Powering the Payroll Engine
by Richard Dutton, Account Director, Symatrix
“Many organisations have made a significant investment in Tier 1 human capital management (HCM) systems, the equivalent of the shiny red Tesla of the HR technology world – leading-edge technology and all the innovation that they can fit under a bonnet. Yet, when it comes to payroll, many continue to run these super-slick engines like a ‘Mr Bean Mini’. They now have access to a high-quality payroll engine as part of their HCM application but don’t know how to access, configure and make use of it to deliver an operationally excellent solution to support either in-house or outsourced payroll operations.
Instead, they often outsource payroll using a completely different application from HR and struggle with off-system manual workarounds, data mapping, error-strewn reporting and resource-intensive administration. In car terms, they are using a broom for an accelerator and trying to stick ropes round the steering wheel to keep themselves on track. This situation is often reached because the payroll function is not embedded in the selection and decision process.
Getting the HR approach right
By investing in high-value HCM and then outsourcing payroll, organisations tend to run into a host of problems. The businesses that provide the outsource payroll service tend to say: ‘just give us the HR data from your HCM tool and we will run payroll for you’ and make your payments to your employees. Unfortunately, though, they typically don’t ask: is that HR tool set up to support the payroll process?
That means that a less streamlined and inefficient solution, which is also typically more reliant on manual interventions, is delivered. By simply asking for the HR data, the outsource provider will generally leave all the pain that is associated with running payroll efficiently with the client who is responsible for getting the right data: in the right format for payroll but has no skill or mechanism to optimise the collection of that data. The outsourcer will typically not have looked at, addressed or helped them with any of that HR flow, so the business will have to dedicate resource to the difficult task of managing it, which mitigates against efficiency.
Moreover, because the service is so disjointed, there is huge risk for the business. There is little or no governance associated with the approach and the payroll that the business thought it was outsourcing to control and manage costs, is costing twice as much as it should and very often riddled with risks of overpayments. This results in total cost of ownership mounting up very quickly when you account for the additional resources required and the cost of overpayments and underpayments, rework and ensuring compliance.
Looking outside the business
With access to the right level of expertise and understanding, however, businesses can go back into their HCM system to configure their HCM applications to be one source of the truth for both HR and payroll. Properly configured, HCM systems should provide one single employee record with all relevant people data in it; including bank details, salary information, performance data and absence data so that both HR and payroll can use it as required.
Unfortunately, many businesses don’t fully realise this is possible. Often they buy a single cloud HR and payroll system but because they don’t fully understand what payroll needs from an operationally-efficient approach, there are still lots of manual services and activities going on around it. They will generally need the assistance of an expert partner to help them get better value from the systems and bring HR and payroll skills into the mix.
The truth is that you have to have HR and payroll operating in tandem in a single system to gain full value from a HCM solution. But just like a car needs regular servicing and a MOT, so too will the HR and payroll solution need ongoing expert support over time. But you also need to wrap around the technology, the right governance and the right operating model to ensure that payroll continues to remain relevant and in line with requirements on a business as usual (BAU) basis so they get the optimum value whenever it is time for them to run the payroll.
So it is important to work with a partner who brings HR, technology and payroll skills together within a single system to drive operational excellence across the whole data process. They need to know what great payroll looks like but they also need to be aware that an efficient payroll is a consequence of good HR. Any HCM system needs to have quality HR data but it also needs to be carefully configured to support the payroll requirements of the business. That means that data coming out of the HCM system has been captured correctly and is ready for payroll to be calculated. This means that businesses can once again have operationally-efficient payroll teams that have been freed up from having to do all the administrative work that they neither want nor need to do and are able to deliver in a very positive payroll that supports your employees.
This positive payroll operation contributes to employees’ financial well-being, including proactively telling employees when any arrangements are changing so that they don’t get any surprises. This proactive approach will also result in a cost saving to the business because it will reduce calls coming into the payroll team when payslips are issued.
In short, if businesses want a supercharged payroll engine rather than a souped-up old vehicle they need to know that buying a high-quality HCM system will not in itself be enough. Organisations must ensure that their outsourced payroll is properly configured with HR, ideally provided and fully supported by a single supplier, to reap the rewards.”