Not-So-Hidden Treasure

Today’s global payroll data far exceeds gold coins. Leverage it correctly, and you’ll gain valuable insight on how to manage your workforce.

By Sheri Sullivan

As business continues to become more competitive, organizations look for any advantage they can use to get ahead. One advantage can be found in data. The copious amounts of data organizations create on a daily basis can help them better understand their costs, revenues, and operating processes, and determine where improvements can be made.

This so-called age of big data isn’t a cliché: According to research from IBM, 90 percent of the data that exists today was created in the past two years. And while companies can now access an almost unlimited amount of information, it is crucial that they not only collect the most relevant data, but also that they understand how it can be used to enhance their businesses.

One area often overlooked as a source of data for business intelligence is a company’s payroll system. Big mistake. Payroll data provides a wealth of key information and metrics that—when leveraged correctly—can lead to smarter decision-making. Just consider the data that the payroll system includes: headcount per month across the enterprise or by country, the total number of leavers and new hires by country or legal entity; how much the company pays each employee; participation in company benefits; and payroll expenses broken down by category, including employee taxes, liabilities, insurance, pensions and much more. Consider what can be done with this extensive data—and how telling that information is.

Why a New Approach is Needed

Payroll data is vast and valuable, so why don’t more organizations leverage their payroll system for insight and predictive analytics? The answer is that most companies—particularly multi-national organizations— do not have this information housed in one centralized location or in a single, consistent format.

Many global companies rely on multiple payroll providers and systems across their different locations to handle the payroll function. In these situations, the company will struggle to gain the complete view of its payroll expenses that can shape business decisions and lead to improvement.

Rather than a simple, single source of information, these companies must contend with the management of various payroll vendors and systems, each providing different gross-to-net reports. And many reports are delivered in a user-unfriendly format, such as PDFs or spreadsheets. The company must then determine how they can consolidate their payroll information, analyze that data appropriately, put it into a useable format, and try their best to make sense of this information and report on it effectively.

A SaaS-based multi-national payroll provider can often replace all systems and house all information under one roof, providing a clear line of sight to all payroll expenses across each country and location. This gives organizations greater control over the entire payroll function with consistent, comprehensive reporting that provides the insight and data needed to improve their overall talent and HR strategies.

For instance, looking at the headcount per month at the local, regional, and global levels gives an organization insight on real-time, year-to-date number of employees. This can reveal how the company is performing as a whole as well as at its various local offices. By accessing reports on the number of leavers per country or legal entity, an organization can better understand the costs of high turnover and determine the areas in which it should invest more in improving employee retention and engagement.

Another key benefit of robust reporting for global payroll is the ability to view the total payroll expenses broken down by category. By understanding how much an organization spends on all aspects of payroll—not just the employees’ salaries—but also the associated taxes, liabilities, insurance, and other benefits, the organization gets a more accurate view of the costs of compensating workers around the globe. At the same time, when managers have the ability to analyze all costs of payroll by category, the organization can see how many employees utilize the various benefits, the costs involved with offering them, and how benefits packages can be optimized.

Leveraging payroll data to create reports can help management make key decisions about where they should either scale up or down their hiring. For example, payroll data can show the costs of compensating a particular position, such as an engineer, across various locations, and consider the revenue produced in each location. As a result, management can ensure the company focuses its hiring efforts for those positions in the locations where it will be most cost effective.

The payroll function is an often underutilized source of truth for an organization. But rather than overlooking the information the global payroll system collects and contains, it is important for multi-national organizations to leverage this data. After all, the information in the payroll system provides an up-to-the-minute snapshot of the company, as it performs one of the most important functions for any business—ensuring their valuable employees are paid accurately and on time. But more than that, a globally aligned payroll system can offer insight into top talent and key positions to allow organizations to make decisions that optimize their costs and workforce strategies.

Sheri Sullivan is a global payroll expert for CloudPay.

HCM Compatibility

The ability to drill down into extensive payroll data is especially important for organizations with operations in locations that do not currently use a human capital management (HCM) system. As such information about headcount, new hires, and leavers at these locations isn’t aggregated by a central HCM system, crucial employee data isn’t included in the company’s reports. However, all of this information is captured and stored in the payroll system, making it essential that companies be able to access this data across all locations.

Posted August 28, 2014 in Evidence-Based HR