6th November 2007Paul Rains

Payroll Software & Technology - Trends and Challenges

Human - Straw Poll

Stand up if you use Self Service Remain standing if you produce e-payslips for

your employees Remain standing if your absence or overtime is

entered by the line / employee using self service

Remain standing if the line inputs leavers using self service

Remain standing if the line creates new starters using self service.

Performance of HR / Payroll Systems

29% 29%

5%

37%

0%

5%

10%

15%

20%

25%

30%

35%

40% Yes MeetsRequirements VeryWell

No Do Not MeetRequirementsAdequately

No Do Not meetRequirements At All

Yes MeetsRequirementsAdequately

Source - PMP

Do your HR / Payroll IT systems meet / exceed you current requirements?

ERP or Best of Breed?

ERP Highly Configurable Costly to Develop Costly to Maintain Slow to Implement No interface

normally required Payroll is not usually

core business

Best of Breed Functionally Rich Specialist Knowledge Cheaper Option Quicker to implement Usually requires

interfaces Payroll is usually core

business

Current IT HR Systems Trends Browser Based

Web 2.0 E.g. Dot Net Global Solutions

Rules based Multi Currency Multi Lingual

Self Service Automated Workflow Point in time reporting Data Warehouse

Browser based Global Solutions Connectivity over the intranet / internet.

Just starting to appear on the U.K. market. Data can be viewed in any language / currency Rules based Highly configurable (like SAP / Oracle) give the

option of paying all employees, irrespective of their geographical location from a single database

Can be designed to dovetail with your own payment strategy if required, but designed for global deployment

Perceived benefits of a browser based system (source PMP)

Integrated Solutions True integrated solutions

Have a single Database Share common data which is entered and

held only once Usually capture data at source Permit segregation of duties if this is

required by the user Allow all types of data (HR / absence / T&A /

payroll) to be reported upon in a single report

Common Shared Data

HR Payroll Absence P11D

Personal Details

Contract Details (T&C’s)

Remuneration Details

Organisation Details

Financial Details

The Challenges ahead

UK HR Directors say that -

By 2020 all transactional processes will be devolved to employees or the Line, or they will be out sourced

0%

50%

100%

2007 2010 2015 2020

Outsource

Self Service

Central Input

HR guru - David Ulrich says

We must have HR innovators delivering innovate HR solutions

What should Payroll Practitioners do?

Seize this opportunity Accept you role will change Focus on strategic issues that add value to

your business Take ownership of all HR / Payroll processes Take ownership of HR/ Payroll systems and the

data they contain

INNOVATE...INNOVATE…INNOVATE

How can Payroll add Value?

Reduce process variation by: Automating a task that was previously done

manually. Eliminating tasks that a customer would not be

willing to pay for. Eliminate tasks that does not subsequently

change the output Measure the ‘before’ and ‘after’ effect to

quantify the improvement in numeric terms.

Which of these tasks add value?

Input of Overtime in to the payroll from a paper claim form /spreadsheet / email.

Issuing a duplicate P60. Keying in a new starter details personal details into

the payroll system from a new starters form. Keying in an employees sickness absence into the

payroll system from a paper based / emailed absence return.

Issuing a manual payment to rectify an error with an employees pay.

Checking all payroll input prior to the payroll running. Issuing a P45 for a leaver.

Short to Medium Term

Ensure the integrity, accuracy and completeness of all data

Strive to improve all HR / Payroll processes using intelligent workflow software

Make greater to use of Self Service

Long Term

Combine data for reporting purposes between systems that feed and receive data from payroll.

Combine data for reporting purposes between payroll and other internal systems that report / indicate profitability.

Develop reporting strategies to monitor and measure Human Capital Management

What is Needed?Greater alignment between HR IT Systems and HR transactional processes. HR strategic goals

and Human Capital Management

THE ‘H’ FACTOR

Systems Processes Strategy HCM

The Strategic Payroll Role

PROVIDE

OWN

INNOVATEDEVOLVE

ENFORCE

PAYROLL

Take Ownership

HR / Payroll data To ensure accuracy and integrity and the data

is used for the correct purpose.

HR / Payroll system Align functionality and technical capability with

HR strategy, business processes and requirements.

HR / Payroll transactional processes Align with HR policies and procedures and

sound accounting practices.

Innovate

Think about how you can help the business Design slick and automated IT solutions for HR

transactional processes Design slick processes that minimise WIP,

errors and re-work Provide management information to

operational managers to enable them to make informed business decisions relating to their people

Develop Innovative Solutions

True E-recruitment Capture basic personal details,

qualifications, previous work experience, competencies that feed HR / Payroll.

T&A interfaces - PDA’s / Phones Monitor attendance Capture hours lost / additional hours

worked / premium hours Absence, hours days lost

Time & Attendance Systems

Traditionally used to capture absenteeism and overtime payments Swipe cards Phones / Blackberries or PDA’s Develop by adding a rostering schedule

to allow operational mangers to make more informed decisions.

Calculate ‘lost time’ Calculate average Absenteeism rate

Typical Payroll Interfaces

IN OUT

T & A Absence, Sickness, Overtime, Shifts

Operational

Productivity Pay, Commissions, Bonus

Flex Bens Salary Adjustments (sacrifices)

HMR&C P9, P6, Student Loans

G L Payroll costs, cost codes

P11D Personal, benefits and Taxable Earnings

Flex Bens Benefit, Salary Details

Pensions Pension contributions and Earnings

HMR&C P45, P11 and P35 (EOY)

Consider interfacing or integrating these systems Fleet Systems

Company cars / vans Benefits and Remuneration

Flexible Benefits Expenses Salary Sacrifice schemes P11D’s Non cash Incentive Payments (PSA’s)

Detecting Trends – Smart Payroll Systems

Creating a payment profile for each employee Alert you to abnormalities in the profile before

payments are made. Remind you when a payment usually due this

period has not yet been processed Search engines to make comparisons for

benchmarking etc.

The reduction in errors and omissions = less re-work

Use EDI / FBI

In year forms P6’s, P9’s P45’s Student loans P46’s P46(car)

Year end forms P14’s, P35 P11d’s

Typical Payroll Workflow Processes

IN OUT

Overtime Authorise / Reject payment

Expenses Authorise / Reject payment

Absence Apply / authorise parental leave / pay

Starters Authorise for payment

Changes Authorise changes to salary

Leavers Recover any monies outstanding, Issue P45’s, SSP1 Forms

Starters Issue Form P46, produce File for WNU

Third Parties

Payments and Reports to Third Payments

Consider Automating

PAYE settlement Agreements (PSA’s) Independent Salary reviews using

workflow Third Party claims administration by

identifying it as an individual absence category and recording the cost and the financial loss

Use intelligent workflow as a task management tool

Manage your service delivery effectively Monitor the amount of WIP in the process

cycle at any point in time Identify bottle necks in the process cycle Escalate tasks that look like failing to meet

a KPI’s Use it as a tool to identify training needs Use it for Benchmarking KPI’s

Provide - Data Driven Business Solutions

Comparing point in time data enables analysis and trends to be identified. E.g. The relationship between overtime payments,

absence levels and headcount levels The data warehouse concept allows you to bring data

together from different systems for analysis E.g. How did the pay review in the sales

department impact on sales targets? E.g. How does the budget forecast from the

accounting system compare against the actual spend in payroll?

The Data Warehouse Concept

Total Reward Statements

Meta Data

Payroll P11D Accounting Flex Bens

Devolve Responsibility

Use ESS and MSS to help: Define and document all your transactional

processes Build automated processes in the build up to

gross with work flow tools Embed the rules into the workflow to maintain

an element of financial control Relinquish control and empower employees

and the Line

Self Service Survey

17%

3%

46%

34%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

No Plans atPresent

Don't Know

Plan to Do SoIn The Future

Have AlreadyDone So

Is you Company Implementing Self Service?

Source PMP

Smart Web Based Systems Makes delivering Self Service to the line and

employee very easy No internal /external communication considerations /

issues. 24/ 7 access anywhere anytime. You decide what screens you do NOT want as self service. The technology will enable intuitive forms to be created

easily. Any MS Word document or MS Excel spreadsheet can be

published as a web page for completion of data on-line. Rules built in will ensure that only the applicable fields

are completed accurately and all mandatory data is completed.

Employee Self Service Consider devolving to employees

Updating their own Personal details Updating their own Bank Details Applying for Annual / Paternity / Maternity /

Adoption leave Submitting an Overtime claim Submitting an Expenses claim Ordering a new company car Flexing Benefits Viewing Payslips / P60’s and P11D’s

Manager Self Service Consider the Line for:

Recruitment Recording sickness absence for their staff Approving Leave Requests Authorising O/T and Expenses claims Measuring and monitoring they own

performance in relation HCM Creating new starter / leaver records. Making changes to T&C’s and cost codes

Examples of good use of Workflow and B.I. Tools

When asking the line manger to authorise leave show them who is also off in that department at the same time

When a line Manager is completing a sickness absence show them any non-attendance patterns / trends for that particular employee and or a Bradford factor score.

When asking an internal customer to ‘sign off’ the payroll show them this periods payroll costs compared against the same period last year

Monitor & Measure

The Rule Enforcer Transactional processes in the build up to

gross and BACS submission. Minimise operational activity on all

transactional processes. The organisations PAYE liability is as low as it

legitimately can be. All HR policies and procedures are adhered to. That PAYE compliance is adhered to.

Consider creating an HR SSC

Do’s and don’ts Don’ t necessarily need an ERP system Do need clear and defined business processes Do need a clear HR IT system strategy aligned to business processes Do need clear definitions of roles and responsibilities Do need segregation of specific duties to maintain financial control

Benefits of HR SSC

Benefits Single location Economies of scale Specialisation Alignment of HR /

Payroll IT systems and Transactional processing strategy

Will reduce the risk of payroll alone being outsourced

Suggested HR SSC Delivery

In Summary

Your roles are changing Smarter web based systems will allow more

transactional processes to be devolved to the line or the employee.

Business will demand more information from HR / Payroll systems and other employee based systems to help them make informed decisions about their biggest cost (their people).

Data provided will need to accurate and up to date.

Financial control, PAYE compliance and data integrity must not be compromised