Getting on a pay roll – is 2010 the year to change the system?

by 19 Nov 2009

Payroll is constantly faced with the need to improve cost efficiencies while maintaining an important focus on compliance and customer service delivery. HR leader looks at some of the latest trends and reveals some important developments for payroll professionals

Payroll is a complex and ever- changing function. While tech nological developments have facilitated easier administration of payroll processes, payroll professionals are faced with ongoing com pliance issues in addition to demands for greater efficiencies. The number-one chal lenge for payroll professionals is an ever- changing legislative environment, according to Jason Low, general manager for The Association for Payroll Specialists (TAPS).

In the past six months there have been several big changes, including: changes to the definition of ordinary time earnings, particularly for bonuses and payments in lieu of notice; the introduction of Reportable Employer Superannuation Con tributions; and most importantly, the final phase of the Fair Work Act 2009, which comes into effect on January 1 2010. “Pay roll professionals will need to be compli ant with new National Employment Standards (NES), new Modern Awards and new severance conditions,” Low says.

“The new legislation will have a signif icant impact on payroll. It would appear that many businesses are not prepared for the changes.” Speaking at a recent semi nar for business owners, Low says he was surprised by how little they knew and how unprepared they are. The two issues that caught their attention were that current conditions of employment in employment contracts, federal awards, NAPSAs, exist ing workplace agreements, ITEAs and AWAs that are less beneficial than the NES will be overridden from 1 January 2010, and the new modern awards could force some employees to be covered by awards for the first time, Low explains.

“There is a common misconception that processing payroll is easy; the computer does all the work. Payroll software cer tainly makes crunching numbers easier, but it is essential that payroll professionals stay current to avoid non-compliance penal ties,” he asserts.

The need for efficiency

Payroll is constantly faced with the need to do less with more, and in-house profes sionals achieve this in a number of ways. Damian Membrey – manager of payroll control and compliance in the HR division at Monash University – says this process is a balancing act between maximising effi ciency while maintaining an important focus on compliance and customer service delivery.

There are a number of key drivers for improving payroll within Monash Uni versity, according to Membrey, with an increased focus on the process of transi tioning from processing data to manag ing data. To improve efficiency and effectiveness of any payroll operation, he says it is critical to identify and remove any unnecessary or non-value- added intervention with regard to the flow of data from the source to the end result. “By streamlining the data flow we can focus on managing the outputs and the integrity of the data and results can improve,” he explains.

The university is also looking for oppor tunities to interface data to efficiently man age additional HR/payroll-related functions, Membrey adds. Monash is plan ning to implement an online probation con firmation and salary incremental progression approval system, which he says will provide relevant data directly to and from the HR/payroll modules.

As with most other payroll profes sionals, Membrey is also tasked with the challenge of reducing payroll processing costs by increasing efficiency. “A focus on payroll error rates can provide pay roll departments with an immediate opportunity to develop improved processes that will reduce overall time spent on reworking data or process errors,” he says.

Low believes that the GFC has increased the need for payroll to be more efficient, and says payroll professionals should be constantly reviewing their processes to ensure they are performing tasks in an organised way, with a mini mum use of time and effort.

At TAPS’s annual conference, he says it was identified that the most efficient practices in the production of payroll include: a focus on technology for col lecting time data; the use of electronic sys tems to disperse wages, superannuation, deductions and payslips; making single payments per pay cycle and avoiding off- cycle payments by investigating and elim inating errors; and creating a stronger relationship with HR to streamline the end-to-end process.

Professional development

Payroll practitioners are constantly faced with the need to improve their profes sional skills, and there is an increasing trend towards certification within the pro fession. “At the moment there is no legal requirement for a payroll person to be qualified in anything,” saysBrian Williamson, managing director of bou tique law firm Workplace Law, which spe cialises in employment, industrial and workplace relations law.

“Payroll people often drift into the function from the accounts department, but I don’t think we are too far away from the day when companies, as part of risk management, will want their payroll peo ple to be qualified in accountancy or pay roll management.”

Membrey also believes it is important for payroll professionals to take time out of the operation of the business and focus strategically on where they can position themselves and their staff to offer the greatest benefit to the organisation. “Ask yourself some important questions: ‘Am I managing data effectively and efficiently? What are the top five processing pain points for our department and what can I do to improve these? What are the chal lenges or issues that I am likely to have in 12 to 18 months’ time and what can I do now to prepare for these?’,” he asks.

“Answers to these questions will lead to opportunities for you to make a real difference to your organisation.”