4 steps to optimise the payroll department
Payroll administration is a vital function for any organisation – yet many of its tasks remain manual and reliant on a handful of key individuals. This vulnerability can lead to inefficiency and risk. Drawing on our extensive experience with payroll‑optimisation projects, the team at Azets have identified specific areas where even minor changes can yield significant gains in workflow efficiency. In this article we explore four effective ways to make payroll operations both simpler and more secure – without the need to invest in a new system or reorganise the entire department.
1. Describe the work processes
The first step in making payroll more efficient is to capture precisely what happens in the payroll department. Without a clear understanding of current operations, one cannot challenge the status‑quo or support the team to work more productively. Drawing up process‑descriptions for payroll operations can uncover hidden inefficiencies that have never been brought to light. When a team has carried out the same tasks for years, much of the work is done by feel rather than description. But writing down every task and process forces the department to scrutinise its routines – even the ones that don’t work well. This exercise often proves to be a real eye‑opener.
- The payroll department must be critical of its own routines!
The payroll team must be willing to question its own routine. Moreover, documenting procedures reduces the risk associated with sickness, absence or departures. Many organisations are heavily dependent on individual employees when it comes to payroll. In some cases the payroll function is handled by a single person; in others only that person has access to the payroll system. With thorough process documentation, a backup can step in when someone is absent. If you’re looking for a short‐term fix, our interim payroll consultants can step in at short notice.
2. Keep staff professionally updated
It’s easy to assume that payroll is a routine task, where the same steps are followed, month in, month out. While payroll certainly relies on consistency and repetition, the process is far from static. The inputs that result in pay keep changing.
Legislative changes and political decisions continually affect payroll – things like new ATP rates, pension rules, data protection regulations, tax changes, company phone and car benefits, mileage allowances and new deduction options. On top of that, digital tools evolve continuously – new systems and updates. The payroll department therefore must stay fully informed.
If you want to get the most out of your payroll team, you must invest in their professional development.
Many payroll staff work in isolation, either alone or in small teams without daily professional exchange. That makes it especially important for management to encourage knowledge‑sharing and ensure that relevant training and updates are available.
3. Get on top of input and output
Do you have a clear view of all the input that enters the payroll department each month? Few managers do – and yet the payroll function may be heavily reliant on it. The same applies to output – beyond the salary payments themselves, there’s a range of data each month that flows from payroll to the wider business and to authorities.
Input from the business
Often sizeable efficiency gains lie hidden in the input from across the organisation. The payroll department may receive variable input from multiple departments: items such as timesheets for hourly paid staff, time and absence records, termination payments, expenses, bonuses, travel claims and overtime. Sometimes the input comes from each employee, sometimes from departments. If this information arrives in different formats which cannot be imported directly into the payroll system, the payroll clerk must manually key in all the data – and the more manual the steps, the longer they take and the greater the risk of errors.
When manual data‑entry tasks are mapped and robustly reviewed, you often find that many of them can be automated.
By standardising formats and workflows, you can automate large parts of this process.
Output to the business and to regulators
When you look at payroll output, there are certain fixed deliverables every month: information to pension providers about contributions; data to the accounting department for the monthly accounts; reports to tax authorities, ATP, municipalities, Udbetaling Danmark and others. These routines are fixed. But it is often possible to configure the payroll system so that it exports data in a format which can be easily transferred to or loaded into the company’s accounts system – saving considerable time and reducing errors compared with manual entry.
Where you’ll often find the greatest optimisation potential is in the internal reports produced for other parts of the organisation – including senior management. For example, if management receives five separate reports each month, it may be possible to consolidate them into one. If only one of the five reports is actually read, perhaps there’s no need to produce them all.
4. Leverage your digital capabilities
Modern payroll systems come with many features designed to make life easier for payroll teams – yet few organisations fully exploit them or even know they exist. Perhaps your business already uses a time‐tracking system which could feed data directly into your payroll system. Perhaps each month your payroll clerk is calculating an employee’s hourly wage manually – when in fact the system could automate this. And what about quality‑control? Rather than checking every payment manually, the payroll system could generate exception‑lists for only those payments that deviate from the norm.
Of course, implementing these features requires a certain level of IT competence. Many companies also have custom modifications in place to make the system fit their business – which can create a hesitation: what if something goes wrong? Or an update removes your customisations?
It is understandable that you are cautious about touching the payroll system. All the same, you should do it.
If you don’t feel confident reviewing the system yourself, you should seek professional assistance – for example from your system provider. Even if they charge for a review, it is often worth it. Many of the processes in a payroll department can be automated – if you know how.
If you are considering a new payroll system which meets all your digital requirements, you can read more about Epos Payroll.
Looking for fresh pairs of eyes?
If you need expert support and fresh perspective on your payroll administration, Azets’ experienced payroll consultants can help. We focus on your current practices – from an objective standpoint. The outcome is typically an optimisation of your existing workflows without necessarily needing investment in new systems or solutions. For other clients we have identified opportunities that reduced their time‑consumption by as much as 30%.
