Monthly Measures: Investigating different payroll errors Monthly Measures: Investigating different payroll errors

Monthly Measures: Investigating different payroll errors
08 Jan 2018

This metric shows the root cause of errors that occur during the payroll process experienced by multinational companies.

Why it’s important

As multinational companies focus on standardisating and automating their end-to-end processes, analysing errors that occur during the payroll process is one way to determine what processes and/or activities are pain points. Insight into this area also helps you prioritise process improvements and/or projects.

Strategic implications

Ironically, errors that occur during the payroll process are rarely the result of activities owned by payroll - most are the result of inefficiencies in upstream processes. The majority of data feeding into the gross-to-net process comes from two primary sources: human resources and time reporting. Therefore, it’s no surprise that errors resulting from human resources contribute to 26 per cent of payroll errors. Time reporting adds another 15 per cent, representing 41 per cent of all errors. Another 10 per cent are direct result of activities that are the responsibility of the payroll.

Companies that know where their payroll errors occur can use this information to facilitate discussions with leaders by helping them fully understand where their support is most needed. It also helps facilitate cross-functional conversations necessary to identify processes that may need to be refined or redesigned.

This situation often occurs when roles and responsibilities are designed to suit individual silos, without focusing on the end-to-end process or that impact of specific activities on the of this process. A good example of this is the termination process which involves line managers, human resources and payroll and represents four per cent of all payroll-related errors. Inefficiencies in the termination process often causes incorrect wage payments, deductions and/or the withholding of tax.

Savvy payroll leaders will use this type of insight to identify what items are key to successfully automating, simplifying and standardising payroll processes, which often results in more efficient and effective processes in other areas too. Even more important, to measuring the impact of an error will provide additional insights help you to prioritise process improvements. For example, if you can demonstrate that 15 per cent of time reporting errors contribute to X per cent of overpayments
such information can be used to justify changes in the time reporting process, ultimately reducing payroll leakage.

Finally, as the payroll function becomes increasingly automated, it will becomes even more important to develop analytical skills among payroll staff. This is as true for payrolls that are processed in house as it is for outsourced activities

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

This metric shows the root cause of errors that occur during the payroll process experienced by multinational companies.

Why it’s important

As multinational companies focus on standardisating and automating their end-to-end processes, analysing errors that occur during the payroll process is one way to determine what processes and/or activities are pain points. Insight into this area also helps you prioritise process improvements and/or projects.

Strategic implications

Ironically, errors that occur during the payroll process are rarely the result of activities owned by payroll - most are the result of inefficiencies in upstream processes. The majority of data feeding into the gross-to-net process comes from two primary sources: human resources and time reporting. Therefore, it’s no surprise that errors resulting from human resources contribute to 26 per cent of payroll errors. Time reporting adds another 15 per cent, representing 41 per cent of all errors. Another 10 per cent are direct result of activities that are the responsibility of the payroll.

Companies that know where their payroll errors occur can use this information to facilitate discussions with leaders by helping them fully understand where their support is most needed. It also helps facilitate cross-functional conversations necessary to identify processes that may need to be refined or redesigned.

This situation often occurs when roles and responsibilities are designed to suit individual silos, without focusing on the end-to-end process or that impact of specific activities on the of this process. A good example of this is the termination process which involves line managers, human resources and payroll and represents four per cent of all payroll-related errors. Inefficiencies in the termination process often causes incorrect wage payments, deductions and/or the withholding of tax.

Savvy payroll leaders will use this type of insight to identify what items are key to successfully automating, simplifying and standardising payroll processes, which often results in more efficient and effective processes in other areas too. Even more important, to measuring the impact of an error will provide additional insights help you to prioritise process improvements. For example, if you can demonstrate that 15 per cent of time reporting errors contribute to X per cent of overpayments
such information can be used to justify changes in the time reporting process, ultimately reducing payroll leakage.

Finally, as the payroll function becomes increasingly automated, it will becomes even more important to develop analytical skills among payroll staff. This is as true for payrolls that are processed in house as it is for outsourced activities

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