We all know that payroll has often been seen as purely functional. That its responsibilities begin and end with ensuring employees are paid on time. Indeed, Deloitte's 2022 Global Payroll Benchmarking Survey noted that 57% of businesses still consider payroll as primarily transactional.
Perhaps because it’s been viewed as a cost-center (and therefore not worthy of investment), payroll has been one of the last departments to enjoy the benefits of digital transformation. One of our clients recently told me how early in his career as a payroll administrator he would “look at other departments and their new tools and wonder what’s happening with payroll? Because we always had to run things manually, putting data together in Excel from different systems”. But the gradual introduction of purpose-built software and robust IT infrastructure has fundamentally changed the day-to-day responsibilities of the job. Pen and paper-approaches are giving way to cloud platforms and automations.
According to Gartner, nearly 60% of payroll operations have automated more than half of their processes. We’re moving out of the chaos of disconnected spreadsheets towards harmonic systems. And now, the rest of the organization can see what we’ve known all this time; payroll departments have access to one of the most detailed and consistent sets of data there is within a company. From employee compensation to hours worked, from taxes, commission fees, bonuses and benefits to country-by-country turnover rates, it’s all sitting there in front of us.
As a result of this data, the perception of payroll, and payroll professionals, is shifting. It is being recognized as a strategic asset, with a unique perspective on, and insight into, so many aspects of the business. This means that payroll professionals are rightfully being given a louder voice at the decision-making table.
How to Proactively Use Payroll Data
So how can you get a seat at the table? And crucially, how should you interpret and present the data when you get there? At a recent Payslip client council, we spoke to senior payroll figures in companies from around the world. All of which have a multinational footprint and a relatively complex payroll operation.
We asked these professionals how access to data had changed their role, particularly when it came to communicating up the chain of command. One global payroll director, with 18+ years of experience, put it brilliantly when he said that payroll “has outgrown being a baby brother of the accounting team. It’s a greater role in its own right and technology has helped to accelerate that. The reporting tools and the access to data has enabled us to say ‘look at what’s coming through’ and help the business leaders make better decisions”.
Each of the professionals we spoke to talked about the need to proactively use data and frame it as insights that can guide business decisions. But a poll conducted by The Hackett Group in 2020, noted that only 29% of organizations had a payroll analytics strategy in place. So let’s look at how you can interpret and present payroll data to senior leadership figures, and build an analytics strategy.
Harnessing Payroll Data for Strategic Insights
With an overwhelming amount of information at your fingertips, it can be difficult to narrow it down to what is most relevant and impactful. Typically, the people we spoke to recommend that you focus on the following;
Current Global Labor Costs
Use payroll data to provide leadership with a clear view of how labor costs differ by region. This helps businesses make informed decisions about where to expand operations, hire new employees, or reduce costs. Highlighting areas with lower labor costs or regions with high employee turnover allows leadership to act quickly on hiring strategies.
Indeed, 21% of respondents in that Hackett Group poll cited reducing workforce costs as a benefit of payroll analytics.
As one leader at our client council noted, “It’s not so much about suggesting new territories to expand into, or outsource to, as it as about running an analysis of your existing entities. Taking a zoomed out, global look at your labor costs, country vs country, is hugely interesting to senior figures”.
Workforce Trends
Payroll data reveals trends in overtime, absenteeism, and turnover, which can indicate underlying issues such as burnout or staffing shortages. “Payroll is a window into workforce health,” notes John Smith, a payroll strategy expert at PwC. Recognizing patterns early allows leadership to preemptively address potential issues, improving both employee morale and productivity. For example, a 2021 PwC survey found that companies using workforce analytics reduced turnover by 15% due to proactive workforce management.
Predict Future Costs
Payroll data is essential for forecasting future labor costs, especially as companies scale. Payroll teams equipped with predictive analytics can project upcoming expenses and help leaders budget accurately. The benchmarking report from Deloitte reveals that 88% of companies using payroll data for predictive analytics report more effective budgeting and long-term planning.
Communicating Payroll Insights to Leadership
Having access to, and selecting, the data is only half the battle. The real challenge for payroll professionals is presenting that data in a way that resonates with leadership and influences decision-making. Here’s 3 ways payroll can effectively communicate its insights to the C-suite:
Speak the Language of Leadership: Executives want to hear about the bottom line. Sometimes, that’s all they want to know about. At the very least, it’s a primary motivator when informing key business decisions.
If you can frame your payroll insights in terms of cost savings, revenue growth, and risk reduction, then you stand a greater chance of getting their attention. Instead of presenting raw data, provide actionable insights that help solve business challenges. One example we heard was instead of just showing turnover rates by themselves, tie it in with how turnover is impacting productivity. And if you have an idea on how to improve this as well, then all the better.
Use Visualizations: As payroll professionals, we are accustomed to spreadsheets. We’re not daunted by hundreds, even thousands of rows on a screen. But that’s very difficult for others to digest, particularly when there’s time-pressure in a meeting. One terrific piece of advice was to use charts, graphs, and visuals to bring the data to life. This helps leadership quickly grasp the strategic value of payroll insights.
Provide Regular Updates: Payroll should be part of ongoing business strategy discussions, not just an annual report. By providing monthly or quarterly updates on key payroll metrics, like labor costs, headcount changes, and benefits utilization, payroll can establish itself as a regular contributor to strategic planning.
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By harnessing and presenting data insights effectively, payroll professionals can influence critical decisions, drive efficiencies, and even contribute to organizational growth. Positioning payroll as a proactive source of insights transforms it into a strategic partner within the company. This shift not only enhances payroll's impact but also empowers leadership to make informed, data-driven decisions that shape the company’s future.
This article originally appeared on global.payroll.org
