Original source data quality is key to payroll accuracy Original source data quality is key to payroll accuracy

Original source data quality is key to payroll accuracy
21 Dec 2017

This metric highlights the importance for payroll in having quality original source data (time, HR, benefits, compensation, etc.) and explains its impact on the “gross-to-net” calculation

Why it’s important

Since most data that is processed by payroll originates from other sources, it is important that not only is it received in a timely manner, but also that it is accurate and formatted correctly. Otherwise it could jeopardise the quality of the “source-to-gross” calculation.

In fact, when we compare our Top Performer peer groups with Multinational ones, more than 50% of Top Performers indicate that the data they receive requires a minimal amount of cleansing before being included in the “gross-to-net” calculation. But quite the opposite is true of the Multinational peer group, where more than 50% indicate that a substantial amount of data scrubbing is necessary before original source data is ready for the same calculation.

For those not working in a payroll environment, massaging bad data is a time-consuming payroll task and so it makes payroll staff smile when they hear: “It’s just “gross-to-net” - how hard can it be?” It can be very hard, believe me!

Strategic implications

In order to increase quality, it is important that clear roles and responsibilities are defined throughout the end-to-end process of data acquisition. It should be clear who has responsibility for the accuracy of any data that is sent to payroll – so is it the payroll department itself or the owner of the data? In the case of Top Performers, it is generally the owner.

This means that the HR function is responsible for the accuracy of HR data, Compensation is responsible for the accuracy of compensation data, and so on and so forth.

In short, to get it right involves more than just the payroll department. The focus has to be on the end-to-end data acquisition process, which means that all inputs and outputs need to be taken into consideration.

If source data is incorrect, the “source-to-gross” calculation will be incorrect, which will put the “gross-to-net” calculation out too. In the past, there was a lot of focus on root cause analysis. But now that we know where errors originate, how can we best improve the process? Here are a few things to consider:

• How effectively is employee self-service being used? All too often it is just employed for time reporting and electronic payslip distribution, but its capabilities are actually much broader. In fact, it can help not only to increase the overall quality of employees’ pay, but also to lower the number of transactional tasks that payroll staff need to undertake.

• How effectively is manager self-service being used? Although the average manager’s main focus is on running the business, they generally work in close proximity with the employees that report in to them. As a result, they have upto- date knowledge of when staff are off sick, hand in termination notifications and/or other activities. This means they are best placed to communicate such information to payroll in a timely and efficient manner. So introducing manager self-service can help to increase quality as well as encourage the timely receipt of data that needs to be included in payroll
calculations.

• Besides the “time-to-gross” element, which is almost always automated, how much of the “source-to-gross” process is too? Automating it means that payroll doesn’t have to manually touch data files before including them in the “gross-to-net” calculation”. This is important because the more automated the process, the better the payroll quality.

While there are several actions that can be taken to increase the quality of payroll source data, automation is key. Also bear in mind that increasing the use of employee and manager selfservice requires cultural change, which is generally introduced most successfully if payroll and HR work together. Increasing usage should not be seen as simply being for payroll’s benefit – instead the benefits need to be understood in terms of overall organisational culture.

Condition of Original Source Data

 

By Felicia Cheek, Global payroll advisory programme practice leader and senior business advisor at The Hackett Group

This metric highlights the importance for payroll in having quality original source data (time, HR, benefits, compensation, etc.) and explains its impact on the “gross-to-net” calculation

Why it’s important

Since most data that is processed by payroll originates from other sources, it is important that not only is it received in a timely manner, but also that it is accurate and formatted correctly. Otherwise it could jeopardise the quality of the “source-to-gross” calculation.

In fact, when we compare our Top Performer peer groups with Multinational ones, more than 50% of Top Performers indicate that the data they receive requires a minimal amount of cleansing before being included in the “gross-to-net” calculation. But quite the opposite is true of the Multinational peer group, where more than 50% indicate that a substantial amount of data scrubbing is necessary before original source data is ready for the same calculation.

For those not working in a payroll environment, massaging bad data is a time-consuming payroll task and so it makes payroll staff smile when they hear: “It’s just “gross-to-net” - how hard can it be?” It can be very hard, believe me!

Strategic implications

In order to increase quality, it is important that clear roles and responsibilities are defined throughout the end-to-end process of data acquisition. It should be clear who has responsibility for the accuracy of any data that is sent to payroll – so is it the payroll department itself or the owner of the data? In the case of Top Performers, it is generally the owner.

This means that the HR function is responsible for the accuracy of HR data, Compensation is responsible for the accuracy of compensation data, and so on and so forth.

In short, to get it right involves more than just the payroll department. The focus has to be on the end-to-end data acquisition process, which means that all inputs and outputs need to be taken into consideration.

If source data is incorrect, the “source-to-gross” calculation will be incorrect, which will put the “gross-to-net” calculation out too. In the past, there was a lot of focus on root cause analysis. But now that we know where errors originate, how can we best improve the process? Here are a few things to consider:

• How effectively is employee self-service being used? All too often it is just employed for time reporting and electronic payslip distribution, but its capabilities are actually much broader. In fact, it can help not only to increase the overall quality of employees’ pay, but also to lower the number of transactional tasks that payroll staff need to undertake.

• How effectively is manager self-service being used? Although the average manager’s main focus is on running the business, they generally work in close proximity with the employees that report in to them. As a result, they have upto- date knowledge of when staff are off sick, hand in termination notifications and/or other activities. This means they are best placed to communicate such information to payroll in a timely and efficient manner. So introducing manager self-service can help to increase quality as well as encourage the timely receipt of data that needs to be included in payroll
calculations.

• Besides the “time-to-gross” element, which is almost always automated, how much of the “source-to-gross” process is too? Automating it means that payroll doesn’t have to manually touch data files before including them in the “gross-to-net” calculation”. This is important because the more automated the process, the better the payroll quality.

While there are several actions that can be taken to increase the quality of payroll source data, automation is key. Also bear in mind that increasing the use of employee and manager selfservice requires cultural change, which is generally introduced most successfully if payroll and HR work together. Increasing usage should not be seen as simply being for payroll’s benefit – instead the benefits need to be understood in terms of overall organisational culture.

Condition of Original Source Data

 

By Felicia Cheek, Global payroll advisory programme practice leader and senior business advisor at The Hackett Group

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