14 November 2024
As payroll evolves beyond its traditional role, it’s becoming a vital component of organisational strategy, collaborating closely with human resources (HR), finance and other departments to drive business value. Jerome Smail, freelance journalist, talks to some of the profession’s leading lights to explore how payroll can collaborate and demonstrate its ability to enhance efficiency, support strategic decision-making and boost employee satisfaction
This issue, Jerome spoke to:
Ian Hodson MSc ChMCIPPdip, director of people and culture, Housing 21
Sam Jones MCIPPdip, payroll advisory team leader, CIPP
Wendy Muirhead, partner, WH People
Steven Watmore, payroll / HR product manager for UK & Ireland, Sage.
How can payroll professionals collaborate with other departments to enhance employee experience and contribute to overall organisational efficiency?
Ian Hodson: Working in a collaborative way with internal stakeholders and in partnership with external providers is imperative to the success of a payroll department. Communication channels are really important and it’s very easy to be ‘heads down’ in our work, but hosting interdepartmental meetings with HR, finance, information technology teams and others can really help in a joined-up approach around the flow of data, budget planning and software security. Sometimes, it’s as simple as having a regular catch-up scheduled.
There are a number of agendas that are now critical to the payroll professional that do lend themselves to a wider knowledge base than just technical payroll, and technology platforms are at the very front of that for both the employee experience and efficiency. If collaboration can lead to increased automation and ultimately fewer errors then everyone benefits. Projects and a project approach to pieces of work that embed change present a huge opportunity to bring in other colleagues from across the business to work together and I would encourage all payroll professionals to upskill in project skills to support our constantly evolving operations.
Sam Jones: The payroll department will often sit within an HR or finance function of an organisation, but can act as a bridge between the two areas. Payroll professionals can assist HR and reward teams in providing a benefits offering that utilises any tax efficiencies available, while maintaining compliance for the finance team to avoid any fines. Salaries are often the largest outgoing for a business, so working closely with the finance team is essential for creating records that are clear, compliant and auditable.
With money being an emotive subject, payroll professionals are often the first to hear from staff when things don’t go right. This could be caused by an error anywhere during the process, from generation of information to payment. An efficient and effective payroll team will serve as an important tool for employee relations, ensuring an employee feels heard and supported, while finding a solution to the issue at hand.
Using root cause analysis where errors occur, a payroll team can be fundamental in creating robust processes that are smooth for employees, while maintaining compliance.
Wendy Muirhead: For payrollers to do their job, they have to have work with multiple departments because the data they rely on comes or goes to those departments. When HR, payroll and finance teams work cohesively together, businesses often see improvements delivered throughout the accuracy and timeliness of the company’s payroll.
Steven Watmore: Understanding the business impact of payroll is key. Work with your ‘neighbour’ to not just answer their questions, but also to ask why they need the information. This simple approach will often mean you can supply better, more insightful information that solves multiple problems.
What are some common challenges payroll departments face when trying to align with other business functions and how can these be overcome to ensure smooth collaboration?
IH: We all know that the time constraints of the operational activities sometimes mean that change pieces of work become focused on what must be done rather than sometimes the perceived ‘nice to haves’ that would bring in other collaborative opportunities. There is also the challenge of our subject matter and often a barrier is put up due to the sensitive nature of the data stored in the system and also the technical nature of payroll operations. This is where upskilling internal partner departments is critical to ensure that there is a basic understanding of the activities and processes so they can support where needed. The misunderstandings of the activities can be removed with improved communication.
Another area to explore is our workforce planning within the team and the design of our roles. Looking at how change, continuous improvement and projects are delivered and ensuring that we have the capacity in the team focused on the right agendas are
crucial to ensuring that collaborative relationships don’t get overtaken by the day-to-day needs.
We often operate lean teams and as technology gets better, there is an expectation that teams will reduce in size. We need strong leadership and understanding of the operations as to how efficiency gains can be refocused towards working collaboratively and improving the employee experience.
SJ: I believe some of the challenges presented to payroll teams are around a lack of understanding within other areas of the business as to what is required for an effective and compliant payroll. Our deadlines are often required by law and can’t be moved, which can be a perspective that isn’t seen by other areas.
Saying that we can’t have a payroll cut-off on commit day is not the payroll manager being difficult, but this window is often squeezed by businesses without realising the impact it can have on
payroll teams.
This could also be said of the ‘big red button’ theory. Many people outside of payroll still have the misconception that we are busy for one week a month, ready to press the button and spend the rest of the time with little to do. We, in the industry, know this is not the case.
I believe communication is key. Many payroll errors are caused by late information or miscommunication, so having open and active lines of communication is essential in creating a suite of processes that minimise error.
WM: For years now, I’ve encouraged payroll departments to get out across their businesses to educate middle managers and colleagues about the actual world of payroll and what’s involved. When something goes wrong in someone’s payslip, often it’s down to timings
or miscommunication from line
managers opposed to the payroll department’s performance.
Most changes of pay are signed off by a line manager. Let’s take the bonus example: just this morning, my husband was told he’d get one this month. He was excited to check his payslip and plummeted with disappointment when he noticed it hadn’t been actioned. Now, the reality was probably along the lines that his line manager either hadn’t signed off the bonus in time for this month’s pay but will now be waiting for payroll to action it in next month’s pay, or he misunderstood the timelines.
Education for all middle managers in how to discuss pay-related topics with their team members can change the entire experience for employees. Like my husband’s example, if his line manager had communicated it in a better way and with greater awareness, it could have completely avoided the disappointment and disengagement my husband experienced today.
SW: A lack of common terminology and understanding is often a barrier to smooth collaboration. Meaning the same thing but using different language may lead to inefficiencies. Find out more about the problems they want to overcome, as this is often the same for all areas.
What advice would you give to payroll managers looking to demonstrate the critical importance of payroll operations to higher management, especially in terms of business impact and compliance?
IH: This always seems to be the challenge, which is strange when you consider that payroll processing is probably the one activity most likely to cause employee dissatisfaction if done wrong and also the function trusted with generating accurately the largest cost to the business. So having to demonstrate the importance shouldn’t be something that needs to be done. However, this is where the problem could lie as a lot of organisations will want payroll to focus on the basics and focusing on other agendas could be seen as a distraction from this.
I don’t think as professionals we do enough to correlate the link between the activities carried out by professionals and employee satisfaction. We should be doing more surveys and sharing the results – surveys not just on accuracy but on customer service, supporting resources to understand pay and finances better and the availability of information. I also believe we can present the payroll function as strategic rather than transactional, influencing policies, remuneration and reward to support the attraction and retention agendas.
Employee experience is now a real expectation and producing a roadmap for how payroll services will be delivered and accessed will also demonstrate the alignment of progressing the technology, suite of services and organisational culture to demonstrate value. This can also be overlaid with reports that highlight the constant change driven by legislative compliance or government change.
SJ: Payroll is an increasingly important area of the business and includes more than just salaries. Automatic enrolment and the apprenticeship levy are areas where payroll can make an impact.
Effective implementation of a salary sacrifice pension scheme with the help of HR could save an employer National Insurance contributions, while offering tax relief to employees, enhancing the appeal of roles within the organisation to potential recruits.
Many organisations pay into apprenticeship levy funds and do not utilise the account to fund apprenticeships for their staff. Hiring an apprentice can be a cost-effective way of expanding staff numbers, while also giving staff the opportunity to expand their knowledge in a field and further their career.
WM: If payroll departments don’t give a business update to C-suite today, I’d recommend that they push to get on their agenda. In the UK, we recently had the budget by the new Labour government and that significantly impacted every employer across the country. Educating C-suite of the compliance updates and the impacts these changes can have within the business is an expertise many payroll departments share. I’ve always found this is the best way to get on the board’s agenda.
Gain the trust of the C-suite and present your department from a strategic lens to earn the right to your regular invitation to participate.
SW: Be curious, and experiment to show the real value of payroll insight. Try a ‘what if’ scenario or two and show the business that payroll can explain how small changes could have significant upsides and downsides. People are often the biggest cost to a business so showing how to manage and create savings by simplifying or reducing unnecessary costs such as overtime (through poor shift planning) can deliver real change.
What different skill sets are becoming important for payroll leaders in the overall move from operational to strategic in terms of the function’s impact?
IH: Payroll leaders need to be able to influence and create a presence for themselves in the right organisational networks to be seen as influencers and valued contributors. Being curious, collaborative and a good communicator will all help raise the prominence of the function being involved in shaping and decisions rather than being seen as a non-influential stakeholder. Payroll leaders should also be able to put a lens on activities that focus on managing risk to employee pay or current policies through change to ensure that the employee experience is not impacted.
Leadership skills and team development are enablers for being perceived as a collective team that understands its purpose. Strong customer service skills are becoming more valued as we transition our profession from back office transactional to outward focused.
Finally, I believe it’s important for leaders to be proud of what they do. We often play down our roles but now is the time for our leaders to represent us as the enablers to much that unlocks employee satisfaction going forward – so let’s shout about it a little more.
SJ: Long gone are the days where payroll was merely processing some numbers and handing out brown envelopes. Payroll leaders must now have a knowledge of pensions, HR, General Data Protection Regulation and finance to have a good handle on their function. Therefore, the top skill I would say is adaptability.
Many areas of the payroll function offer opportunities to businesses to increase their offering, save money or maintain compliance in an ever-changing landscape, so having communication skills to promote the opportunities to senior leaders is essential in maximising positive outcomes. Payroll managers play a key role in the success of a business, with the role requiring collaboration across the organisation more than ever.
WM: Payroll leaders have to think like business owners. The reality is there’s a huge amount of data audited through the pay cycle. That payroll data quality is often how businesses report their overall performance. Having a solid reputation for quality, expertise in compliance and ability to advise on strategic initiatives for business growth is something payroll leaders can do. However, sometimes they are held back by limited resources, poor technology or simply the inability to demonstrate their value to the C-suite.
Let’s face it – if you have people, you have payroll and compliance. If you mess up payroll, it has devastating consequences to businesses if their people leave en masse. There is power in the work that payroll departments do. Demonstrating their knowledge, expertise and capability in newer technologies will help payroll departments be seen
more as a strategic function rather than simply operational.
SW: Problem solving is number one for me. Be curious as to how you could make changes and be critical in your thinking. “There must be a better way to do things” is not a bad starting point; it doesn’t mean it’s completely broken but by making small incremental gains
in the payroll process could have massive returns.
Finally, be brave. It’s really hard to let a payroll process fail, but payroll professionals have to hold others to account if deadlines are missed. Payroll professionals are great at filling gaps in other people’s processes but in the longer term, this needs to stop.
This article featured in the December 2024 - January 2024 issue of Professional.