the initial project is not so ambitious, the ongoing payroll maximization and
improvement process should include identifying these new opportunities for efficiency; creating an
taking informed knowledge base with which to draw upon for further implementation decisions.
As noted in looking over ancillary HR technology solutions, Employee and Manager Self-Service (ESS and MSS) options are strong drivers for process change and are software features that can
potentially transform the payroll culture in an organization. In large part this transformation comes
down to the direct interaction between the manager (or employee) and the system; thusly cutting
out the HR or payroll “middle man” and inherently making changes to the existing payroll process.
For example, as the 2011-2012 report, New Horizons - No Boundaries, states, “while ESS personal
data tools such as those for viewing pay stubs, changing personal data, and viewing vacation/sick
time usage are well established, we are seeing plans for substantial (18% to 20%) growth for setting
up and making changes to direct deposit and viewing total compensation and benefit statements”.
As indicated by self-service case studies, these changes show a six-fold time savings on just basic
administrative tasks (e.g. changes to payroll details); drastically reducing the workload of the
payroll team and cutting down on transaction times for the user. For new-adopting organizations in
particular, these feature sets represent processes that could be changed due to payroll technology
and perhaps should be different in order to fully leverage the new payroll software.
Complying with labor law is a concern for organizations in any country but perhaps particularly so in the United States given the array of data capture and reporting requirements from federal legislation such as FICA, FUTA and even the Consumer Credit Reporting Act (which affects garnishment or wages). Couple these regulations with additional state and local laws and the compliance burden becomes ripe for automation. Yet, many organizations choose to rely on salaried staff members to handle compliance; a fact that unfortunately still results in failures. In fact, as a 2011 Paychex report, Mastering Payroll Compliance, points out, “Businesses pay government agencies millions of dollars each year in labor and tax compliance penalties”. Further, Paychex cites that, “in this economy [government] agencies are more vigilant than ever about enforcing regulations”. However, many to most payroll software solutions have the capability to automate and reduce the compliance-monitoring burden. Social security contribution splits, correct classification of workers, and even less common issues such as garnishment of wages, all can be handled by a
fully-leveraged payroll solution.
Concluding Thoughts on Managing Payroll Software Improvement
Countless studies have proven that the closer the alignment between an organization's processes
and a given payroll software's capabilities, the better the ROI. However, automating out-of-date
or inefficient processes only achieves the result of streamlining the existing inefficiencies. As
such, organizational best practices would dictate that all payroll processes be reviewed; namely
because the mere addition of technology does not ensure excellent payroll performance or
employee satisfaction with the payroll service. As Cedar Crestone highlights "The top initiative
organizations work on is business process improvements [cited by 71% of respondents] such as
process standardization where and when it makes sense. No organization can fix broken processes
with automation [alone]".
Equally as important as reviewing outdated and encumbering processes, organizations should leverage the fact that today’s e-compensation and payroll technologies offer capabilities that extend far beyond the simple automation of the payroll cycle."