I spend a lot of time explaining why things need to be done a certain way in payroll to senior managers and even payroll practitioners. It’s required to ensure compliance, best practice, reduce the cost of processing and security etc. In a lot of cases, there is no understanding on their part of the importance of these areas and this is sadly reflected in their payroll.
The effect of this is that payroll gets the blame for actions based on people in control of, or working in, payroll. However, if those in control were educated on the requirements and applied them correctly to payroll there would not be these issues, or they would be minimised.
In this post I want to cover a few topics that should be considered:
- Know what your payroll system can and cannot do
- Develop your payroll process to fit with end-to-end processing (automated and manual activities)
- Understand how the legislation impacts on what is done in payroll.
Know what your payroll system can and cannot do
I have said this many times, but payroll is not just the payroll system. It is only a tool to help in the payroll process. Any payroll provider stating that their product is the “total payroll solution” is just wrong. Please see this as just the typical marketing hype that salespeople use!
Let’s take a step back. Firstly, selecting a new payroll system should be done on its fit to the business along with ensuring it is compliant and future proofed. So, knowing what your system can do should be a given; however, I am surprised to find many payroll practitioners using a payroll system that actually they do not fully understand or appreciate how it can aid them in running a successful payroll.
On a regular basis I see payroll practitioners complaining about the shortfalls with their payroll systems. However, in my experience I have found it is not a shortfall of the actual system, but of the knowledge of the payroll practitioner in terms of their understanding of what the system is capable of doing. One of the main reasons for this is the lack of training, or the poor quality of the training provided by the payroll provider. In addition, it could be the help functions online and in written form, or the business not willing to fund payroll system training for the payroll practitioner. Just on the last point, I often see businesses spending substantial amounts of money but not budgeting for the training of the payroll team on the new system. This means the company doesn’t get the full benefit of what the system could do for payroll and the business overall.
Develop and understand your payroll process to fit with end-to-end processing (automated and manual activities)
Payroll is an end-to-end process and payroll staff or anyone managing the payroll function must understand that process fully. These personnel should be involved in its design and ongoing review to ensure it always aids compliance, reduces cost and minimises time in processing pay. Again, one of the myths about payroll is the system does all of this automatically, but that is far from the truth. There are manual inputs or extra processing that can happen throughout the payroll process.
One of the areas that should be very important in the selection of a new payroll system is how much extra manual processing as well as extra external steps and work arounds are present with the new system. These can add up to a substantial amount of extra work when you are spending money on a new system expecting all of this to be included. Don’t listen to the salesperson. Do your own research and check fully before signing on the dotted line. NZPPA can help you in this regard by putting you in touch with people already using the system.
Understand legislation & how it impacts on what is done in payroll
This is essential and without it your payroll is just driving blind. I come across people all the time running payroll with no understanding of the law that payroll works within or why they can or cannot do things. It’s dangerous to have people in payroll that cannot even explain how the payroll system calculates tax or leave entitlements required by law. Without knowledge of the law, how can payroll or the people that oversee it ensure its compliance? Do they even know what compliance is?
Another myth is the system covers all of this, or that the outsourced payroll provider takes care of it. ABSOLUTE RUBBISH. All liability sits with the employer – you cannot outsource that!
Now, understanding legislation is an ongoing professional development activity for a payroll professional and for anyone managing payroll. Even HR is not equipped for this as payroll requires an in-depth knowledge of calculations and how they should be applied in a payroll system. So, it is essential that the business invests in the ongoing professional development of its payroll practitioners and any staff involved in managing or making decisions that affect payroll.
So in conclusion, understand what your system can do especially before you purchase it and use it to its full potential. Make sure you understand all payroll processes and actively review them to be certain they are valid. In addition, set the understanding of legislation that impacts on payroll as a professional development priority for payroll practitioners and anyone else involved in its management.
NZPPA supporting NZ payroll since 2007!