Feature insight - Payroll data and benchmarking
arrangements. At board level, the key driver for benchmarking payroll may be in identifying areas that could deliver higher quality at lower cost. Ginnie Freeman, principal consultant at i-Realise Ltd, says: “Benchmarking payroll data is vital to stay on top of the overall cost and data integrity of the payroll to an organisation. It helps to identify the cost of processing the payroll, balance the number of FTE [full-time equivalent] per headcount, and the cost of running the payroll as a ratio to the overall business revenue.” So, once you have established why you are benchmarking, just how do you go about doing it? Ensuring the process runs smoothly Firstly, identify what areas you want to measure. One area could be accuracy and/or efficiency. Are you trying to evaluate your end to end payroll or human resources (HR) process? Another might be compliance with payment deadlines or statutory filing. Alternatively, your focus could be on data security and confidentiality. Cost per payslip could also be an area you wish to measure, since this can demonstrate value for money and efficiency. These are generally considered to be the four key strands of providing a payroll service. At the outset, organisations must be – and remain – aware of market activity in relation to legislative requirements. They should research how other companies are managing the data. Employers must also consider what is out there to help ensure compliance at a reasonable cost. It is a good idea to conduct a search to find out what options are available and carry out some research around the subject. There are a number of surveys available that you can participate in to benchmark your data. There are some specialist industry groups that can help provide advice on this. It is important to establish the focus of the benchmark, what you are aiming to achieve and how it is best to capture the desired information. If you can find peers in your sector willing to share this kind of intelligence then that is an added bonus. Freeman advises organisations to register with a payroll forum to engage
with those who have industry-specific knowledge. She says employers should be particular regarding what it is they want to benchmark, whether that is cost, employee retention, accuracy, data flow, or another area altogether.
give bad news to someone, and that if the benchmarking is public then “there are notable risks attached and commercial sensitivities must be considered”. According to Grover, it can be difficult to get hold of reliable benchmarking data. “Develop metrics that you can easily populate, avoid subjective metrics (opinion), make them measurable,” he says. “Above all, understand what would be involved in improving them, otherwise they will be meaningless.” He warns that benchmarking “can be misleading and force you to set unrealistic aspirations by benchmarking against the wrong peers or incorrect matrices”. Gaining meaningful results There is no doubt that understanding and benchmarking to the industry key performance indicators will provide meaningful reports and can help you show measured improvements over time. “What you can do with the data depends on its purpose and why you are benchmarking. It could just be for internal use as a comparator to measure but it could also be used for global or UK-based surveys,” says Parsons. Make sure you have a clear understanding of what data you need and why you need it. It is important to ensure good communication, keeping people in the loop, to avoid ‘big brother’ syndrome and also to bear in mind the sensitivity of this data from an employee point of view. The process of benchmarking involves balancing the need for compliance against delivery costs. It is only when this is achieved that employers can be sure their payroll operation is on the right track. The advantage of embarking on such a project is that it allows businesses to have a measurement over time, whether it be to show improvement or to make a comprehensive judgement on the level of return on investment. But remember, it’s not enough to just collate the data – it’s what you do with it that counts. By developing relevant measures and implementing company- specific solutions, you can make sure you reap the rewards of your benchmarking exercise. Ultimately this could reduce both errors and costs. n To take part in the CIPP’s benchmarking survey later this year, register your interest now at http://bit.ly/2rGmkEF.
...important to establish the focus of the benchmark...
Overcoming the hurdles Some smaller organisations may believe there’s no need for them to benchmark, but size needn’t be a factor. There may be significant benefits for smaller businesses to benchmark payroll. “Your payroll can be any size. The complexity must also drive the need for continued review,” says Freeman. “Efficiency has to be the focus for all organisations. Ultimately the per-payslip cost must be driven down by introducing an effective workflow in the HCM [human capital management] process.” She adds that, even if you don’t like the results, the project will highlight areas to fix within the business and can identify areas for serious review or reorganisation. “I don’t believe there are any disadvantages,” says Freeman. “An organisation would be disadvantaged by not benchmarking.” It is widely agreed that it is important to have some sort of benchmark because it allows you to monitor the effects that any change in variables, such software, could have on a cost profile. One reason it might be unwise to benchmark, however, is if there would be a substantial cost involved that would outweigh the benefits. A further consideration for smaller payrolls is that they will have less capacity to benchmark reliably. Simon Parsons, chair of SD Worx Payroll Group, says benchmarking helps a business identify challenges and allows a scale to be set for improvement. However, he warns: “It may uncover problems that you don’t want to be identified depending on who you are sharing the information with. Benchmarking could show a real deficiency and it is all about how you overcome that natural bias in terms of where you want the results to go.” Parsons adds that the results could
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Issue 32 | July/August 2017
| Professional in Payroll, Pensions and Reward |
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