Here are the articles if you missed them: 

To approve or reject: That’s the question 

Take your passion, and make it happen: Get that payroll approved with a smile!

Inspired by conversations with peers during the PAYO Congress in Nashville, I decided it was time to set a benchmark around efficiency. So, I asked this question to my network:

How much time does your team spend on checking payroll results per payroll run, per payroll before it’s approved?

This therefore includes all trial runs and final runs, multiplied by the entities payrolled (“a payroll”). To set the scene, in my previous roles this ranged from 45 payrolls to 89 payrolls. For argument's sake, let’s take an average global payroll that manages 35 payrolls in a month (taking other payroll frequencies than monthly into account).

The results setting the benchmark are as follows: 

1. 20% : < 2 hours
2. 37% : 2-4 hours
3. 26% : 4-6 hours
4. 17% : > 6 hours

The results are clear. Getting the review process done within 2 hours per payroll is the industry best practice. The majority (63%) take between 2-6 hours with 4 being the median, while 17% take longer than 6 hours. Of course, you can argue that the complexity of a payroll, headcount, and if it’s run in-house or outsourced can impact this, there will always be nuances. However this can be used as an industry benchmark to rank yourself against. 

What does it take to be at the highest standards?

The North Star to work towards is spending less than 2 hours per payroll on reviewing payroll results and getting them approved (or rejected). I have reflected on this benchmark and it got me thinking: What does it take, based on my experience and many chats with peers, to get to this aspirational level? 

Five areas of focus come to mind:

• Standardization
• Automation
• Providers
• Knowledge
• Willingness

While I was looking for a nice acronym here, I think “SAPKW” just doesn’t fly well. So let’s explore each of these focus areas individually.

Standardisation

I’d like to link this to another poll I ran last year, where I asked about the rate of standardisation of controls across the scope. An industry benchmark is to standardize at least 75% of controls in global payroll. Due to local practices and nuances, this is challenging - and requires change. The poll showed there is work to be done: 80% have not yet reached this level of standardisation.

This probably explains why only 19% spend less than 2 hours on reviewing payroll results. How do you standardise controls? While this will differ for everyone, my teams and I always (without exception) hit that 80% standardisation. Let me explain how in a few practical steps:

1. Gather all (and I mean all) the inputs from the teams in terms of controls they operate. Review those and look for commonalities, and ask the question: what risk does this control mitigate? If none, get rid of it. Gather details around how it is operated and evidenced.
2. You then want to look at similarities around controls. What can be made global and what is a local touch. A local touch can be a variance control and threshold amount tailored to local materiality. You would then end up with true local controls. These should be less than 20% of the controls operated. 
3. Link those controls to risks and summarise them in a Risk & Control Matrix (a true guilty pleasure of mine!). This helps to get an overview of what is operated where and serves as great internal and external audit input.
4. Create Actual Control Descriptions (ACD) to define:some text
   • Why is this control activity performed?
   • What activity is undertaken in performing the control?
   • Who performs the control activity?
   • When is the control activity performed?
   • Where is the control performed?
   • How is the control activity evidenced and how are errors dealt with (for continuous improvement, audits, and monitoring activities)?
5. Operate them, and then cross-train the team to take over from other regions and countries to further drive standardisation. In my experience, if you hand over a control there is a fresh look between its design and operation. This will flush out bad practices and personal bias.

I’d encourage you to review the above, internalise it and start applying it in your global payroll to step closer to the industry benchmark.

Automation

Of course: automation! This probably deserves a whole dedicated blog, but let me attempt to summarise automation in terms of being more efficient in reviewing payrolls. For me personally, automation in this space is to systemise controls and look at anomalies rather than finding them. Let’s unpack this.

To systemise a control is to make it non-person dependent - zero touch. This often includes how data flows, how segregation of duties are set up, and how information is shared. You don’t have to spend time scrambling for information or data to support the control execution. That is all just waste, and aside from the lack of standardisation, likely the main cause of underperformance (those spending more than 2 hours per payroll).  A solid, standard G2N is used in most of the controls: systemise this, please, for your team’s sake. DM me if you need support!

So, to make automating controls and focus on anomalies very practical, here are some examples:

• Standard variance reports on employee and pay element level. This is also where GenAI comes in: get prompted with possible variance explanations based on both pure data and on how it learnt from you (i.e. your writing style, risk appetite erc). We are actively working on this level of automation through practical GenAI use cases.
• Automated input vs output reconciliation.

Providers

The providers you use in the countries you operate in, whether they’re global, regional, or local, play a vital role in the efficiency of the payroll results review process. Timeliness, quality, and responsiveness are key areas here.

As we all know, payroll runs a tight payroll calendar that’s based on cut-offs, processing windows and pay dates. This feeds into resource planning and how work is divided. It’s therefore crucial for providers to adhere to the agreed timelines so resources (read: payroll teams) get the results at the scheduled time. When the results arrive, they should have already been properly validated on the provider side. 

The Payzaar platform offers the same validations for the provider AND the payroll teams. This means that the provider can almost play the role of the customer: explain differences between input & output, explain variances and include local validations. The payroll teams then just need to validate what was already reviewed with a possible additional set of internal controls. This avoids rejections and duplications. Still, there can be questions back and forth so responsiveness on both sides is super important. One could argue, it takes two to tango.

Knowledge

All of the above focus areas assume there is an appropriate level of knowledge within the payroll teams, enabling them to perform the controls they need, and understand local nuances. Often, their knowledge of the internal controls are sufficient (although there likely is room for improvement, especially in the standardisation of this), but not on the local nuances.

I was surprised to learn that many payroll managers underestimate this crucial part and do not put in sufficient effort to upskill their teams. If you, as a Payroll Specialist, are responsible for a set of countries and you have outsourced payroll it doesn’t mean you don’t need any knowledge of that country. This is a topic I discuss with peers often. What level of knowledge is required? I would always train the teams on these topics per country:

• Starters: what are the registration timelines, required onboarding documents, and local data requirements?
• Tax & Social Security: how are these calculated, what are the percentages, calculations bases, and who is covered or exempt? 
• Filings: what regulatory filings are required, what is the filing schedule, and how do you reconcile the numbers against the approved payroll results?
• Benefit: how are company-specific benefits taxed?
• Leavers: what are the deregistration timelines, required offboarding documents and local data requirements?

I encourage you to develop a training program with the above guidelines to upskill your team and process documentation. This would likely cover that additional 20% of local controls required!

Willingness

To be more efficient in reviewing payroll results and especially standardising those controls, requires a willingness to change. It was the Greek philosopher Heraclitus (530-470 BC) who discovered that change is the only constant. So, now 2500 years later it is about time that we also accept and embrace change. However, this still proves to be difficult. Payroll people like doing things the way they have always done them; especially their beloved controls. Why change?

It’s exactly the “why” that Global Payroll Leaders should focus on when they embark on a change journey. Why is it relevant and important for the payroll teams to standardise, automate controls and upskill themselves for their own professional development. When you then need to roll this out, I have used these two approaches: enforce and embrace. Sometimes either of them will suffice, and should be tailored to the organisational and regional/local culture. Other times however, you may find yourself starting with embrace and ending up with enforcing; or the other way around. I would encourage you to give clarity: this change will directionally happen (no choice) and how we execute it together is a collective effort (there is some level of choice and a high level of input).

So, what’s next?

I hope this detailed blog explains why it is important to standardise and automate your controls to become more efficient, to ultimately hit that benchmark of less than 2 hours per pay run spent on run payroll controls. In order to achieve this, you need to also work with your providers; it takes two to tango. As a Global Payroll Leader ensure that your team possesses the right knowledge to get them into their comfort zone and make them more willing to change; enforce the change and/or let them embrace the change. You’re up next!