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Seize the Data: 5 Ways to Benefit from Payroll Analytics and Big Data

Jan 4, 2018  | Topic: Analytics

Big data may be nothing new to global businesses today; however, the means for analyzing big data in payroll are relatively recent developments. Just as they have embraced the advantages of technology and automation in HR, finance, and marketing, successful multinationals are now exploring the potential that has laid right there, in their biggest data source, for all these years.

Beyond merely an essential function or the largest budget item, payroll should be seen as a key source of important data and strategic insights. It involves a lot of precise, varied information about every person in your organization—data that could be leveraged smartly to guide business operations and objectives.

While the payroll function has traditionally been paper-bound and human-led, today’s leading global payroll solutions include automated tools that offer a deeper look into payroll data, providing reports on everything from supplemental runs to employee absence rates to compensation change costs.

However, although these reports are important and helpful, they are not the same as analytics. This is where the value of data lies and, therein, the key to positioning and leveraging Payroll as a critical strategic resource. Here are five key applications of payroll data analysis that can transform your business.

1. Minimize and Eliminate Errors

Payroll is the largest single cost for most multinational organizations, comprising between 50 and 70 percent of a company’s overhead. As such, even small persistent errors in global payroll can add up to big problems, which means visibility of your processing and outcomes is key. The ability to easily see where and how often errors are occurring, and to track trends over time, can help organizations identify areas for improvement and earn significant savings.

For example, if a particular location consistently requires supplemental runs, this information could indicate that additional training is needed or signal an issue with data collection further up the process chain. If errors in another office tend to spike at certain times of the year, perhaps you need to examine holiday schedules or adjust workflows to even out staffing and responsibilities.

2. Guide Business Decisions

At a minimum, analyzing payroll performance over time can provide more accurate yearly forecasts, which can help manage budgets and cash flow in times of change or growth. Going deeper, payroll data can be instrumental in assessing the true costs and organizational impact of both large and small business decisions.

Say a product you’ve introduced is doing well, and you want to increase production. Payroll data will give you crucial insight into your staffing capacity and performance, such as the potential cost and impact of overtime versus adding headcount, any added tax or compliance implications, or even the effect on other staff, such as support or IT. Armed with this information, you can weigh options more accurately, set pricing accordingly, and grow your business with the confidence of knowing where the money is going.

3. Inform Future Planning

Similarly, the right analysis of payroll data can inform future strategies. Having visibility into the process and challenges of global payroll and a total picture of your operational costs and requirements puts business leaders in an empowered position from which to plot and evaluate ways to grow their organization.

For example, your payroll data could reveal a trend of decreased profit as compared to compensation in one region, which could bring about a beneficial reevaluation of your staffing deployment. The data could alert you that key management in one location are nearing retirement age, so you can begin planning ahead for transitions. Good payroll analytics could also help you decide to expand operations in one location over another based on costs for compensation, training, tax liabilities, or even team communication across time zones.

4. Improve Hiring Practices

Closely related to future planning are the unique challenges and opportunities for growing, diversifying, and deploying a global workforce that will empower your organization. Understanding accurate costs and risks associated with employment in various locations is critical for planning and hiring your workforce.

Of course a lot more than a salary payment goes into hiring a new employee. Contingent workers may be an attractive alternative to full-time employees in a location with higher insurance contributions or more competitive benefit standards—or, when weighed against the costs of training new workers each time a contractor moves on or the risk of losing legacy knowledge or confidentiality, the data may show that growing a full-time team is worth the investment.

5. Win and Retain Key Employees

Jobs and the people who perform them vary widely, both within an operational team and around the world. While many roles may be interchangeable across companies, some positions and employees can be critical to the ongoing success of a major multinational organization. As such, achieving the right relationship between compensation, performance, and loyalty on both sides is a critical endeavor for any company.

Payroll data often shows a direct, positive correlation between compensation and performance. Understanding the detail of that is key to designing deals that will attract and retain the employees you want. Across localities, for example, holiday allowances could mean more or less than bonus schemes. Younger populations may be less likely to take advantage of pricier health insurance options and place a higher value on flexible work hours. Each of these insights can help you design compensation and reward strategies that deliver maximum value to both you and your employees.

Quality Is Key

The first step in leveraging the big data in payroll is to get consistent, high-quality data. This remains a challenge for many organizations still using legacy software and a fragmented payroll model. However, it is now possible to run global payroll on a unified system, meaning that all your data for all locations and populations is standardized and collated in one system, comprising a single source of truth for your critical payroll information. A good global payroll solution will offer real-time data collection, so you can get a accurate picture of costs at any time, as well as automated integrations with other systems you rely on, such as for HCM or Finance.

Real-time data visibility, process standardization, and automation are helping people realize what has always been there: a wealth of unique, valuable information with applications throughout an organization. By seizing the opportunity presented by proper analysis of payroll data, you can better position your business and your payroll team for ongoing success.


A version of this article was previously published by GPA.

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