How Calendar Length Can Impact Payroll Efficiency
Aug 6, 2019 | Topic: Analytics
Earlier this year we launched the Payroll Efficiency Index, the industry-shaping report that has reimagined what we can learn about processing payroll. The PEI analyzes anonymized payroll processing data from more than 2,500 global entities on the CloudPay platform to gain insights into process efficiency and set benchmarks for payroll performance at the global, regional, and country levels.
Rather than settle for the limited, traditional method of using SLA reports to measure payroll outcomes, the PEI introduced five key efficiency metrics that focus on the process itself. In addition to helping payroll professionals better understand how individual factors impact overall efficiency, this new model enables teams to identify bottlenecks, breakdowns, and opportunities for improvement that would otherwise be missed.
Here, we take a closer look at the fourth efficiency metric, payroll Calendar Length, and what it can reveal about global payroll processing.
What It Is
The calendar length metric calculates the number of days required to complete a payroll processing cycle, measured from the moment the payroll is locked until it is approved by the customer. The average calendar length over time provides a standard for processing that payroll teams can work to and, in many cases, aim to improve.
In 2018, the global average calendar length was 5.73 days. Countries in the Americas typically have a shorter calendar length, averaging just 3.65 days compared with 6.35 in EMEA and 6.36 in APAC. While many people would be quick to attribute that disparity to the typical frequency of pay cycles in the different regions — the Americas generally have more semi-monthly payrolls than monthly — the PEI formula accounts for variations in pay frequency. This means factors other than how often payroll is run must account for the difference.
Why It’s Important
Payroll cycle length is a powerful metric for capturing overall process efficiency. This single number gives a defined picture of how long it takes to process payroll once all the data is received. This makes it a critical metric to understand, monitor, and regularly benchmark.
If payroll leaders think of calendar length as a direct measure of process efficiency, they can observe any improvements made to that process as time savings. The number of days it takes to complete the payroll cycle depends on multiple factors, from accurate data input to subject matter expertise to error resolution time. Each variable represents an opportunity to improve processing and thereby decrease the calendar length.
Some changes can bring dramatic results, such as using Robotic Data Validation before and after gross-to-net calculations, which can cut days from the payroll cycle. Other improvements may be more subtle but no less impactful, such as a payroll systems integration that delivers automated data transfer with no manual intervention.
For Example: A US-based organization with more than 20,000 employees worldwide recently integrated their global payroll and HCM systems, and wanted to better understand why payroll took longer to process in some countries. Using the calendar length KPI to track improvements, stakeholders took steps to adopt automated data validation to reduce opportunities for delays and errors. Soon they were left with shorter cycles and clear explanations for why one payroll took longer than another. For example, they found clear correlations between the complexity of a payroll’s statutory filings and processing length.
How To Use It
The data for this key performance indicator can be accessed directly in our Analytics tool by all CloudPay customers. There, they can not only view their own data but also compare it against companies similar in size and location. The payroll benchmarking data for calendar length, as well as the other efficiency metrics, is widely available in the Global 2019 Payroll Efficiency Index. If you’re not a CloudPay customer but can calculate or even estimate your payroll calendar length, you can compare your number to the average in your countries and regions.
If your calendar length is more than the average, work with your payroll team and global payroll provider to identify all possible factors and decide which ones are impacting your processing times the most.
For additional information on payroll metrics and country rankings, download the complete PEI report at payrollefficiencyindex.com.