Do you ever consider how your salary gets to your bank?

Withdrawing salary from ATM

I’ve worked for many years. Yet it wasn’t until I started working for a payroll services company that I ever considered how my salary arrives in my bank account. I just assumed my correct wage, with all additions and deductions made correctly, would be there, ready to spend as the clock struck payday. Had it not been, this might have been the only time I ever questioned the process.

For most of us, the only reason we work is to be paid. Before we accept a job, we negotiate our total rewards and payroll benefits. We discuss bonus programs and the parameters to pay-out.

However, few of us ever think about the people and processes that transfer funds from our employer to our banks. Even fewer of us ever think to recognize the complexity of the processes.

You will rarely, if ever, hear a payroll administrator say; “Oh it was great to receive so much recognition of thanks this month from the 1,000s of colleagues I paid accurately, and on time, like I always do.” In this blog, I provide a snapshot of the role of payroll department.

Processing payroll is a complex process

Payroll is not just a case of calculating numbers. It is a legislative minefield. Each country, and in some countries, each region, have their payroll nuances. Each payroll run must factor these in. Furthermore, you can’t assume there have not been changes made.

Some countries, especially in emerging economies, adjust their income tax rates almost monthly. There is no margin for error. If you thought GDPR was going to simplify the HR data challenge in Europe, then you are mistaken. Most countries still have layers of personal identifiable information (PII) legislation on top of this. Challenging enough? It keeps getting more so.

Multiple payroll processes

The majority of multinational organizations continue to use legacy processes or have a chaotic set-up to process payroll. This is often the result of years of M&A activity. The result is a high risk approach. Dozens of local payroll providers, different systems, workflows, data storage, etc.

Such a decentralized payroll model is not sustainable long-term. It can’t grow with the business. This is because there is no room for innovation. There is zero transparency, no single-source data or central management. In addition, it’s an expensive, high-risk approach to payroll.

Only by taking a unified approach to global payroll, can organizations deliver the effectiveness and economics needed to pay a modern workforce. It’s for this reason that so many of the world’s major brands have their payroll services managed by or even outsourced in its entirety to NGA HR.

At NGA HR, we remove the risk and ensure payroll is compliant, data-safe, on-time and correct -every run. This is far from a simple process in one country. The more countries there are employees, the greater the payroll challenge becomes.

Consequently, the higher the personal risk that we might not get paid!  That said, there are many more organisations that continue to manage their own payroll, to varying degrees of success.

Global Payroll Complexity Index addresses payroll processing challenge

Many of these organizations use the biennial Global Payroll Complexity Index (GPCI) to decide which countries they will continue to manage payroll in-house and which they will outsource.

Business transformation teams use the GPCI when mapping the challenges of expansion into new territories. Be sure to download your copy. Pre-register for the Global Payroll Complexity Index report here.

What happened in the payroll department?

So far this blog has focused on payroll. I expect for many, this has presented a very different view to that most of us have about the payroll process. In the past decade we’ve moved so far on from cash in a brown envelope.

Payroll is now data driven. Therefore, in most organizations, the payroll department is a highly secure environment. The payroll teams work in very controlled conditions to ensure our personal identifiable information (PII) is kept confidential.

Inside, the payroll team calculates employee compensation in return for hours worked and pay employees accordingly. There are many steps and processes to be followed.

In summary, it takes 15 steps to ensure we are all paid on time. Moreover, accurately and knowing that all the right deductions have been made on each payroll run. This is a huge burden. We should perhaps take a moment to spare a thought for the teams of people who ensure our salaries make it to the bank.

The 15 steps to payroll success…. and this is not all

  1. Create and maintain payroll policies, procedures and best practices for the organization.
  2. Maintain payroll information through data collection, calculation and entry.
  3. Keep employee records up-to-date for benefits eligibility, insurance coverage, exemptions, changes in role/department, job changes, savings deductions, etc.
  4. Process new employees and temporary workers for financial or tax purposes during onboarding.
  5. Calculate taxes (federal and state income tax and social security taxes)
  6. Report on taxes, social security, deductions, leave, disability, non-taxable wages, etc.
  7. Stay informed on changes to laws and company policies.
  8. Update the business on these changes.
  9. Issue paychecks to employees according to the payment structure of the business.
  10. Provide payroll information to employees and resolve any issues.
  11. Keep up to date with cyclical dates and deadlines.
  12. Calculate payments for employer’s social security, unemployment, worker’s compensation, and benefits coverage.
  13. Prepare management reports on a monthly, quarterly, and year-end basis.
  14. File appropriate tax forms.
  15. Communicate regularly with HR and finance.