In this podcast episode, we finish up with the best practices that can be applied to the payroll function. Key points made are noted below.

So, in the first three parts, we talked about cutting back on the amount of data to collect, automating data collection, reducing the number of deductions, adding self-service, streamlining payroll calculations, and using electronic payments.

The Order of Priority

What order should you use to install all of these changes? I have some suggestions that give priority to immediate, low-cost improvements. And the reason for this priority is that you want to build a reputation for being able to complete projects, so cranking out a few easy ones might give you the internal support for a bigger change later on.

I think the first item to fix is to get rid of any excess data that’s being collected.

The main reason is that there’s no new system to install. You’re simply stopping the collection of information. That means everybody throughout the company is wasting less effort on recording information. And that makes folks pretty happy, which in turn means that they may be more willing to listen when you install the next change.

And also, the impact is immediate. The company stops recording information, and the payroll staff immediately has less work to do.

My suggestion for the second most important item is error monitoring. And again, this is partially because it’s a relatively quick fix and it can have an immediate impact on the payroll department. When there’s a payroll error, it takes an amazingly long time to fix. So if you can start collecting error information and fix even a few of the underlying problems, this is really going to help.

Third in priority is payroll cycles. If you can extend from weekly to any longer payroll cycle, then do it. And furthermore, put the entire company on the same payroll cycle. Obviously, this saves the time of the payroll staff, but it takes longer to implement.

You have to convince the other managers to do it, and notify everyone, and possibly arrange for advances for some of the staff. So, it’s a good improvement, but the delay in seeing results puts it a ways down on the priority list.

After that, I suggest automating time keeping as much as you can. This means spending some money on equipment or software, and training employees in how to use everything. So, because of the investment and the time required, I put it rather far down the list. But it’s still something you should get to fairly soon.

Next up, do electronic payments. Employees love it, but the net impact on the accounting department is not that large. When you switch from checks to direct deposit, it’s not like there’s a huge decline in the payroll work load.

And finally, and really dead last, is self service. You’re going to pay for this feature, either by programming it yourself or renting it from a software provider – so there’s going to be a cost that you have to balance against the benefit of shifting some data entry outside of the payroll department. For smaller companies, this may not be an overwhelming cost-benefit tradeoff.

Now, keep in mind that you can alter priorities based on your circumstances. So if you have thousands of employees, having self service might be really cost-effective – even though it was my lowest priority recommendation. It just depends on the circumstances.

The Level of Technology to Acquire

I also have a suggestion regarding the level of technology that you buy into. And this mainly refers to timekeeping hardware and software. All of the technology you need for a nice, solid system has been on the market for years. That means you don’t need to take a chance on some new and unproven technology, and especially from a new supplier who hasn’t been in the market for long. If you buy something that’s been used for a while, and which appears to be getting good supplier support, with plenty of upgrades, then that’s a good choice. This doesn’t mean that I’m a reactionary old dinosaur; it’s just that you want to develop a reputation for successful projects, and having some technology crash on you is not a good way to develop that reputation.

And once you have a system upgrade ready to go, don’t roll it out everywhere. Instead, do a pilot test, correct any problems you find, then use a larger test, and then roll it out. Does wonders for your reputation if you only crash and burn during a small pilot test. And this doesn’t just apply to technology. For example, if you’re getting rid of some data collection, you could have just a few people stop doing it, and see how that lack of information impacts the rest of the company. And if no one complains, then roll it out everywhere else.

For example, a bunch of years back, I was paring back on data collection, so my team yanked out a couple of data items. And then found out that we had just completely screwed over someone who used that information for some pretty critical reports.

Stagger the Upgrade Projects

Another issue is to move around your upgrade projects. The reason is that people don’t want too much change. It disturbs their routines. So, if you can, implement a change in one part of the payroll department, and then deliberately give those folks a break for a few months while you do an installation somewhere else, and then come back and do another project. Makes people a lot less unhappy.

Parting Thoughts

I’ll finish with a few thoughts on how all of these changes impact the payroll staff. Under a traditional payroll system, there’s a lot of data collection and data entry – and that’s pretty boring work, to say the least. A lot of what I’ve been talking about over the past few episodes has been to either eliminate that data entry, or to have employees outside of the department do that work themselves. That means the payroll staff ends up monitoring the information that everybody else entered – and they’re looking for errors, and missing information, and so on. That means you essentially shift out of the data entry business and into the data analysis business.

It’s very likely that the payroll staff will prefer the change. The work is certainly more interesting, but on the other hand, some people may be uncomfortable with the change of focus, and you’ll have to replace them. Will there be fewer people in the department? Maybe. It depends upon how large a group you have in place already. If it’s always been a smaller group with a strong knowledge of payroll, I would expect no staff changes. But if there was a large data entry group – then yes, there will be a staff reduction, and you may also end up upgrading to employees with a higher knowledge level.