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How To Ensure Payroll Is Carried Out Effectively

Author : Jamie Simpson

Benchmarking is a proven practice and core process of strategic management. But how can this practice be applied appropriately to explore the possibility of process improvements in payroll services? To shed some light on this subject, let's address some questions payroll managers may have concerning payroll and benchmarking.

1. How and why does benchmarking apply to payroll?

When left alone, payroll managers believe their departments employ the best and latest practices. But when they actually compare themselves to others, they're able to confirm their assumptions or find areas requiring improvement. If your payroll department operates without peer-benchmarking, it doesn't know if it's performing at its peak, its nadir, or somewhere in between.

Payroll is subject to cost controls and seeks ways to improve performance to minimize costs. Best practices help to cut costs and maintain compliance. Benchmarking then takes the best practices from other payroll departments and improves yours to save time and further costs. It also helps to answer questions you may have such as:

A. Should we be reporting to Finance/Accounting or to Human Resources?

B. Have we exceeded industry standard levels of participation on our direct deposit program?

C. Are payroll services cutting too many manual checks or is there possible room for improvement?

2. How do I establish a benchmarking process for payroll services?

Phase One: Planning. The following questions are essential to any plan's development:

A. Which process will be benchmarked? Every function of payroll has a product or an output. So essentially, benchmarking is appropriate for any payroll function. However, electing the payroll processes to be benchmarked can create a hurdle at this stage of the process. One method to overcome this is to start with the most common areas of benchmarking such as annual department budget, cost per payroll distribution, error rate in payment processing as a percentage of total payroll payments, cost per manual check, and percentage of payroll time records received error free. Determining the key ratios and indicators is a critical first step.

B. How will the data be collected? That's contingent on time and budget constraints. There's no singular way to collect data.

Phase two: Analysis. After picking the function you want to benchmark, study the process in your organization, make sure you understand your current processes and practices before beginning the benchmarking process, establish your metrics and analytics, determine your current performance ''gap,'' and project future performance levels. Metrics are essential in benchmarking. They will tell us where we were, where we are, and where we are going. You can't apply a best practice unless you know these specics. The number of employees on direct deposit is a metric. Analytics, however, refers to the methodologies, metrics, processes, and systems used to monitor and manage the business performance of an enterprise.

Phase three: Integration. Once you complete the benchmarking, use the information to make improvements. You must communicate the benchmark ndings by creating the package that pulls together all of your research, gain acceptance by management to implement your changes, and finally establish functional goals that are reachable but valuable as a real cost savings.

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Submitted : 2011-02-21    Word Count : 1    Times Viewed: 555