Historically, organisations have dedicated their payroll functions to remunerating their workforce by calculating and disbursing salaries and benefits. In addition, they ensure their business adheres to Australia's complex compliance laws. As a result, payroll's primary goal is to ensure employees are paid on time and accurately. Payroll software has been used to ensure there are fewer payroll errors and all the payroll information is captured in a system.
What is payroll data worth?
Payroll data is considered a business's most valuable asset, yet it is not used to its full potential.
Payroll data is essential for business success. All businesses collect payroll data and process payroll runs; it's a requirement. All the data is needed to process employee wages, compensation, benefits, taxes, personal details, and record keeping. Payroll data management is critical for businesses to comply with legal requirements, pay employees accurately and on time, and maintain a healthy relationship with their workforce. The data outweighs the costs of payroll and payroll software.
The Dimensions of Payroll Data
What is payroll data?
Payroll data is the collection of employee information, including wages, taxes, benefits, and leave details. Payroll data plays a crucial role in managing the financial aspects of a business, ensuring that employees are compensated accurately and on time. The payroll data is typically stored and processed in payroll software, which helps streamline payroll processing and ensure compliance and managing risk. Payroll data can provide valuable insights into staffing and resource costs, employee productivity, turnover rates, and overall labour costs, allowing businesses to make informed decisions about resource allocation and budgeting. In essence, payroll data is a vital tool for maintaining an organisation's financial health and stability. There are many types of payroll data that all expose valuable insights for business strategy.
There are many facets to payroll data and how you can use the data for business advantage. Let's start by exploring some payroll data examples.
Employee information
Employee information is the foundation of payroll data. It is often collected when onboarding a new employee. It includes personal information such as name, address, and Tax File Number. This information is used to identify employees and ensure they are paid accurately. Employee information includes job-related information such as job title, department, start date, etc. This information is used to determine employee compensation and benefits.
Remuneration and compensation
Remuneration and compensation data summarises salary data, overtime rates, and additional payments. Employers must ensure they pay their employees accurately and on time. Tracking employee compensation, such as raises or promotions, is also necessary to keep payroll records current.
Time and Attendance
Timesheet and attendance data are often tracked in payroll, as this is required to pay employees accurately. This includes regular hours, overtime, annual, and personal leave information. Time and attendance data are critical for payroll to ensure employees are paid correctly. They must also comply with labour laws such as the minimum wage and overtime regulations.
Taxes and deductions
Taxes and deductions are essential parts of payroll data. They include tax and compliance information at federal, state, and local tax levels, such as salary sacrifice, superannuation contributions, and other payments. Taxes and deductions are deducted from employees' gross pay to calculate net income. Calculating taxes and deductions correctly is essential to avoid penalties and compliance issues. Tax liabilities and Superannuation liabilities can also be reported from this data.
Benefits
Benefits are a significant part of employee compensation. This information is usually held in the HR department. Benefits include gym memberships, health funds, insurance, uniform allowances or training reimbursement. Benefits data determines employees' total compensation and ensures they are enrolled in the correct benefit plans.
Compliance
Payroll compliance is crucial. Labour laws, tax laws, and other regulations must be checked to avoid penalties and legal issues. Additionally, employees must be paid fairly and their rights protected.
“Any organisation without a defined payroll strategy which mitigates the risks involved in paying employees and looks to add value to the employer by the use of technology, data and insights, is potentially missing a competitive advantage in their industry.”
Transforming payroll data into a strategic business enabler.
More than 15% of Australian businesses have failed to stay profitable over the past 12 months. In addition, the cost of doing business has increased for 57% of companies.
The Access research report also revealed that payroll is more than a remuneration and compliance tool. It contributes significantly to legal compliance, financial management, employee engagement, and strategic decision-making.
The study involved 215 top executives and found that businesses that enhance their payroll system from a basic payment process to a strategic tool can increase visibility within their organisation by two to threefold.
Payroll software helps businesses measure human capital costs, reduce administrative burdens, and save time. However, only about a third of non-strategic payroll users rate their ability as 'excellent' when gathering primary employee data.
Businesses with an automated and integrated workforce management solution with inbuilt payroll gain a holistic view of their workforce. They can make informed decisions for optimal resource allocation and business growth.
The 2024 Access Group's research identified 4 key pillars where payroll data can help decision-making aligned with strategic goals:
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Workforce management visibility
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Making informed decisions at the right time
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Enhancing the employee experience
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Managing complaints and risk
1. Workforce management visibility
Few business functions can compete with payroll for handling core employee data. However, this data has so much untapped potential that it is often only collected to meet regularity requirements. This is to process payments and report to regulators. As a result, it’s often forgotten in the cloud or on a server until it’s needed again, usually for compliance or auditing.
Workforce management solutions with inbuilt payroll improve operations and workforce performance. Only a third of the companies surveyed (36%) had payroll systems that provided visibility into their workforce, operations, and data. The number of companies using payroll strategically jumps to 60%, while the number of companies without complete visibility into their workforce management data drops sharply to 23%.
The most effective way to access payroll data to overcome data visibility challenges is to use a perfect payroll solution with a single data source for strategic workforce management. Audit your data sources to see if a separate application vs an all-in-one workforce management solution is the solution that enables you to make strategic business decisions based on data.
2. Making informed decisions at the right time
Payroll data offers so much more than simple employee information. When payroll data is used for workforce planning and analysis information such as employee attendance, turnover rates, and labour costs, it helps businesses identify trends and identify future staffing needs. This allows effective planning and allocation of resources.
Additionally, payroll data can provide insights into employee demographics and skill sets, which can be valuable information for workforce planning and talent acquisition strategies.
Payroll is a strategic lever for workforce planning decisions and a driver of business growth.
Only 30% of the total sample rated their payroll system's ability to help them make informed business decisions as 'excellent'.
The number jumps to almost half (49%) for those using payroll strategically; for non-strategic payroll users, it drops to under a quarter (23%).
Businesses struggle to make informed decisions from comprehensive data due to the lack of a single data source for reporting and visibility, analytics or if the data is not available in real-time. Suppose your business lacks the visibility you need to be truly data-driven. In that case, you may need to research alternative workforce solutions that deliver a single data source in real-time, like Access Definitiv.
3. Enhancing the employee experience
In today's tight labour market, it's more imperative than ever to focus on creating a positive employee experience. With unemployment rates at historic lows, jobseekers have more choices, and employers must do everything possible to stand out from the competition.
The research highlighted only 25% of respondents rated payroll systems and their data as ‘excellent’ for their ability to inform and improve the employee experience. This number doubled to 49% in the group that used payroll strategically, compared to just 15% for those who did not - almost a threefold difference.
Payroll data provides insights into the employee experience by revealing patterns in employee salaries, benefits, taxes, awards, employee types and even longevity in the role or attrition trends. Analysing payroll data helps employers identify areas to improve the employee experience, which can be a competitive advantage. This includes personalising employee benefits, creating fair and equitable pay practices, providing financial wellness programs, improving employee engagement, enhancing recruitment and retention efforts and offering self-service options for autonomy. By using payroll data to understand employee needs and preferences, employers can create a more positive and supportive work environment that leads to engagement.
4. Managing payroll compliance and risk
Payroll systems provide detailed information about various factors, such as overtime pay, annual leave, personal leave, awards, and taxable income. Businesses can ensure compliance with employment laws by using this data.
Non-compliance costs can be significant, and failure to properly manage and comply with payroll regulations results in financial penalties, legal action, and brand tarnish. Non-compliance also leads to decreased employee trust and morale, which impacts productivity and staff turnover.
Only 40% of respondents rated their ability to use payroll data to stay on top of compliance and regulatory requirements as excellent. By contrast, only 29% of those who do not use payroll strategically achieve this result.
A compliant payroll system is essential to the continuity of a business. By having access to all data from one source, businesses can ensure compliance from start to finish. This delivers peace of mind, less stress on your payroll team and less risk of burnout. The data in an all-in-one solution makes it easier to conduct payroll audits and manage risk intuitively.
Strategic Payroll as a Business Enabler
Discover how payroll data can boost your business growth by downloading the 2024 Payroll as a Strategic Business Enabler Research Report today.