The payroll department is crucial for keeping the business running smoothly. However, inefficiencies can slow everything down and cause bigger problems. You need to find a way for payroll employees to function more effectively. Here are some of the top reasons payroll departments are struggling with efficiency:
Too Many Spreadsheets
Spreadsheets have long been considered one of the best ways to stay organized and do basic calculations. When some startups begin, they may run payroll with spreadsheets, but this quickly becomes ineffective as more employees are hired, according to Business 2 Community. Not only is a spreadsheet-based process a hassle, but it also opens the door for more errors. Payroll mistakes can lead to problems with compliance later on, so this isn’t a good option for a rapidly growing company.
Payroll regulations widely vary by state, so you’re at a greater risk of noncompliance if you operate in multiple locations or have employees who are eligible for overtime. Plus, employment regulations are constantly changing, and payroll managers need to keep up. Spreadsheets require extensive data entry. None of this in real time, so there’s a huge chance that errors will slip through the cracks.
Lack of Communication
When payroll is functioning in isolation from the other departments, more problems can arise, an article from Demand Media suggested. You need to maintain open lines of communication with human resources and the finance team to ensure everything is streamlined. These internal silos can hold a high-growth company back.
However, each department has its own priorities that can interfere with strong communication. You need to break down the walls between teams and keep everyone on the same page.
Communication issues can also stem from disjointed systems and a lack of shared data.
“Strict time and attendance policies, inaccurate data and late entries are roadblocks to efficiency improvements.”
Payroll Problems Can Harm an Employer’s Brand
Payroll is at the heart of business operations. Ultimately, employees need to get paid to keep coming to work. Issues in this area can cause employees to become disgruntled, Business 2 Community argued. For example, if workers are owed overtime and it doesn’t show up on their checks, they aren’t going to be happy.
Considering the number of websites there are that let people review their employers, this can inadvertently harm future recruitment efforts. Because employees in the tech sector have so many options on where they take a job, they most likely won’t want to work at a company with unhappy employees.
The Good News About Payroll
While the idea of so many inefficiencies running rampant through the payroll department is scary for most employers, it doesn’t have to be this way. Fortunately, process change is possible for payroll departments, especially when they implement more employee self-service channels, according to research from the Hackett Group and the American Payroll Association. The research analyzed 84 companies’ payroll processes and found that automation could easily be implemented for many. Strict time and attendance policies, inaccurate data and late entries were found to be roadblocks to efficiency improvements.
Some of the businesses surveyed had payroll departments that were either aligned with the finance team or human resources. The companies that the Hackett Group identified as top performers in payroll had a shared services model. These top performers not only were more efficient, but they also cut payroll spending. High-performing businesses spent an average of $2.65 per pay slip and $70.78 per employee each year. For comparison, the average annual cost per employee in the U.S. is $99.13.
Outdated processes and silos between departments are highly detrimental to an efficient payroll process. You need to align payroll, HR and finance for better results. Many errors can be eliminated after moving away from manual processes. A shared system with an employee-facing interface can significantly improve these issues. Employees can log in and ensure their own information is updated, which may also cut errors.