Payroll Maturity – What it is and Why You Need It
Ian Giles| Apr 02, 2023
Payroll is the most complex recurring process at any company. There are so many factors to consider – employment categories, tax brackets, mandatory benefits, and much, much more. Depending on how well a company manages its payroll process, payroll can be a liability or a strategic asset.
An immature payroll process is manual, error-filled, and low in oversight. It can be a drain on a company’s time and resources.
A mature payroll process is automated, globally compliant, and integrated with HR and finance systems across the company. It can produce analytic insights that guide important business decisions.
How does a company move its payroll out of the immature zone and what steps does it take in between to achieve the gold standard in payroll? It starts by asking how payroll can add value to the enterprise.
Stages of payroll maturity
A company’s payroll maturity can be assessed based on a variety of factors, including the level of automation, accuracy, tax compliance, adherence to labor laws, integration, security, business insights, and overall efficiency of the payroll process.
Typically, companies pass through four stages of payroll maturity.
The payroll tends to be high-touch and heavily manual in approach. Error rates are high due to minimal data validation, lack of audit and governance. Payroll cycles can lack harmonization.
The payroll is focused on maintaining – but not improving – payroll expertise, compliance, and administration. It has a medium-to-low touch approach with a moderate level of manual effort.
A controlled payroll is focused on improving payroll execution, increasing technical expertise, and achieving excellence. The number of technologies is kept to a minimum, and they have a lower-touch approach that reduces error and effort.
This type of payroll shapes strategy by influencing other functions, delivering value added activities. It is centralized though centers of excellence. It works with partners, not vendors. Employee satisfaction and business trust is very high.
A mature payroll typically includes:
- Automated processes to reduce manual processes and errors, reducing the element of risk.
- Compliance with relevant laws and regulations, including tax laws, country labor laws, and employment regulations. It builds on internal policies and procedures.
- Integration with other employee-related systems such as time and attendance, benefits administration, and the general ledger systems. These integrations help simplify processes and improve data accuracy.
- Data security to protect both employee and company data and prevent unauthorized access.
- Real time analytics and reporting to enable HR and Finance teams to track key metrics.
How to level up payroll maturity
To climb the ladder of payroll maturity, you first need to find the gaps in your current payroll process. Then you can begin implementing changes to make your payroll a greater contributor to your company’s success.
Sounds simple, right? Well, improvement requires that payroll managers change the way they do things, and historically, payroll has been the department most resistant to change at most companies. You’ll even hear that fatal phrase, “we’ve always done it this way,” as a defense for using out-of-date and inefficient processes.
If you resist change, the ‘norm’ wins. But you can start moving forward by asking yourself some essential questions:
1. Do you have multiple vendors in multiple countries?
Managing multiple relationships is time consuming. You lose time waiting for data to flow from various sources and you still have no unified view of all payroll costs.
2. Is your technology solution fit for the future or is it already outdated?
Is there a single, integrated source of payroll data or are you still using spreadsheets? To grow in payroll maturity, you need data-driven real-time business insights.
3. Are there countries where you rely on just one person?
What happens if members of your team want PTO or are sick? Are they close to retirement age? There are lots of reasons this could become a problem. Look at the payroll model and staffing within payroll.
4. How compliant is your payroll and how compliant can it be?
This is where it’s important to be brutally honest with yourself. Do you audit your own payroll, or do you leave that to the auditors? Could you spend less time gathering data and reports for them if you did this regularly yourself? Be prepared, audits are generally cyclical events, there is no reason to be on the backfoot.
5. How are your employee to payroller ratios?
Is it 1:200, 1:500, 1:1000, 1:2500? Focus on eliminating manual processes via automation, the introduction of an integrated Time & Attendance tool, adopt RPA tools and employee Self Service. If the right tech and processes are in place, you can save time and resources while improving the quality of your payroll.
Improving processes in these five areas will help you take real steps forward and move you up the ladder of payroll maturity.
Improve payroll payment delivery
Why are payments so difficult? The sheer scale and variety of payments has grown dramatically. The global labour force is now 3.5 billion and there has been no real change in process or technology in over 30 years!
Traditional networks allow zero visibility and have slow settlement times. Payroll payments are “Super Payments”, not your run-of-the-mill payments. It matters when they hit bank accounts.
Upgrade your payroll and payments with Papaya Global
Find out how you can boost your productivity and performance – while saving time and money on your global payroll. Schedule a meeting today.