The journey toward payroll best practices can be a daunting one. Managing the process is key. A good approach is to break down the elements of the payroll process in order to focus and direct efforts more effectively rather than trying to address everything at once. This process begins by making sure the services provided and the model for delivering those services will help the organization achieve its strategic objectives for the organization as a whole and payroll specifically.
From there, companies can look for ways to:
- eliminate unnecessary steps and processes,
- simplify and standardize the remaining steps and processes in order to reduce complexity,
- automate as much as possible to reduce the potential for errors and the effort required to complete processes and
- leverage available delivery tools, such as self-service and outsourcing, in order to deliver services through the best available means.
In addition, "every company has a formal or informal service delivery model that they can use to leverage best practices in each component," says Felicia Cheek, director of the global payroll advisory program with The Hackett Group in Atlanta. Hackett has identified the seven components of this service delivery model:
- Information, including data standards, report design, key performance indicators and master data elements.
- Service placement that specifies which activities and processes take place and where.
- Process sourcing that focuses on how and where processes and sub-processes are sourced.
- Process design, which focuses on the processes, exception-handling rules, mappings and other elements associated with functional roles and responsibilities.
- Enabling technology required to support service delivery.
- Skills and talents needed to ensure service delivery and process transformation and execution.
- Governance for decision making and organizational structures, entities and reporting lines.
Using this model or something similar allows companies to have a more structured approach to implementing best practices. For example, Cheek notes best practices in service placement would not necessarily measure the effectiveness of a service but where that service should take place to enable other best practices.
As globalization has become more widespread, many companies have begun looking for ways to leverage best practices for their global payroll operations. In these cases, "companies start by looking at what best practices they can do on a global basis and which best practices are best leveraged on a regional or local basis," says Cheek. For a global company, service placement focuses on determining whether an activity or process is best done on a local, regional, corporate or global level to enable best practices. Given varied legal and regulatory requirements, certain processes will need to be handled at the regional or local level.
Overall, companies need to consider whether this service model and the resulting process will encompass only payroll or the entire "hire-to-retire" process. "If it is going to focus on the entire hire-to-retire process, those changes will have a wide-ranging impact on human resources, benefits, payroll, accounting and so on," says Cheek.
Read the first article in our payroll series "What's at Stake with Payroll Best Practices."
