How payroll data can support business decisions

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By Vinod Gulvady
3 minute read ● January 27, 2020
Payroll data can support business decisions

It is no secret that companies rely heavily on data in this complex world of business in order to be ahead of competition. Timely and accurate data helps the management on critical matters such as pricing, resources, cost controls, etc. While the balance sheets, P&L statement or Financials do provide a good picture of the health of an organisation, it is important to review some crucial reports that might help to take even better and informed decisions.

A fairly new concept called payroll data analytics is taking shape and drawing the attention of management. As the name suggests, these reports are generated from payroll data and primarily related to spending on manpower. Some examples of such reports are provided below.

Overtime reports

One of the most variable and unpredictable costs to any organisation is overtime payments. A company may not have cost visibility until the payroll generates the attendance report to extract overtime hours of its employees. This report can be used by an organisation to evaluate resource imbalances, under or over utilisation of resources, help in resource optimisation, etc. payroll system should be able to allow business heads or managers to set overtime threshold hours for their respective functions and alert them if the threshold is reached or breached. This would keep the overtime cost in check or within budget and also helps in resource planning.

Wage parity

One of the most challenging tasks for a manager is to maintain wage parity amongst team members. There could be various situations why wages cannot be maintained at a particular range even though team members may perform similar tasks or are equally qualified and experienced. It could be a case of hiring at a higher wage, salary changes, promotion, etc. It is uncertain if companies regularly track this inequality by each function and recommend corrections. At some point in time, disgruntlement would set in amongst team members, badly impacting productivity and motivation and in worst case, leading to attrition of good, trained resources. Payroll systems can provide comparative data of such departments having huge wage differences between recommended pay scales (or wage tables) and actual payouts.

Attendance reports, EWACS for abscondment, etc

Attendance reports should act as an early warning and control system (EWACS) to detect abscondment or no-show employees. The system should alert the timekeeper or respective managers if a continuous absence of 2-3 days without notice has been detected by the system. In turn, the impacted manager will instruct payroll and HR departments to stop salary payments to the particular employee. This will plug any money leaks in terms of processing of ineligible salaries or extending benefits.

Ghost employees have been a matter of concern for some years now and payroll reports can come in handy to provide confidence to both management as well as stakeholders. Payroll can generate a monthly analysis of headcount by comparing its active employee data versus attendance records to weed out ghost employees or duplications, if any.

Sick leave reports, repetitive insurance claims for self, non-availing of PL

Sick leaves cause unplanned disruptions in a process and hampers continuity. However, this cannot be avoided too as these are unpredictable whilst employees are rightly eligible for such leaves. Though a very sensitive matter and may look intrusive, payroll can play a constructive role by providing sick leave reports to HR to help them check the wellness of employees who are on regular sick leaves or for that matter employees submitting regular medical claims for self. HR could plan for their counselling or therapies which will help them to perform better and also repose confidence in the company benefits program. On the other hand, payroll could also generate reports for HR of employees who have not or under availed paid leaves which could cause burn outs and exhaustions.

Wage cost predictions depending on patterns or trend from historical data

Historical payroll data can be used by Finance and Treasury teams to predict wage costs for their financial planning or funding. This will include not only actual salary costs but statutory costs, benefits, retirement funding and other variable costs such as incentives, bonus or overtime depending on the past trends.

Wage cost predictions depending on patterns or trend from historical data

Other variance reports for management review

Many payroll softwares do provide a variance report for the payroll manager to review any cost differences between any previous data, say, last month to current month or quarter on quarter or year on year. This is just to ensure that there are no errors in computations or duplications. However, what is significant to review from these reports is any abrupt sharp cost increase or decrease in overall payroll costs or any particular pay component, either from an entire company perspective or by department / cost center / entity. A regular review by senior management or audit teams would keep errors or fraud in check and control.

These are only a couple of suggestions and perhaps, many such analysis can be generated depending on the requirement of individual organisations and the kind of data available. Do write to us on what kind of reports you use and if you would like any such analytical data from your system? We would love to hear from you. Like we say, wherever there is data, there can be analysis.

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