Payroll KPIs - Part II

In continuation to the previous post, the next key performance indicators can be - 

2. 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

3. 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 utilized 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

4. 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 inquiry in order to identify service demands and improvement areas

5. 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

Many payroll services benchmark themselves against others, or against industry, country or global best practice KPI’s.  Before deciding how you will utilize benchmarking, it is important to understand the dynamics behind the numbers. You should 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.