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A 5-minute Guide to Payroll Best Practice




Payroll best practice comes down to always remember the purpose of payroll. It’s understanding that it needs to be:


· Delivered on time and closed out consistently

· Reliable and always delivering the correct result that conforms to the applicable award


Payroll best practice encompasses all aspects from rostering, to how a team manages a pay run window. Success in these areas generally comes back to one thing - having a mature payroll team.


One of the challenges of implementing new systems is that we often find that certain processes have historically been passed from person to person without review and have failed to be documented correctly or completely. Because of this lack of documentation, there tends to be gaps in processes, leaving room for error.


These errors especially become apparent when someone spots a discrepancy between the old payroll system and the implementation of the new system.


Add to this that payroll outcomes are completely dependent on the data which is available to the technical system executing the calculations. The data that may be needed for effective payroll calculation ranges from age, address, role, award, seniority, disabilities/special needs, rostered shifts, worked timesheets, work location, calendars and special conditions.


That’s why validating data is so important. You can be confident then that you are not only paying people correctly but that the data is consistent across all platforms.


What Does a Mature Payroll Team Look Like?

Mature payroll teams are self-managed, with touchpoints from external parties to ensure that they’re following best practices.


A mature payroll team has the ability to improve itself, is incentivised to do so and has the motivation to see it through.


Teams can be encouraged to be mature and make their own improvisations when they’re (1) given a budget for external consultancy, software, and training, and (2) senior management listens and acts when they report issues.


There is one obvious aspect that all mature payrolls have in common. They have clear documentation of processes and procedures that are kept up-to-date and are a true reflection of what the team does. This documentation provides true visibility of what’s going on within the organisation’s engine room.


The payroll function of an organisation holds a lot of data and is often the biggest operational expense. Mature teams are able to analyse payroll data to find ways to cut costs. They might learn that they’re constantly paying excess overtime. They would then act upon this knowledge and suggest ways that rostering could reduce this overtime expense.


What Suggests That a Payroll Team Isn’t Mature?

So, how do you know if your team isn't 'mature'? This comes back to external input. As a general rule, payroll is seen as a service to the business or a cost. Therefore, companies try to minimise it as much as possible - and therein lies the danger.


You can tell that a payroll team hasn't been given the tools to be mature when you're unable to say, “in the last year, we invested time and budget to improve it".


If you’re not proactively moving forwards, you’ll find that you’re actually moving backwards.


If senior management hasn’t heard proactive suggestions for improvement from their payroll team, that team hasn’t yet reached maturity. Your team needs to be looking at both improving payroll and also at how payroll can support the business by analysing the data that they have access to.


How Can Payroll Best Practice Be Achieved?

Let’s start with the simplest tip: Ask your Payroll Manager where improvements can be made.


Tell them to put aside everything they’ve been told that can’t be done and to give you a wish list of three things that they need to improve their outcomes. Tell them to act as if money is no object. It doesn’t matter if it’s going to cost a million dollars, because that’s for you to worry about. You just need to know what they feel that they need.


You can also flip the question and ask what their three biggest impediments are and how they could solve those issues.


Many managers will tell you that they need a new system, but that’s rarely the solution. It’s expensive, it’s risky and it might not actually fix what they think it’s going to fix.


One of the best ways to get started is to ensure that you have a comprehensive and consistent set of processes in place and that the culture of the team leads to constant improvement of these processes over time. This will mean that, if someone leaves the company, the system can keep running and you are guaranteed continuity.


It is also important to stay ahead of ever-changing legislation. It’s easy for payroll to become an echo chamber. To avoid this, you’ll want to make sure that you’re regularly keeping up to date with the changes. This can be done by simply ensuring that your payroll team is subscribed to websites such as TAPS and Fair Work and that they read and report on the information therein.


The Psychology of Teams

It's all about being agile and chasing constant improvements. You can't set just “set and forget”. There has to be a process where team members can look retrospectively at the work that they've been doing and find ways to improve it.

To do this effectively, you need to tap into the psychology of teams. Your employees are generally less worried about processes and more worried about getting their actual job done, so it can help to bring in external parties who can hold them accountable.


I’ve worked with people and teams who’ve tried to audit themselves but the challenge is that it’s almost impossible to analyse yourself. Often, we’ll start working with a company and they’ve already wasted six months and a tonne of money trying to get their processes in place and all they’ve succeeded in doing was alienating their employees.


That then leaves us with a harder job because in addition to all that wasted time and effort, they have people who are more resistant to change than they were at the beginning.


It’s natural to want to put some numbers on this and to think about a return on investment but don’t make the mistake of thinking only about cost and benefit. A simple Return On Investment approach doesn’t work in this context because the impacts of the change (both positive and negative) are far too complex. The ROI will be shown in the overall profitability and overall success of the company.


What’s the value of your culture? What’s the value of a motivated team?


We find that it’s better to think about it from a risk perspective. Robust payroll systems can deal with a limited number of errors but once you cross a certain threshold, you get chaos. That’s why it’s so important for your payroll team to work proactively, looking out for flaws and errors so that they can fix them, instead of allowing them to build up until the proverbial straw breaks the camel’s back.


Ultimately then, payroll best practice is achieved through building a mature team that drives itself and receives outside input to ensure that they’re not in an echo chamber. When they receive this kind of insight and support, they take the opportunity to improve. They can make sure that payroll and your company as a whole is heading in the right direction.


Businesses can email contact@agilexperts.com.au or call 1300 287 213 for free first-step advice on how to ensure your payroll processes can safeguard your payroll compliance. Follow us on Linkedin or sign up here to receive our articles direct to your email inbox.

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