As a Payroll stakeholder, one is
responsible for managing what is the greatest cost of one’s organizations 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.
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 organizational 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 organizational goals
are to minimize 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.
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 organizations 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:
1. 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
- 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
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