16 May 2021

Jaspal Randhawa ChMCIPPdip, director of product management, Payroll Solutions, Zellis, argues now is the time

According to LinkedIn’s Global Talent Trends 2020 report (https://bit.ly/3fbDb9n), those employers assigned the highest rankings for their compensation and benefits packages saw 56% less workforce attrition. Nonetheless, employee benefits often have low take-up levels.

In some instances, people are confused by the complexity of what is on offer, while in others what is on offer may simply not meet their needs. But another common problem is simply a lack of awareness of what benefits are actually available.

This is where the value of integrating payroll and benefits systems and processes comes in. Growing numbers of organisations are starting to link payroll more tightly with other core human resources (HR) functions – and the connection between payroll and benefits is particularly clear. After all, pay and benefits together represent an employee’s total reward package – something which heavily influences that individual’s choice to stay with or leave a company. Plus, the benefits selected by individual workers have an impact on payroll, adding a further layer of complexity.

Joining up the processes that manage such activities offers advantages for employees, payroll professionals and the wider organisation. Here are three of the most important to consider.

Communicating the total value of the staff employment package – Two in five employees are unacquainted with the total value of the pay and benefits provided by their employer, according to our research. A key reason behind this lack of awareness is that all too often they do not have a single place they can visit to access the information. Even if they do, it can be frustrating to have to log onto an entirely separate system just to manage their benefits.

But this oversight has a number of consequences. Firstly, staff end up wasting their own time and that of HR professionals in dealing with benefit-related queries. Secondly, the rate of individual benefit take-up is lower than it could be, which leads to inadequate data on the benefits to which employees are responding well or not. And thirdly, the positive outcomes associated with benefit provision, such as higher levels of staff engagement and productivity, are not fully realised.

Joining up payroll and benefits systems by integrating their data, however, enables employers to create what is commonly referred to as ‘total reward statements’. Usually accessed via self-service HR applications, these clearly present the total value of each individual’s employment package.

Improving employer communication in this way helps boost individuals’ understanding of their financial position, improving financial literacy, and enabling them to make smarter decisions about which benefits to choose, what level of pension contribution to make, and more. It also helps to increase overall benefit uptake.

Supporting payroll compliance and accuracy – In order to calculate payroll accurately, professionals need timely access to the correct information, which includes data relating to benefits. The tight integration of payroll and benefits administration software makes it possible to share this information seamlessly, thereby improving speed, accuracy, and overall quality of the payroll process.

Another advantage of improving integration is that it becomes much easier to ‘payroll benefits’. This concept means that most benefits-in-kind, such as company cars and private health insurance, can (optionally) be reported directly via payroll, reducing the admin burden.

But as the regulatory environment around benefits becomes more complex, another way that integration can help is by mitigating compliance risks. In this context, Zellis’ ResourceLink software can, for instance, automatically flag if the salary of an employee taking part in a salary sacrifice scheme (which is taxed on its benefit-in-kind value) falls below the threshold for the national minimum/living wage. This enables steps to avoid any compliance breaches before the payroll is finalised.

Accessing integrated data for enhanced reporting and analytics – Joining up payroll and benefits systems is not just about enabling automation and optimising business processes. It is also about integrating employee data to create a single source of truth which not only enhances the accuracy with which payroll data is processed, but also makes it possible to undertake strategic reporting and analytics activities. By analysing, for example, how pay and benefits influence employee satisfaction and attrition trends, employers can make smarter decisions to enhance their talent and people management initiatives.

In an age in which out-of-the-box, catch-all benefits no longer cut it and personalisation is key, analytics tools are also vital in pinpointing employee requirements across the gamut of different age ranges, lifestyles, and cultures. Put another way, the more accurate the data, the better the analysis and the more effective are the employment packages, all of which lead to a happier workforce, reduced costs, and a bigger return on investment for the business.

As employee benefits grow in importance, payroll is likely to play an increasingly significant role in not only supporting legislative compliance, but in helping to improve employee awareness around what benefits are available, thereby contributing to their financial wellbeing.

All of which means that the time to integrate those vital payroll and benefits processes is now. 

Featured in the June 2021 issue of Professional in Payroll, Pensions and Reward. Correct at time of publication.