Dear payroll, time to move from bottleneck to business booster

By Luca Saracino, Chief Commercial Officer at Strada

December 13 2024 - Payroll may seem like a flawless operation from the outside, especially after a company has transitioned to digital and automated systems. And, many execs believe that once this step is complete, the challenges are simply behind them. However, the reality is more complex.

Despite cloud and automation upgrades, hidden hurdles can still undermine payroll performance, leaving a gap between expectation and reality. There's a myriad of ways to to help businesses better identify these challenges and better leverage their payroll's capabilities. So, how can teams realise the full potential of payroll and the knock-on effects on the rest of the business?

Why your payroll could be underdelivering

According to our recent research, 47% of payroll processes are still handled manually. Despite investments in technology and system integration, many companies continue to rely on manual processes. This not only increases the risk of errors but also leads to an average of 345 time-consuming reruns per year.

Additionally, issues such as data inconsistency, weak governance, and poor integration can negatively impact payroll performances behind-the-scenes. Too often, payroll teams find themselves bogged down by inefficiencies, errors, and increased costs, preventing them from leveraging payroll´s potential to provide strategic insights that drive business growth.

Unlocking the full benefits of the payroll system

Payroll's potential extends far beyond just paying employees accurately and on-time. When integrated with HR, Finance, and Operations, payroll becomes a powerful business asset, providing real-time, data-driven insights into workforce trends, pay equity, and performance.

Yet, our Bridging the Gap report reveals that 89% of businesses surveyed feel their payroll systems aren´t delivering the insights they need. This underscores the importance of a well-integrated system to unlock payroll´s full potential.

Scalable and well-integrated systems help businesses allocate resources more effectively, ensure pay parity, attract and retain top talent, improve overall workforce management, and maintain compliance.

Furthermore, companies that optimize their systems beyond initial implementation are better positioned to leverage advanced technologies like AI and automation to reduce errors and free up payroll teams for strategic analysis.

Fully utilizing payroll's capabilities provides companies with insights that drive smarter decisions and innovations, enabling them to maintain a competitive edge in a rapidly changing business environment.

Why the human element still matters in payroll

Overcoming payroll's challenges is not a matter of technology alone. To fully harness its potential, a focus on people, skills, and continuous process refinement is essential.

Payroll's true value is realized when systems and skilled teams work together to deliver the insights that drive better decision-making and business outcomes. However, while 99% of respondents in our report agreed that people are crucial to payroll, 49% identified a lack of internal skills as a major obstacle to achieving integration.

Giving people the skills to manage these tools is vital for ongoing optimization. Without the right expertise, payroll teams will struggle to harness the potential of new technology, limiting the full benefits of digital transformation.

Tried and tested approach for payroll transformation

To turn payroll from a bottleneck into a business enabler, companies must bridge the gap between their idealized view and the operational reality by balancing people and technology.

Here are three targeted steps businesses can take:

1. Start with a clear, honest assessment

   Evaluate how well payroll systems are integrated, identify where manual processes still exist, and develop a focused plan to address inefficiencies.

2. Develop skills with a focused HR strategy

   Determine the skills needed for the new payroll system, assess current team capabilities, and create a training plan to bridge any knowledge gaps.

3. Have a long-term maintenance plan in place

   Payroll and payroll processes are not a one-and-done exercise. Develop a maintenance plan that includes regular reviews and quality checks to ensure data accuracy. Incorporate ongoing tech updates to maximize system value and provide consistent training to keep your team skilled and ready to leverage new tools as payroll needs and technology evolve.

It's never too late to transform the nitty gritty processes

While digital and automated payroll systems promise efficiency, the reality often reveals hidden challenges that prevent businesses from fully unlocking payroll's potential. From manual processes to data inconsistencies and weak integration, these issues can slow everyone and the business down. By getting to the root of the problem, addressing these inefficiencies, enhancing system integration, and empowering teams with the right skills, companies can transform payroll into a powerful tool for better decision-making and business growth. It's just a case of when.

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