40 | THOUGHT LEADERSHIP
Complex payroll doesn’t have to be risky payroll
As business headcount and size increase, so does payroll complexity. But risk doesn’t also have to increase. Read on to find out why.
O nce organisations get beyond a certain size, everything changes. Responding to this can easily move pay teams outside of their comfort zones. One of the hard lessons for teams is realising that what they do has necessarily become more complex. This presents its own challenges, but there’s also an opportunity to look ahead and plan for an equally successful future. The CIPP caught up with Graham Wylie, a member of the senior leadership team at Sage People, to get some perspective on how change can enable and empower teams. Q: The entire pay industry seems to be selling simplicity. Why do you think that message falls short? You go to every website, hear every product pitch, visit every exhibition stand and it’s some version of ‘make payroll simple.’ And I think that’s actually disrespectful to the pay professional. Yes, vendors can help you tackle certain parts of complexity, but that doesn’t make something that’s inherently complex suddenly simple. And payroll is inherently complex, because it’s where the needs of the business, the employee and multiple Government bodies all meet on a weekly or monthly basis against a constantly changing set of working patterns and regulation. So, I think the honest conversation isn’t about making things simple. It’s about de-risking the complexity you already have. Q: If complexity is inevitable, should pay teams be worried about it or is there a different way to think about it? Complexity can be a positive sign. It means the business is growing and evolving. It’s also a natural side effect of how important payroll has become to companies and regulators. So rather than dreading it, pay teams should own it. Don’t pretend it should be simple, and don’t let stakeholders become complacent just because payroll is working today. If you recognise and own
the complexity, you can do a lot to de-risk it: ensure your stakeholders understand the challenges, support you in maintaining appropriate expertise and invest in the necessary technology needed to eliminate errors. Having a clear payroll strategy rather than just getting by month-to-month doesn’t come from pretending something should be simple. The goal isn’t to entirely eliminate complexity. It’s to stop it from turning into risk. Q: Where does the pressure hit hardest? Which organisations are feeling this the most? I think it’s in mid-size businesses where this really bites. You’re no longer a small business, but you haven’t got all the resources and scale of an enterprise. What happens is, as organisations grow, the business becomes more complex – more entities, more countries, more people. And most pay teams are inherently risk- averse, so they’ll try to live with the pain of that increasing complexity. In fact, they’ll often live with it for too long because stakeholders don't understand the risks and there isn't a payroll strategy in place, so the thinking goes ‘if it ain’t broke don’t fix it’. It’s why payroll is very sticky. Q: What do you mean by payroll being ‘sticky’, and what does that cost organisations in practice? If you’re only ‘getting by’ each pay run, it’s scary to think about changes to your payroll. Humans are hardwired to fear loss more than we feel the joy of success. So, often no one is pushing for a change until it's really become a problem. Even then, when a pay professional decides the current setup isn’t working, they must go and ask for permission or resources to make a change. And that becomes a longer process. You might end up waiting multiple budget cycles depending on what’s going on internally in your business, and few stakeholders will thank you for bringing an urgent unplanned project to the table.
Meanwhile, the complexity is still growing. So, by the time you get to act, you’re often in a much worse position than when you first flagged the problem. Q: At what point does a growing organisation typically start feeling these payroll pain points? There’s an interesting theory called 'Dunbar's number', which provides clues about organisational development. The idea is that, as a person, you can’t manage a network of relationships beyond about 150 people. So, in a small business, the Founder knows everybody. But once you pass that threshold, personal relationships can’t scale to the capacity of the business anymore, and you need formal processes. That’s typically when human resources (HR) show up for the first time and payroll pressure starts to increase. Now, it’s not a fixed number. If you’re a fast-growing multinational, you might feel those pains at 100. If you’re a long-established business all on one site, you might get to 200 before it really bites. But the principle holds. There comes a point where individual knowledge isn’t enough, and you need systemic thinking. Q: So, the 150 mark is a real tipping point. What tends to go wrong after that? What happens is people hit 'Dunbar's number' and realise they need to fix the problems this creates. That often means a HR function and new systems. But they don’t know how fast the business will continue to grow, so they either buy something that's right for where they are now or they buy something better suited to a bigger company. Getting this wrong can mean the company gets stuck, slowly implementing an enterprise solution that it takes years to grow into, or stuck in a painful cycle of rip-and-replace point solutions. That HR change directly impacts payroll. An informed team with a strong payroll and HR strategy can manage these transitions well. But because payroll is 'sticky',
Made with FlippingBook - Online magazine maker