Five ways to benefit from payroll analytics and Big Data Five ways to benefit from payroll analytics and Big Data

Five ways to benefit from payroll analytics and Big Data
14 Nov 2017

The analysis of big data may be nothing new to many global employers these days, but specifically looking for patterns in payroll information is not as common as you might think – even though it can prove to be a vital source of strategic employee and operational insights.

Payroll data is important because it consists of a lot of precise, varied information about each individual working in your organisation, data that can be used to help inform your business decisions and activities. While the payroll function has traditionally operated in a very manual way, today’s IT systems include automated tools that enable you to mine such data and generate reports on everything from supplemental runs and employee absence rates to the cost of changing compensation levels.

But while these reports are important and helpful, they will never have the same impact as analytics tools in helping to position the payroll department as a strategic resource. Here are five suggestions for how your payroll data could help to:

1. Minimise payroll errors

Payroll is the largest single cost for most multinational companies, comprising between 50% and 70% percent of their overheads. As such, even small, persistent errors in global payroll can add up to big problems. This means it is vital to understand where and how often such errors are occurring and to track any trends over time in order to identify areas for improvement.

For example, if a particular location consistently requires supplemental payroll runs, it could indicate a problem with data collection further up the process chain or that additional staff training is required. If errors in a given department tend to spike at certain times of year, it could also suggest that holiday schedules need revising or workflows require adjusting in order to smooth out staffing issues.

2. Guide business decisions

At the very least, analysing your payroll performance can provide more accurate annual forecasts to help manage budgets and cash flow at times of change or growth. But payroll data can also be used to assess the true costs and organisational impact of business decisions, both large and small.

For instance, if a recently released product is doing well and the aim is to increase production, payroll data could provide the organisation with crucial insights into its current staffing capacity and performance. Such insights include the potential cost and impact of overtime versus taking on additional headcount, the tax or compliance implications and even the potential effect on other staff such as IT.

This information will enable the business to weigh its options more accurately, set pricing accordingly, and grow with confidence by having a clear view of its staff-related costs.

3. Inform future planning

Analysing payroll data effectively can help to inform the company’s future business strategy. Having a total picture of the organisation’s operational costs and requirements and a clear understanding of where the challenges lie, enable leaders to more effectively evaluate how to grow the business.

For example, your payroll data might reveal that compensation is rising in one region at the same time as profits are falling, which could indicate a need to reevaluate how many staff are employed there. It could also become clear that a number of key managers in a second location are coming up for retirement, which means it is time to start succession planning.

4. Improve hiring practices

Your payroll data has an important role to play in helping the business better understand how to diversify, grow or cut its workforce as well as deploy personnel where they are most required. But to do so, it will be necessary to understand the costs and risks associated with employing staff in a range of different locations.

For instance, to understand whether contingent workers are an attractive alternative to full-time employees in a given location, it is necessary to compare not just respective earnings, but also issues such as the cost of paying insurance or other benefits to salaried workers versus the cost of training new contractors each time one of them moves on.

5. Retain key staff

Payroll data can help employers design compensation and reward strategies that deliver maximum value to both themselves and their employees as it provides insights into staff preferences.

So, for instance, in some locations, holiday allowances may be valued more highly by staff than bonus schemes, while younger workers may be less likely to exploit health insurance options but more inclined to take up flexible working hours instead. Such information can be used to tweak reward strategies accordingly.

Quality is king

The first consideration when trying to exploit big data in a payroll context is to ensure your information is consistent and of a high quality. This situation remains a challenge for organisations that still use legacy software and a fragmented payroll model.

On the other hand, running global payroll operations on a standardised, real-time system that enables a single source of truth for your data - thereby providing an accurate picture of your costs at all times, will enable you to position your payroll team - and the data it handles, as a strategic business resource both now and into the future.

 

Paul Bartlett is the CEO of CloudPay, which provides global payroll and payments managed services to multinational organisations. A global business expert, he has much experience in helping companies improve the efficiency and scalability of their operations using technology and services.

The analysis of big data may be nothing new to many global employers these days, but specifically looking for patterns in payroll information is not as common as you might think – even though it can prove to be a vital source of strategic employee and operational insights.

Payroll data is important because it consists of a lot of precise, varied information about each individual working in your organisation, data that can be used to help inform your business decisions and activities. While the payroll function has traditionally operated in a very manual way, today’s IT systems include automated tools that enable you to mine such data and generate reports on everything from supplemental runs and employee absence rates to the cost of changing compensation levels.

But while these reports are important and helpful, they will never have the same impact as analytics tools in helping to position the payroll department as a strategic resource. Here are five suggestions for how your payroll data could help to:

1. Minimise payroll errors

Payroll is the largest single cost for most multinational companies, comprising between 50% and 70% percent of their overheads. As such, even small, persistent errors in global payroll can add up to big problems. This means it is vital to understand where and how often such errors are occurring and to track any trends over time in order to identify areas for improvement.

For example, if a particular location consistently requires supplemental payroll runs, it could indicate a problem with data collection further up the process chain or that additional staff training is required. If errors in a given department tend to spike at certain times of year, it could also suggest that holiday schedules need revising or workflows require adjusting in order to smooth out staffing issues.

2. Guide business decisions

At the very least, analysing your payroll performance can provide more accurate annual forecasts to help manage budgets and cash flow at times of change or growth. But payroll data can also be used to assess the true costs and organisational impact of business decisions, both large and small.

For instance, if a recently released product is doing well and the aim is to increase production, payroll data could provide the organisation with crucial insights into its current staffing capacity and performance. Such insights include the potential cost and impact of overtime versus taking on additional headcount, the tax or compliance implications and even the potential effect on other staff such as IT.

This information will enable the business to weigh its options more accurately, set pricing accordingly, and grow with confidence by having a clear view of its staff-related costs.

3. Inform future planning

Analysing payroll data effectively can help to inform the company’s future business strategy. Having a total picture of the organisation’s operational costs and requirements and a clear understanding of where the challenges lie, enable leaders to more effectively evaluate how to grow the business.

For example, your payroll data might reveal that compensation is rising in one region at the same time as profits are falling, which could indicate a need to reevaluate how many staff are employed there. It could also become clear that a number of key managers in a second location are coming up for retirement, which means it is time to start succession planning.

4. Improve hiring practices

Your payroll data has an important role to play in helping the business better understand how to diversify, grow or cut its workforce as well as deploy personnel where they are most required. But to do so, it will be necessary to understand the costs and risks associated with employing staff in a range of different locations.

For instance, to understand whether contingent workers are an attractive alternative to full-time employees in a given location, it is necessary to compare not just respective earnings, but also issues such as the cost of paying insurance or other benefits to salaried workers versus the cost of training new contractors each time one of them moves on.

5. Retain key staff

Payroll data can help employers design compensation and reward strategies that deliver maximum value to both themselves and their employees as it provides insights into staff preferences.

So, for instance, in some locations, holiday allowances may be valued more highly by staff than bonus schemes, while younger workers may be less likely to exploit health insurance options but more inclined to take up flexible working hours instead. Such information can be used to tweak reward strategies accordingly.

Quality is king

The first consideration when trying to exploit big data in a payroll context is to ensure your information is consistent and of a high quality. This situation remains a challenge for organisations that still use legacy software and a fragmented payroll model.

On the other hand, running global payroll operations on a standardised, real-time system that enables a single source of truth for your data - thereby providing an accurate picture of your costs at all times, will enable you to position your payroll team - and the data it handles, as a strategic business resource both now and into the future.

 

Paul Bartlett is the CEO of CloudPay, which provides global payroll and payments managed services to multinational organisations. A global business expert, he has much experience in helping companies improve the efficiency and scalability of their operations using technology and services.

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