> How payroll can raise its strategic profile and deliver critical business insights

2019 American Payroll Association Survey, sponsored by Kronos

Changing the Perception of Payroll

The State of PayrollHistorically, many organizations have viewed payroll as a tactical function — due to its transactional nature, heavy administrative requirements, and because payroll teams have often struggled to demonstrate how they deliver strategic value to the organization.

But times are changing. More organizations are investing in efforts to track KPIs and measure the business impact of internal processes — including payroll. Significant changes to state labor regulations like minimum wage increases and mandatory family and medical leave, as well as federal proposals to change the Fair Labor Standards Act (FLSA) overtime threshold and the W-4 format, are putting payroll at the forefront of organizations’ compliance strategy.

Ultimately, these factors are pushing organizations to transform the role of payroll.

This eBook highlights the critical findings of the 2019 State of Payroll study — conducted in February 2019 by the American Payroll Association on behalf of Kronos. The study explores how organizations measure the business impact of payroll and examines payroll’s shift from a tactical, back-office function to that of a critical strategic contributor.

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The Perception GapWhen it comes to strategic value, payroll has a perception gap. Even though the vast majority of payroll professionals view themselves as performing a strategic business function for their organizations, far fewer of their coworkers share that perspective.

As the adoption of payroll technology accelerates, payroll teams have new opportunities to become strategic contributors. But that can’t happen until payroll shakes the perception that it is solely a tactical, back-office function.

of payroll professionals view themselves as

strategic

of payroll professionals believe the C-level views

them as strategic

78%

22%78.03%

Myself

52.53%

My supervisor

28.57%

My functional department

leader

21.66%

Other functional

departments

22.12%

C-level executives

8.29%

Employees

Q: Who views payroll as a strategic function?

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Communicating the Impact of PayrollUnderstanding the business impact of payroll on metrics such as cost savings, efficiency, and compliance violations requires that payroll create and track KPIs. The failure to use KPIs can contribute to the perception that payroll isn’t strategic.

Unfortunately, over half the teams surveyed report that they don’t track KPIs. Among teams that do track KPIs, the study found that the most common are:

• 37% Number of manual, voided, and stop payments

• 24% Payment errors as a percentage of total payroll

• 20% Total processing time per cycle

And worse, nearly 10% of organizations don’t know their cost of payroll.

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How Speed Impacts Payroll PerformanceHow long it takes to close out and reconcile payroll is an important KPI for understanding the efficiency and administrative impact of your payroll processes.

When you combine this metric with the payroll error rate, an interesting correlation is revealed: compared to organizations with higher error rates, organizations with the lowest error rates close out payroll faster — allowing them to add greater value to their organization through more streamlined and accurate processes.

Q: How long does it take your organization to close out payroll?

1 day 28%

1-2 days 50%

3+ days 22%

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Case Study Improving Payroll EfficiencyProblem: Rehab Resources, a non-acute care organization, struggled with lengthy payroll processing times due to an outdated system that required payroll to manually enter time at the end of every pay period. The company needed a solution that unified timekeeping and payroll to simplify and automate processes.

Solution: After implementing Kronos, Rehab Resources was able to reduce payroll processing time from 7 days to 2 days — enabling staff to focus on more strategic priorities.

“We don’t have as many errors, so it’s real ly helped payrol l make sure that employees are paid accurately without having to go back and f ix mistakes.”

Ryan BaldwinIT Director

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Delivering Business InsightsPayroll sits at the intersection of business data and employee data — the sweet spot for delivering critical insights into the health of an organization.

Without effective reporting tools, it can be difficult to accurately assess issues like pervasive overtime, time theft, and low productivity. And when you can’t see these challenges clearly, senior leadership can’t develop the best strategies to address them.

With reports like gross wages, total taxes paid, checks greater than a determined amount, excess hours worked, and account balances, payroll is in a great position to deliver valuable strategic business insights.

9.13% Very difficult | Reports are pulled from multiple, disparate systems and require significant manual manipulation.

24.66% Somewhat difficult | Reports are pulled from multiple systems and/or may require some manual manipulation.

25.72% Somewhat easy | Most reports are pulled from one system and/or require minimal manual manipulation.

13.7% Very easy | All reports are pulled from one system and/or payroll system provides a dashboard of standard reports.

26.79% N/A | Do not pull reports.

1 in 4 payroll teams don’t pull standard reports

1 in 3 payroll teams find reporting somewhat or very difficult

Q: How easy is it to pull standard and KPI reports from your current payroll solution?

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The Risks of Aging Payroll Systems Trying to make a strategic contribution with an outdated payroll system is a huge challenge. With their limited capabilities, rigid reporting, clunky interfaces, and reliance on disparate data sources, older payroll systems get in the way of today’s modern payroll teams. The result? 

• Inaccurate, inefficient payroll

• No insight into workforce data

• Poor employee experience

More than 6 Years Old

45%

More than 10 Years Old

27%

Q: How old is your payroll system?

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Modernizing Payroll Pays OffThere’s no question that over time, payroll software has improved. We’ve moved from unwieldy, rigid on-premise options to modern, user-friendly, flexible cloud-based solutions. Moving to these modern solutions is a critical step for payroll teams seeking to improve efficiency, compliance, and the employee experience.

Modern Payroll Solutions Top 5 Must-Haves

94%

Security access options based on

user role

89%

On-demand reporting

85%

Frequent compliance and

regulation updates

84%

Real-time reporting and

analytics

82%

Employee self-service

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Case Study Moving to a Modern SolutionProblem: An aging payroll system can have serious business implications, as Environmental Control, a building services company, found.

The company’s legacy HR and payroll system didn’t have the robust reporting functionality it required to get visibility into labor costs for its 4,300 employees in 50 franchise locations across 19 states. This gap in reporting was preventing the company from understanding how it could improve service and profit for each franchise location.

Solution: After implementing Kronos, Environmental Control was able to gain real-time visibility into its actual versus budgeted daily and weekly labor expenses by job. Now the company has the insight it needs to dramatically improve each franchise’s customer service and profit levels.

“For our management teams running al l over town working to track employee activity, having mobile, schedule, and labor visibility [with Kronos] has been critical for us.”

Jeff LaBenneVP Marketing/Development

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The Benefits of a Unified SystemA unified system for payroll, time and labor, and HR provides many benefits, including easier data management, improved user experience, and more streamlined processes. Savvy payroll professionals know that this integration of workforce data is key to their ability to deliver strategic value.

Over 60% of respondents say payroll must be unified with time and labor management

Nearly 60% of respondents say payroll must be unified with HR

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Closing the Payroll Perception GapPayroll teams can shift perceptions and make the transition to becoming a strategic department and business partner. It starts with an audit of your current payroll processes and systems to identify areas for improvement. Four key areas to address are:

• System age and functionality

• Compliance and efficiency KPIs

• Reporting and analytics gaps

• Employee experience feedback

Transforming payroll into a more strategic role requires the right technology. The study found that the Kronos unified solution for payroll, timekeeping, and HR was the most commonly used payroll solution among strategic payroll teams. Kronos can help you:

• Improve accuracy, compliance, and the employee experience

• Improve reporting and KPI tracking

• Better understand total cost of payroll through clear, transparent pricing

• Realize greater value through award-winning customer support and service

Learn more about Kronos and see why it is the most commonly used payroll solution among strategic payroll teams.

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AppendixKronos sponsored the American Payroll Association survey. A total of 651 payroll professionals from North America replied to the survey during February 2019.

Primary role

0

20

40

60

80

100

OtherExecutiveManagement

OperationsHumanResources

FinancePayroll

Level within the organization

0 5 10 15 20 25 30 35 40

Other

Coordinator

Specialist

Administrator

Manager

Director

Vice President

C-Level, President, Owner

Number of total employees (full-time and part-time)

0

5

10

15

20

25

10,000+5,000 –10,000

2,501 –5,000

1,001 –2,500

501 –1,000

250 –500

101 –250

1 – 100

0 5 10 15 20 25Retail

Professional Services

Nonprofit

Manufacturing

Logistics

Hospitality

Healthcare

Government (Federal)

Government (State/Local)

Financial Services

Education

Industry

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About KronosKronos is a leading provider of workforce management and human capital management cloud solutions. Kronos industry-centric workforce applications are purpose-built for businesses, healthcare providers, educational institutions, nonprofits, and government agencies of all sizes. Tens of thousands of organizations — including half of the Fortune 1000® — and more than 40 million people in over 100 countries use Kronos every day. Visit kronos.com. Kronos: Workforce Innovation That Works™.

© 2019 Kronos Incorporated. Kronos and the Kronos logo are registered trademarks and Workforce Innovation That Works is a trademark of Kronos Incorporated or a related company. Kronos Workforce Ready and Kronos Payroll Services are provided by and contracted with Kronos SaaShr, Inc., a wholly owned subsidiary of Kronos Incorporated. For a full list of Kronos trademarks, please visit the “trademarks” page at www.kronos.com. All other trademarks, if any, are property of their respective owners. All specifications are subject to change. All rights reserved. CV1086-USv1

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