Payroll and HR administration has historically been seen as a back-office function, a ‘basement-level’ issue that holds no real strategic value. As long as nobody is shouting about it, the prevailing belief in many management teams is that you can leave well alone. This is a big mistake.

Whereas payroll and HR administration is often described as ‘back-office’, it should more accurately be labelled as ‘business-critical’.

Without the ability to pay its people accurately and on-time, a business can’t operate to its maximum potential. This is because:

1.    Payroll is a central transaction in the employer-employee relationship – fundamental to employee relations and the formation of company culture.

2.    Payroll is the single biggest operational cost for many businesses.

3.    Payroll is complex, as it’s typically the repository of the company’s accumulated complexity arising from change like M&A and evolutions of policy.

4.    Payroll is an increasingly regulated area, with obligations as diverse as National Minimum Wage, FCA rules around incentivisation, CEO pay ratio reporting, and the GDPR.

With this in mind, it’s clear that it can’t be the sole concern of the payroll and HR admin team. A business with an underperforming payroll and HR system will feel the impact on its people, its finances, and its reputation. Hence why so many businesses are now using software like the ​Zenefits payroll software to keep on top of their day to day transactions.

By contrast, a business that ascribes strategic importance to how it handles employee data and pays its people will reap rich rewards. Here’s why.

The foundation of employee experience

It’s would be hard to believe there is a company anywhere that can claim 100% accuracy on its payroll and (HR) records. There are many factors that explain this, but one of the main one is that employees are increasingly responsible in modern companies for the inputs that drive pay, as HR functions move towards self-service.

However, our recent research suggests a problem is affecting many companies that is much more serious in scale and impact than one might expect.

According to our recent research, 39% of UK employees have been paid late on at least one occasion, while 60% have noticed mistakes on their payslips.

Roughly half (48%) said that this made them feel their employer didn’t care about their wellbeing, a similar number (40%) claimed it put their financial situation at risk, and a quarter (25%) admitted it made them less engaged and productive at work.

But perhaps most significantly, one in five (21%) said they have actually changed jobs because of a payroll incident.

We were surprised by these findings, since the employers we work with on payroll have a high standard of efficiency and accuracy. Yet the evidence suggests our customers’ experience may be untypical.

Too many organisations maintain the attitude that “if it ain’t broke, don’t fix it”, believing that they can get by with legacy systems and prioritise other “sexier” areas for HR investment. We believe companies that are serious about their people strategy should fix this fundamental issue before anything else.

Companies send a powerful cultural signal to their employees when user-interfaces are modern, easy to use and faff-free. Modern payroll and HR software fit a culture which focuses on customer experience and responsiveness.

If a company subjects its employees to a rigmarole of frequent errors, multiple sign-offs, paper forms in excess and mind-numbing administrative processes, it’s hardly surprising if those employees then treat customers in the same way.

Even the way data is collected in payroll and HR systems can send powerful signals about culture and values. For example, allowing employees to self-describe their gender within the system helps to promote an inclusive workplace culture.

In a sense, this is an example of corporate existence catching up with how the world has changed for millennial and Generation Z consumers – Facebook already allows over 70 gender categories for users to identify with.

The power of data

At a time when technology is transforming a plethora of business processes, payroll and HR administration is no exception. Advances in automation have enabled greater speed and accuracy, and modern user interfaces can make the experience painless for regular employees and HR professionals alike.

But one potential benefit of modern payroll technology that’s often under-appreciated is the increased power of data to create business insights.

The payroll, and the HR records that drive it, is the definitive source for all the fundamental knowledge that the business has about its employees – who joined, who left, who got promoted, who worked what hours, and much more.

Basic analysis can help identify outliers which might indicate an historic aberration in rates or worked hours in the past, driving additional cost. More sophisticated correlations can be made, to create predictive analysis of HR data – for instance, to suggest who might be at risk of leaving an organisation.

The best organisations are able to correlate HR variables from the payroll with other business metrics, unlocking real P&L value and making the HR voice much more authoritative in the boardroom.

We are seeing increasing numbers of companies begin to recognise the boardroom value of modernising backroom processes. One hopes for the competitiveness of British business that, in a challenging economic environment, more soon follow suit.

John Petter is CEO of Zellis.