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Closing the Skills Gap With Smarter Payroll Data

Jul 27, 2017 

For three years in a row, a global survey of CEOs conducted by Ernst & Young has identified human capital as the single greatest challenge for long-term business growth. Payroll spending clocks in as the biggest controllable cost facing most companies, yet few take advantage of payroll data to ensure the investments they make into human resources are smart ones, aligned with the strategic goals of their organization.

While company executives by and large mine data from ERP, IT and sales systems for business insights, the utility of payroll data is too often overlooked, leading to inefficient hiring decisions and uninformed finance and HR practices. Why ignore such a valuable trove of information?

For one, corporate payroll systems are typically fragmented across countries, making it difficult to gain a holistic view. But even more fundamentally, there’s an issue in the way we regard the value of talent, which is to say, we look at it abstractly, as if the worth of an employee is something totally intangible, not subject to the ordinary calculus of business decisions. But while human capital can sometimes be difficult to quantify in dollar terms, payroll data can go a long way in helping global organizations ascribe a monetary value to a given skillset in a given region.

That a software developer with 10 years experience commands a higher salary than a recent college graduate is common sense. But less intuitive is the understanding that the same developer might cost more, for instance, in the U.S. than in Germany. For an organization aiming to close a specific skill gap with a strategic hire, these variances can make all the difference. Moreover, to paint an accurate picture of what a prospective hire is worth as well as what they will cost, a plethora of payroll expenses must be taken into account, all of which vary from country to country. These include statutory taxes, benefits, perks, and the cost of office space — expenses that, in the aggregate, can easily compound the cost of a salary by a factor of two. This is the sort of information that can only be gleaned from an intelligent, well-integrated global payroll system.

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And that’s just the beginning. Payroll data can yield far deeper insights. Like the fact that sometimes, the right hire is no hire at all. With the rise of AI-powered bots, machine learning and other technologies, many organizations are evaluating which roles can be replaced by automated systems. Payroll data can help not only inform these decisions, but also provide a framework for retraining and up-skilling existing talent to take on new roles. While it’s highly likely that the job of, say, a customer service agent, will largely be performed by autonomous software in the near future, there’s no reason an employee’s expertise and tribal knowledge can’t be leveraged in a new capacity given the right opportunities for continuing education.

Best of all, a smart global payroll solution with deeply integrated analytics can be used to create a transparent, employee-facing system that incentivizes workers to invest in their own future, delivering new value both for themselves as well as the organization at large.

Imagine a simple, streamlined interface where employees can plug in their existing skillset, add in a new skill they’re considering acquiring, and instantly receive a salary estimate for what they would earn. Conversely, employers could use the same system to drive awareness around an existing need, encouraging current workers to close the skill gap internally rather than through a new hire. And rather than offering vague promises of advancement in return, employers could offer a concrete dollar amount. Such an approach not only bolsters company morale, but also shields the organization from various costs incurred through new hires.

The idea of such a system represents more than the future of payroll — it is a re-contextualization of the very relationship between employee and employer. Organizations that drag their feet in embracing this new paradigm do so at their own peril, as the future belongs to those who embrace it.

Get more out of your payroll data today!

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