Why HR Leaders Must Get More Strategic About Payroll

In this article, we discuss:

• Why HR leaders must implement strategic payroll practices to drive business outcomes
• The role of automation in elevating payroll as a strategic partner
• Why payroll is more than a transactional function and can provide valuable insights for decision-making

Faced with a rapidly changing business landscape, the C-suite increasingly looks to HR leaders to create a robust talent strategy that fuels the broader business strategy. That’s a positive trend in helping HR achieve the strategic partner status it deserves. But for HR leaders to continue to elevate their strategic presence, operational HR functions must also evolve—specifically, payroll. 

Payroll operations is a business-critical function, but its back-office nature fosters the notion that running payroll is as simple as hitting a button. In reality, payroll is more than a transactional function. It has the potential to provide valuable insights for strategic decision-making and, ultimately, impact business outcomes.

HR leaders who recognize the importance of payroll as a strategic function can unlock the full potential of their role as a strategic partner, enabling their organizations to stay ahead amid a dynamic marketplace.

Payroll’s Potential: It’s All About the Data

Payroll is like a car engine—it may not be the most glamorous part, but it’s essential for everything else to function. It also impacts employees at a personal level and plays a big role in the overall employee experience. 

If payroll isn’t delivered accurately, on time, and in compliance, that can directly affect an employee’s ability to put gas in their car or purchase food. In the workplace, employees’ ability to quickly manage benefits and get answers related to their pay can make all the difference in fostering an engaged and empowered workforce.

But can payroll make the all-the-difference impact that drives business outcomes? Yes, and it does so in the same way it impacts the employee experience: through payroll data.

Stacey Harris, chief research officer and managing partner of Sapient Insights Group, shared that insight on a Workday-sponsored episode of HR, We Have a Problem, a podcast miniseries hosted by Teri Zipper, chief executive officer of Sapient Insights Group. 

“Time and time again, our data shows that rolling data throughout the organization—to more than just the executives, to more than just the HR business partners—but to all levels within the organization at some point and providing guidance on how that data should be read is . . . just like any other sort of metric, [and] allows you to make some adjustments to what you’re doing, to how you’re working with your employees,” Harris says.

For example, payroll data provides details on labor costs and tax liabilities by location, offering insights to make smart business decisions and run a compliant payroll process. From a workforce planning perspective, payroll data showing more overtime costs in one office location versus another can prompt leaders to assess workforce gaps and talent management approaches.

How Automation Elevates Payroll’s Strategic Potential

Payroll plays an important role in helping to ensure organizations operate ethically and within government regulations. However, this requires tactical work, which can involve calculating payroll taxes, data entry, or conducting audits and leave little time for professionals to focus on strategic work. 

Although technology has helped payroll processes become more streamlined, companies still aren’t achieving enough efficiencies. According to Deloitte’s most recent “Global Payroll Benchmarking Survey” report, more than 25% of survey respondents indicated that their payroll staff spends the most time each month on running payroll that is largely manual.

So, what can make the difference for payroll teams to be viewed as strategic versus just getting the job done? It’s driving efficiency with a focus on creating business impact.

First, HR leaders should assess payroll’s workload: “You have to take a step back and say, ‘I need to either get help so I can figure out how to do this more efficiently, or get help so I can outsource some of these elements and figure out what that cost is and how that will save me,’” Harris says.

While automation has helped streamline and simplify parts of the payroll process, it should do more than drive efficient record-keeping and tax filings. For payroll to serve as a strategic HR function, automation should help payroll professionals deliver forward-looking metrics. 

“[For] the organizations that were viewed as strategic, what they were doing differently from a reporting perspective was going beyond compliance reports and providing other information,” says Teri Zipper, chief executive officer of Sapient Insights Group. 

Take, for instance, overtime insights from payroll data. Tracking overtime is important to comply with labor laws and budgeting, but it can also alert company leaders to root causes and forecast future costs. Are employees working overtime because there’s a staff shortage? Or are staff working overtime due to the incentive of increased extra pay, possibly signaling a lack of efficiency?

“That’s when you start to realize that’s a forward-looking metric for workforce planning that most organizations overlook,” Harris says. “That’s the piece where, when you’re being strategic, you have to not just look behind you at what you need from a workforce planning perspective, but also ahead of you.”

Most organizations don’t connect the dots to the payroll data and workforce planning or employee experience until employees voice frustration, Harris adds. 

“And that’s not when you want to be making those decisions,” Harris says.

Utilizing Data-Driven Insights for Better Decision-Making

In times of uncertainty, HR leaders can leverage data-driven insights from payroll services to make better decisions. By analyzing payroll data, HR can gain valuable insights into employee performance, productivity, and engagement.

These insights can inform strategic workforce planning and help organizations navigate challenging times with agility and resilience. With the right payroll technology and analytics tools, HR leaders can harness the power of data to drive informed decision-making and optimize the use of their workforce for improved business outcomes.

Learn more about elevating payroll as a strategic HR function through the Workday on-demand webinar “Mastering Outcomes: a New Leadership Model for Strategic HR and Payroll.”