Payroll maturity – why it’s important and how to assess where you are

No human resources (HR) or finance decision-maker in a global company will have been able to avoid the drive towards HR digital transformation over the last few years. Whether their role is central or regional, they will have been under increased pressure to scrutinise existing payroll operations and implement changes to processes, business models, and culture that will drive efficiency and productivity.

Despite the pandemic-provoked economic headwinds over recent years, many companies are continuing to push ahead with global expansion projects. As they are adapting models to this changing global reality, businesses are continuing to turn to technology to fast-track operational and cost efficiencies where possible.

Why payroll maturity matters

As a company continues to expand internationally, the difficulties of running payroll does too. The complexity of in-country compliance cannot be underestimated. However, there are also difficulties of managing mounting processes, team roles and responsibilities. Plus, demands around employee expectations and management reporting. Add to this, the need to understand the dynamics of a remote and hybrid workforce; and it is clear – the sophistication of an organisation’s HR and payroll technology can make or break how it copes with international expansion.

Before a business moves forward with its digital transformation plans, it is important to assess the maturity of current payroll operations. Whilst its maturity could be thought of as reactive, emerging, controlled, advanced or leading, do bear in mind that very few companies will fully match one single maturity level; and that developing maturity is rarely a straightforward, linear process.

Having said that, it is important for any organisation with global ambitions to transition its payroll maturity level from reactive to leading. If a business is still reactive, it is hampered by inefficient systems and blind spots around workforce information. Whereas, when the payroll level is leading it can influence other functions within the business and have access to vendors’ product development roadmaps.

As organisations strive for a leading level of payroll maturity, it’s important to understand what that looks like. Leading payroll maturity means that an organisation is using payroll and all the data it gives to its absolute optimum ability. This include using a provider on a unified payroll platform, meaning payroll and HR teams have more time to dedicate to other strategic business pursuits, and using data for benchmarking, forecasting and reporting, all to inform better collaboration and decision making.

The three phases towards transformation

To know how far a company has come on its journey of HR and payroll digital transformation, it needsto be benchmarked against the optimal state, other functions within the business and against competitors. This will establish whether the business is making the most of payroll as a powerful business differentiator. The transformation process and outcomes can be broken down into three phases: optimisation, visibility, and agility.

It is important to cut out cost inefficiencies and optimise payroll. Manual and error-prone processes that require the payroll team to work many hours’ overtime and rely on payroll ‘heroes’ to complete each pay run are far from optimal. Far better to have a unified payroll platform that has an unrelenting focus on process performance and innovation and is scalable in line with the growth of the business.

It is important for businesses to remember that they can’t control what they can’t see. For maximum visibility, teams should share payroll-linked data across the organisation for better collaboration and decision-making. It makes perfect business sense. After all, without doing so, the business may be unable to quantify risk of non-compliance with in-country labour laws, leaving it open to potentially crippling fines.

Building agility into a payroll solution, means that a business can adapt to new ways of working as the market in which it operates continues to morph. To facilitate this, payroll software should be intrinsically integrated with existing human resources information system (HRIS) and accounting systems to provide a single source of truth with data that informs C-suite decisions.

How to ensure payroll copes as a business expands

Whichever maturity level, or mix of levels, a business’ payroll function currently occupies, as it gets ready to enter new geographies it will need to know it is equipped with the technological capabilities that will help it overcome HR challenges so that it can hit the ground running.

There is no doubt that reaching payroll maturity is important for any business craving global expansion and growth. It may seem overwhelming to have to contemplate HR digital transformation at the same time as ensuring an existing payroll function is fit for purpose within the new markets. However, a business should think of the two as going hand in hand and take a phased approach to payroll transformation. Focus on optimisation, visibility, and agility to limit disruption and deliver measurable results. A good starting point is to download a payroll efficiency checklist to help pinpoint the areas where payroll technology should be helping to introduce efficiencies that cut costs and risk as the organisation expands, whilst also continuing to improve the added value that it offers to the business as a whole.

By Frank Smits, President, ADP Celergo & Streamline