Why Getting Payroll Right Might Be A Company's Most Important Job

Brandon Baker
9/15/18 9:05 PM

An estimated 152 million U.S. workers and their families depend on payroll professionals to get it right every payday. It’s a critical job for all kinds of reasons.
Here are just three:

  1. Nearly 6 in 10 of those U.S. workers and their families are living paycheck to paycheck.
  2. 82 million new hires would leave their jobs if their first paycheck was wrong.
  3. The IRS levied $4.96 billion in civil tax penalties against U.S. business for payroll errors and violations in 2014.

Despite these undeniable and eye opening stats, only 13% of payroll professionals believe that the paychecks  they issue for hourly workers perfectly represent the hours worked and the pay due.

The fact is, payroll is no longer just about payroll; it’s about managing employee data — the handling, the control, the accuracy and the security of data.

Being   paid   is   literally   what   defines   work. As   Mollie   Lombardi,   co-founder   and    CEO   of Aptitude Research, wrote, 

If you can’t get [payroll] right, really nothing else matters. And you have to get it right for compliance reasons, as well as for your employees. Nobody likes surprises, particularly when it comes to their money.

At the same time, payroll has become an increasingly complex process. Federal, state, and local payroll tax laws are frequently changing and becoming more complex. The information needed to process payroll comes from more sources than just the employee’s timecard. Along with that complexity has come greater risk of getting things wrong.

Despite the increased complexity of payroll and compliance, many companies are still using manual methods to get the  job  done. An estimated 33% of employees who are required to input their hours each pay period use a timecard or timesheet (rather than a software application or even a time clock). Consider the implications of that number. It means the time being reported by about 30% of all employees who input their own hours is far likelier to be wrong compared with hours tracked with an automated system. The time entered by those workers is also more  likely to lead to errors in payroll calculations and data entry, and to be misrepresented (either intentionally or accidentally).

When it comes to payroll, perfection is hoped for but rarely achieved. This is especially true with large companies. Even organizations that perform in the top tier of their industries don’t get payroll 100 percent correct. In fact, top- performing companies have an average payroll error rate of 0.7% per pay period — only five points less than the peer average of 1.2%. But that relatively small difference makes a significant difference on the bottom line. The difference of 0.5% amounts to a cost of $22,695 in annual payroll for every 100 employees, based on the average national  weekly  earnings  rate  of $907.82.

The far reaching impact of payroll errors

So what can we do about it? Thought you would never ask...

Automation is the No. 1 solution for payroll challenges

Replacing legacy payroll tools and manual methods with a unified human capital management cloud platform can create a rock-solid foundation for all other initiatives aimed at improving the employee experience. An automated, cloud-based system can help companies improve payroll accuracy, process payroll more quickly, and ultimately leverage tremendous knowledge to take on a more strategic role in building engagement and mitigating risk within the organization.

 The right system for time and payroll automation can reduce errors and costs caused by payroll leaks, increase efficiencies in payroll processing, and practically eliminate manual processes. It can also reduce errors and heighten compliance with labor and pay regulations, union regulations, and pay rules. Three of the most critical advantages gained with the right automated system are:

  1. Complete automation, eliminating timekeeping errors, manual data transfer, and manual
  2. Automatically flagging exceptions that violate policies and alerting managers so they can take remedial
  3. Automating delivery of correctly calculated hours to your payroll system, so each employee check is cut right the first

We automate payroll and compliance so companies can empower managers to manage by exception — reviewing and approving employee time daily so pay accurately reflects time. This allows payroll professionals to run as many reports as needed — payroll register, labor distribution, general ledger, and more — before they finalize and submit payroll, which helps further ensure accurate results.

 The same functionality gives payroll leaders the ability to proactively identify issues and collaborate among units and managers thanks to email alerts and a robust workflow that flags issues before they become trends. In the end, managers and supervisors save time on payroll problems and details so they can focus more on revenue-generating activities such as customer service or production quality.

 

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