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Greg Newns | Senior Business Development Manager, CloudPay
Every payroll team will be familiar with the standard SLAs that their enterprise service providers and global payroll functions fulfill. But what can often leave businesses scratching their heads is when payroll are struggling with a variety of issues, but the SLA metrics seem to suggest everything is fine.
When this happens, it means that the service level agreements in place aren’t delivering a sufficient level of detail and insight into how well payroll actually operates.
CloudPay’s John Pearce regularly uses the phrase ‘Why are my payroll KPIs green, if my payroll team is red?’. This quote perfectly highlights the common issue faced by enterprise service providers and global payroll functions who fulfil standard SLAs, whilst feeling discontented with payroll performance overall.
In this blog, we’ll explore why that’s the case, what can be done about it, and the type of issues that can be highlighted with a new level of KPIs.
Why standard SLAs aren’t enough in payroll
The main reason standard service level agreements don’t deliver the level of detail that payroll teams need is because they’re only really focused on minimum standards. Generally speaking, they focus on the basics like timeliness and accuracy, with levels expected to be as high as 99% and often even 100%.
These high-level figures can easily mask any underlying issues within payroll, preventing businesses from understanding how to make improvements. So it’s clear that a more detailed approach to measurement and key performance indicators are needed.
Payroll Efficiency: the new model
There are so many different potential key performance indicators that payroll teams could use that it can be difficult to know which ones are the most important to pinpoint. At CloudPay, we’ve explored the various options in detail, with the aim of identifying the most relevant metrics, but also those that can be collected accurately and consistently.
The result of this work is a unified data model that we call the Payroll Efficiency Model, within which payroll teams can benchmark their performance at global and regional levels across the following five KPIs:
- First-time approvals: the percentage of payroll runs that are approved at the first attempt with no changes
- Data input issues: the proportion of issues affecting payroll that are caused by mistakes in data input
- Issues per 1000 payslips: the number of payslips affected by data errors in each cycle
- Calendar length: the amount of time it takes to complete a payroll cycle end-to-end
- Supplemental impact: the proportion of total payroll runs that are completed in addition to the normal payroll cycle
What problems can these KPIs help solve?
These five KPIs collectively deliver a much deeper level of insight into payroll efficiency. Additionally, it also helps businesses understand how well their vendors are performing, and the strength of the relationship between the two parties.
Typical issues that can be uncovered through analysis of these key performance indicators (and correlation of results across them) include:
- Data compromise: where errors or inconsistencies in data are leading to disruption for payroll teams
- Local reporting: where payroll performance can’t be put into the context of global or regional trends
- Lack of cost visibility: understanding how much payroll costs to run, and where certain problems are generating unnecessary costs
- Fragmented processes: where continuous improvement is prevented as payroll teams can’t identify where problems can be resolved#
Solving all of these problems means that payroll runs more smoothly, more consistently, on time and meets the needs of the workforce, who expect timely, accurate pay. Furthermore, it supports better planning and decision-making across the business as a whole, especially if global payroll data is integrated into overarching managerial processes across finance and HR.
How does the Payroll Efficiency Model work in practice? And what are the latest global and regional performance figures across all five of these detailed KPIs? Find out by downloading your copy of the Global Payroll Efficiency Index from CloudPay here.
