By Eddie Megas, ADP’s Managing Director, Australia and New Zealand
What if payroll could offer your business a competitive edge?
Many organisations view payroll as solely transactional. While they generally acknowledge the importance of accuracy and compliance, often the process as a strategic function is not given the priority it truly deserves.
A mindset shift is required to extract the full value out of a business’ payroll.
Not only is payroll one of the largest expenses for most organisations, it is also integral to the employer-employee relationship. Despite this, one in four companies do not have a payroll strategy, according to a survey by Ernst & Young. This increased to one in three companies if payroll reports to HR rather than finance.
When payroll is viewed in isolation from a business’ broader HR and financial objectives, the ‘human’ aspects of the process can go missing, such as user experience or transparency.
The ADP Research Institute found almost one-third of employees in the Asia Pacific region would not realise if they were paid incorrectly, and for 11 percent of these employees, it was because their pay or payslip confuses them. Globally, one in three employees say they are always, often or sometimes paid late.
Being paid correctly, on-time and transparently is intrinsic to the way employees perceive their employers.
Processes that are heavily reliant on manual input can be fraught with error and inefficiency. This risk has been put in the spotlight during the coronavirus pandemic. ADP has calculated that at the beginning of the pandemic, the number of new regulations impacting payroll increased by 400 percent in a single month.
Almost every country has seen rapid and ongoing legislative changes around working arrangements, wages, entitlements and subsidies. Organisations without a standard process for receiving and implementing regulatory changes were at greater risk of violations.
A lack of digitisation not only makes compliance difficult in the midst of regulatory shifts, it also leads to poor visibility and quality of data. Now, arguably more than ever, businesses need data-driven insights for informed decision making when the external and internal environments are ever-changing.
Without automation and integration across the business, the hidden costs of payroll mount up. Common inefficiencies include time spent collecting and interpreting data, validating results and answering employee enquiries. Payroll professionals can become bogged down in administrative details, meaning there is limited time and perspective to focus on the bigger picture: how payroll can enhance the business.
Moving from a tactical to a strategic approach for managing payroll goes beyond reducing costs, even though there are certainly cost efficiencies to be made. The ultimate gains come from mitigating risk and creating value.
In order to unlock this power, payroll needs to be:
A payroll process that is optimised, visible and agile enables greater accuracy and easier access to important information. When information is digitised, payroll professionals can receive relevant details such as timesheets and leave requests directly from the source, reducing the possibility of human error.
Moving information to a cloud-based platform supports business continuity, which proved to be critical during the unprecedented move to remote working over the past year.
When employees are located around the APAC region or beyond, the importance of a modern and integrated payroll solution becomes amplified. Almost half of payroll professionals say they have very low or limited levels of standardisation globally. This makes communication between payroll teams difficult in a time of crisis.
Setting up the structures to enable an efficient and compliant payroll across multiple countries is one of the key benefits that can be realised when leaders set a deliberate payroll strategy for the business.
Some of the first areas where a business will see value in payroll are increasing productivity and reducing costs associated with an outdated, error-prone system. A study by Forrester on The Total Economic Impact™ of ADP Global Payroll found that companies that switch to fully managed services can reduce payroll effort by up to 30 to 75 percent, depending on the size of the market.
As the payroll process becomes increasingly optimised, visible and agile, the benefits will start to flow on across the entire business.
Payroll data can be messy when it sits across numerous spreadsheets or programs. Digitising and integrating data allows for leaders in all departments to spot trends and gather insight that can inform business decisions.
Having the ability to be more innovative in remuneration models means pay can better align with employee needs. This can encompass anything from managing flexible benefits such as paid overtime or the option to buy annual leave. This ability is particularly advantageous in recruitment and talent attraction.
Payroll can be a means to empower employees and strengthen their relationship with the company. When payroll information is accessible on-demand, there will likely be fewer queries and any errors can be identified sooner by employees.
Transforming payroll requires endorsement from senior leaders and collaboration between HR and finance departments. This is by no means a straightforward feat, but the potential advantages can be felt far beyond these two departments and in the bottom line. If your payroll solution does not increase efficiencies, enhance visibility and empower agility company-wide, it is time to take a new look at pay.
About Eddie Megas
Eddie Megas joined ADP as the Director of Implementation and Service in 2013, before leading ADP’s Australian and New Zealand operations as Managing Director in 2018. With a background in IT, he has held senior leadership roles at the Australian Management Institute and Idria, a simulation training business.
Connect with Eddie Megas on LinkedIn.
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