Payroll is critical, yet its operations are often overlooked and neglected. Jessica Webbley-O'Gorman outlines four common obstacles faced by the payroll function and how to overcome them
Payroll is essential for both organisations and employees. Despite this, payroll is often neglected and overlooked until a crisis occurs. Instead of treating payroll as though it's the poor cousin of strategic internal business functions, organisations should instead critically evaluate the payroll function to reap an abundance of benefits.
Here are four common stumbling blocks most organisations trip over when it comes to payroll—and how best to navigate them.
1. Payroll is often neglected until there is a crisis
Anecdotally, it takes eight months for an employee to regain confidence in their payroll after just one error. The time payroll teams require to verify, adjust and readjust an employee's pay is vast—without adding value to the organisation or individual.
Paying attention to payroll when it's business as usual is essential in avoiding errors, rather than hyper-focusing on the area when there's a problem.
2. Unclear roles and responsibilities
Payroll generates changes and improvements from within the organisation and will be able to implement them. But, it is just one part of the organisation: identifying what happens upstream and what flows into payroll is important.
Organisations should critically examine the overall organisation in which payroll operates. Remove silos surrounding your payroll team and ask yourself: what are the wider organisation's processes, operations and goals that payroll could support or that impact on payroll's ability to deliver its core tasks?
3. Lack of intentional inclusion of stakeholders
Payroll is experienced in different ways by different people. Whether it's a new employee, an employee on sick leave, a line manager struggling to understand a new expenses policy, a finance director who needs to close this quarter's reports, a payroll administrator or an outsourced payroll provider—all have different priorities, experiences, and levels of authority affecting the outcome they want.
You need to consider as many different experiences as possible regarding payroll. These multifaceted perspectives can help plan for – and navigate – potential obstacles that could otherwise snowball. Unless such diversity of these moments and needs is considered and planned for, payroll will not be appropriately resourced or prepared to respond, and the experiences of key stakeholders will not be positive.
4. One size does not fit all
Payroll must be an overall process and yet accommodate each individual employee. Employee numbers, benefits packages, legacy systems, HR reporting capabilities, organisation culture, and individual circumstances will all impact the complexity of payroll.
There is no magical 'payroll button' that can accommodate everyone across the organisation, meaning that the payroll function must be nuanced, robust and flexible.
In practical terms, this could mean including payroll in planning new HR systems or processes; linking in with HR on employee experience programmes and priorities; and taking resource or system concerns raised by your team seriously.
How to elevate your payroll function for good
The following actions can help elevate the payroll function so it is seen as a vital part of any organisation.
Being an active and visible part of the broader organisation is critical for payroll
Communicating what is going into payroll and what is not is critical. It is not good business, nor a good experience, for an organisation to fail to consider how payroll operates as part of the organisation's employment tax, employment law and revenue compliance profile.
The solution is to map out your payroll processes, identify your stakeholders, and communicate those findings.
Payroll process mapping opens the opportunity to identify, discuss and alter how things are happening or who is responsible for them
Clarity around roles and responsibilities isn't just for the benefit of payroll. Providing a clear structure around the roles and responsibilities regarding payroll is a proactive risk management strategy within the organisation that will also outline how payroll adds value to the organisation and the payroll function itself.
There is a tension between the universality of payroll (everyone needs to get paid) and bespoke requirements (everyone needs to get paid their pay)
The most urgent or essential challenges facing an organisation or payroll team will vary from organisation to organisation. Pick an easy win or the biggest pain point and promote payroll's positive capability.
Jessica Webbley-O'Gorman is Tax Director at PwC