Jaspal Randhawa-Wayte: Five common payroll myths dispelled

When you think of payroll, what’s the first thing that comes to mind? You might think of it as a simple, transactional function that all businesses are required to have. Something that runs smoothly and silently in the background – a few numbers are crunched, staff get paid, and everyone is happy.

This isn’t the case, and it’s because of this assumption that many fail to realise the true potential of payroll and how it can help to shape the business agenda. With that in mind, there are many common payroll myths that need to be dispelled. Here are five of the most important.

Payroll is simple, right?

Payroll is a business-critical function – so getting it right is imperative. It requires handling a lot of complex information with confidence and accuracy to make sure each employee receives the right remuneration, all while ensuring steadfast compliance with myriad – and frequently changing – legislative requirements.

This means that payroll is far from simple. In fact, we ran a survey recently which found that four out of 10 UK employees have been paid late, while six out of 10 have spotted an inaccuracy on their payslip. Since the large employers we work with have a very high standard of payroll accuracy, we were surprised by this finding. It indicates that within the business community as a whole, more needs to be done to meet employee expectations for reliable pay.

The potential business impact of this isn’t to be understated. After being paid late, nearly half (48 per cent) felt their employer simply didn’t care, 40 per cent felt financially unstable, and a quarter felt less engaged and productive. Surprisingly, one in five (21 per cent) employees claim to have actually changed jobs as a result.

The ‘people’ costs of payroll mistakes alone are significant enough. But compliance is also a looming concern – in recent years the government has stepped up its enforcement of regulations. Take national minimum wage rates, for example. According to data from the Department for Business, Energy and Industrial Strategy (BEIS) and HMRC, the value of penalties for breaching these requirements increased by a staggering 261 per cent from 2017 to 2018. And with other new requirements, such as gender pay reporting and CEO pay ratio reporting now in effect, having a robust payroll system in place is more important than ever.

Work patterns never change

In today’s world, the idea that everyone must work to the same 9-5, Monday to Friday, schedule is unthinkable. A generational shift in attitudes, the growth of the gig economy, and the steady march of globalisation all means that flexibility is the new norm.

And that doesn’t just mean flexibility of working arrangements, but of pay and reward options, too. An organisation that employs a lot of contract and freelance workers to fill key skills gaps will need to accommodate a variety of different payment schedules. Similarly, we have already seen a huge uplift in the choice and quality of reward and benefit options, from pensions and healthcare, to sponsored season tickets and childcare vouchers. Making sure they can be personalised to the individual will only help to improve engagement, loyalty and productivity.

Employees only care about salary

As much as developing an excellent remuneration package is important, it’s only valuable if your employees actually understand and engage with it. According to our research, 40 per cent of employees don’t know the total combined value of all the rewards and benefits they receive from their employer, and only 34 per cent expect this figure to be represented on their payslip.

Base salary is always going to be important – but the link between money and attracting and retaining talent isn’t as a strong as it once was. It’s all a matter of perception – and that perception is influenced when employers go the extra mile to emphasise the total value of rewards. This might involve something as simple as holding seminars to showcase specific initiatives, yet could go as far as producing statements that display the value of salary, combined with the value of benefits, to represent the value of ‘total rewards’.

Payroll data has no impact on the bottom line

In most organisations, the payroll system represents one of the biggest sources of useful data – but one that is seldom used to its full potential. The idea that payroll is purely transactional, with no impact on the bottom line, is a myth. After all, wages are usually a company’s single biggest cost – so making sure staff are happy, engaged and ultimately productive is essential.

Payroll data can be used to glean insights such as:

  • Where and how frequently payroll mistakes are being made, so the right steps can be taken to avoid non-compliance penalties and damage to employee trust.
  • Patterns in absences and sick days, so that appropriate health and wellbeing initiatives can be developed as part of the HR strategy.
  • The types of benefits that are receiving the most uptake, so that employment packages can be refined and cost-optimised.

 

The payroll department still has some way to go in terms of selling its value to the rest of the business, but its close relationship with HR should help. We found that nearly all CEOs (94 per cent) consult with the company’s HR leader before making key decisions. Payroll and HR data provides a window into the performance of people – and people are an organisation’s most important asset.

Changing systems is a nightmare

Most organisations will have the same payroll system in place for many years, partly due to the myth that switching things up is inherently more trouble than its worth. However, if you don’t make changes, you can’t reflect on the way payroll is done within your business and whether there are ways it can be improved. Important housekeeping tasks like data cleansing and system upgrades are invariably ignored, and – perhaps most crucially – the employee experience never evolves.

With the growth in complexity of legislation, the increased importance of digital transformation, and changing employee expectations, you must work with a payroll partner that can help you adapt to the rigours of the modern workforce. Having a system in place that is simultaneously flexible and well-fitted to specific needs is paramount for future-proofing your organisation.