Check it out here: To Approve or Reject: That is the question
In today's article, I’ll focus on the baseline and crucial controls in this run-payroll cycle, as part of the overall Global Payroll Control Framework (GPCF).
Of course, let me first link this to the overall best practice around Global Payroll Management. While all components are truly interlinked, the GPCF focuses on the section Risk & Control as part of the component Global Payroll Governance, and it is also linked to the section Objectives as part of the component Global Payroll Strategy.
I used to love designing and operating a smart set of controls, together with my team, These controls should balance efficiency (doing more with less) and effectiveness (catching all possible errors).
Leading up to payroll approval, or rejection
It’s worth mentioning that by now, we have already ensured that the RBAC (Role Based Access Controls) and Payroll Cycle SoD (Segregation of Duties) are in place. And, that the input data is accurate, validated, complete and transformed to the local provider formats. This really is all you can do as a global payroll team, and then it’s in the hands of your payroll providers. So, this is what you can influence: working with the best payroll providers. With Payzaar, you have full flexibility and choice.
For me, the most important payroll provider qualities came down to three areas:
- Fast and quality processing. You need a short 2-4 business day timeframe (depends on volumes, automation) window for submitting payroll and getting trials. I demanded at least a 80% FTR rate from my providers, meaning a maximum of 2 trials results out of 10 were rejected.
- Responsiveness. There are likely no other support processes that are more time sensitive (aside of business critical processes) than payroll. When you outsource your payroll, you are heavily reliant on the payroll provider. You need open, direct communication lines.
- Partnership, and fun. When you work together so closely, your payroll provider (and specifically your contact) is an extended team member. You therefore need to trust them, and have fun too!
If you ever look to replace a global, regional or local payroll provider, let me know. We have an extensive network of the best providers, all meeting the above criteria.
Alright, let’s explore those crucial run-payroll controls! And remember, all controls must mitigate a certain or group of risks. Otherwise why perform a control and spend time on it?
Variance Control
One of the classics, like the pure chocolate magnum. You will be hard pressed finding any (global) payroll team out there not performing this control. It is just a must have, because it mitigates certain risks. Risks pertaining to unusual high fluxes from period to period and rationales between gross pay, statutory liabilities and net pay. You would normally see a certain relative flux between those, and anomalies would be caught with the use of a variance control. There are generally two ways to operate a variance control, of which both can coexist in a payroll model, and even within one country payroll.
One method is a period over period pay element level. So, this compares the aggregate of all amounts on a pay element from all employees and compares it to a comparison period. This is often used for higher volume payrolls (or above x% variance), or for employees with a net pay variance over x% to ensure you also check the individual and not just the aggregated sum. The other method is to operate employee level variances, so comparing amounts on pay elements per employee period over period, by default (so not by exception like with the prior method). You often see this implemented in payrolls with < 10 employees.
At Payzaar, we offer automated variances on both pay element and employee level. You can view this with local pay elements (if you are native to the payroll) and/or on a global consistent pay element level. You can then further define which variance $ or % level you want to in/exclude. You can toggle between this in a very easy user interface, add comments and upload to the 100% audit log.
Threshold Control
This very much looks like a variance control, but looks more at the risk of fraudless data entries and unusually high payments. I used to love this control in combination with an aggregate pay element variance, as this threshold control ensures we catch outliers. Depending on the workforce makeup, you can think of setting an above x$ threshold of net pay, to then single out those outliers and verify all pay elements for those employees.
At Payzaar, we also offer this automated threshold functionality to identify the outlier employees with any % or $ threshold on any or all pay elements. You can then grab those employees, identify their variances and comment to those with an audit trail upload.
Input vs Output Data Validation
One could argue that with sound pre-payroll controls and a variance and threshold control you are safe. I would argue that, you would still want to reconcile all the inputs to all the outputs. Was something processed that you had instructed, was something processed you hadn’t instructed? You want this control because a variance (unless you reconcile all variances for all employees) can even out incorrect processing. One of my recent polls revealed the (brutal) truth about this input vs output data validation control: 96% operate this control, yet 80% do it manually via spreadsheets.
If you operate this control via spreadsheets you need a very sophisticated sheet with input code vs output code mapping, and someone who can operate these complex sheets. Whenever there is a change, you need to likely change this across all local payroll mappings. If you operate in 20+ countries, you need to manually change 20 spreadsheets. And when you do operate the control, how will you evidence accuracy and completeness? Everything is manual.
So, time for an automation change. One of the most sexy features of our platform is our automated input vs output reconciliation. This reconciliation is instant and is done on amounts, units, dates and text - beat that in Excel. Whenever a G2N is uploaded, the reconciliation is available for you AND your provider, meaning your provider spots, clears differences before it is sent for your review and approved. The reconciliation val. And if there are “correct differences” such as you input sick days but get sick money back, this is explained for you. I used to say that an explained difference is no difference. All the (accepted or rejected) differences are automatically added to the audit trail, so no need for manual drives or uploads. Awesome, I guarantee.
Payslip recalculation
Last but not least, a control that gives the final piece of mind to the payroll DNA:
"Let me just check if that payslip reconciles."
However much we advance technology, I know the payroll DNA still calls for a need to look at the payslip, aside from all the data driven controls (variance, threshold, input vs output). What I used to implement, is a framework across the scope that looks something like this for payroll recalculations:
- For larger payrolls, reconcile 4 payslips in full including statutory contributions: highest net, lowest net pay, starter leaver. With these four scenarios, you have a good diverse set of scenarios with varying risks.
- For smaller payrolls, reconcile 1-4 payslips (depending on volume) for mathematical accuracy. This means just built to gross, gross to net based on simple yet effective maths.
You can then use our sophisticated G2N with local and/or global tags, and do the recalculation while also adding payslips for additional audit proof. Easily upload this last piece of evidence to the audit log, and ask your manager for approval. Your manager then has access to all of the above controls, can ask questions to the team for verification in the collaboration tool as part of the workflow and ultimately approve! (or reject).
So, what now?
The payroll is approved! Oh man, what a feeling! (as Irena Cara would sing out loud in their song). This is our flashdance. As I have been a football player, a sports reference would be that it always felt like scoring a goal. Approving a payroll really is up there in terms of excitement. However, now that the payroll is approved, the work doesn’t stop. Oh no, it never really stops, so make sure you have the tools to make your life easy.
In the next blog, to finish off the GPCF, I will focus on the last run-payroll controls (financial posting and reconciliation) and all post-payroll controls. Stay tuned!
I am a Global Payroll Professional and a passionate one too! After managing global payrolls across the world for about 20 years, I found there must be a better way of doing this. I joined Payzaar - the global payroll management platform everyone needs and can easily implement.
Oh yes, we are just fun to work with too - Let's chat about the Payzaar Experience! And who knows, I might just deliver you a demo that you’ll truly enjoy.
