How to make sure your Payroll Processes are Always Improving

Payroll can often seem like a bowl of spaghetti, having multiple processes and procedures all intertwined. It’s complicated, varies from one organisation to another, and it’s difficult for outsiders to comprehend how it all comes together.

Within all organisations, systems and processes grow organically over time, and this is especially true in payroll. This can lead to insufficient documentation about how the pay is actually run, which leaves the company in a heap of trouble if someone leaves abruptly and takes all their knowledge with them.

What organisations need is a continual reset and reflection on your processes - how you said you’d run your processes versus how you are actually doing things today. During this reflection, you can also add in the idea of refinement and optimisation – improvement!

A really important facet of this continual improvement is to focus on the purpose or end goal of the process. Don’t try to refine a little step without seeing it in the context of the full process.

Tesla is so effective as an organisation because they practice this optimisation and continuous improvement relentlessly. They were able to eliminate hundreds of components and steps in their manufacturing process by simply casting the chassis of their cars in a single piece. They didn’t improve the speed of how to assemble all the components – they saw the purpose of the process was to have a completed chassis of a car as quickly as possible, so they innovated and delivered on that goal.

In order to apply this same approach to your payroll systems and processes, you must first have an understanding of how your payroll department is operating currently. You don’t necessarily need to know all the fine details, but you need to have a strong top-level overview. To achieve this, check out our article on 3 questions C-Suite execs MUST ask their Payroll team.

Once you have an understanding of how things are running, then it’s time to take action. The first step on this journey to continuous improvement is always to discuss it with your payroll team. Make sure they’re aware of your goals and any new processes that you’re asking them to put in place. Then you can also give them the opportunity to provide input and tell you how that new process should best be designed and how it should be implemented.

Here are a couple of simple starting points we recommend you put in place to get this ball rolling.

Duration Parameters

We generally suggest setting minimum and maximum duration parameters for each pay run. As soon as the duration of a single pay run extends outside those time parameters, alarm bells should start ringing. This could be a sign that something isn’t running effectively and should encourage you to examine processes further for possible areas of improvement.

Tracking Duration Trends

On top of having thresholds which will tell you after a Payroll risk has become an issue, it is also excellent practice to track trends on the duration of payrun executions. This way to can actually notice a risk before it becomes an issue. If your notice that the execution of the last 4 payruns keep getting longer in duration, then you can investigate why before the payrun execution time triggers your maximum allowed duration threshold.

Documentation

Without documentation, you’re left with a set of systems and processes in place that you’re blindly following and hoping for the best. Without documentation, any change that you make is inherently burdened with risk and you can’t truly analyse the ramifications. With documentation, everyone can share ideas to improve your processes.

The spoken word can be beautiful, but often it doesn’t provide accuracy, specificity and ease of reproduction. When we look at fairy tales (which were shared verbally), they changed with every retelling. With a printed book, every copy has the exact same words in the exact same order – thus the power of the written word.

Making sure your payroll team is keeping thorough written documentation makes it significantly easier to be constantly improving on processes. And it means that all the necessary information to keep things run is stored centrally, not just in one person’s head.

What’s next?

Reach out to your payroll team to communicate about ideas, and make sure that it’s not just a token gesture. Take their feedback and act upon it.

It can help if you create a list of priorities and quick wins that you can focus on first. You’ll also want to allocate time and budget to work towards some of the longer-term changes that will improve your approach to payroll.

And of course, it should go without saying that you need to communicate with your payroll team so that they understand what you’re doing and can appreciate that you’re taking their feedback seriously. They’ll thank you for it.

Businesses can email [email protected] or call 1300 287 213 for free first-step advice on how to ensure your Payroll processes can safeguard your Payroll compliance. Sign up here to receive our articles direct to your email inbox.