Improve Business Efficiency with These 5 Payroll KPIs

Payroll Key Performance Indicators (KPIs) are essential to the smooth and efficient running of payroll, as well as to the company's overall health and efficiency. 

Covid-19 pandemics and the Great Resignation are affecting workplaces worldwide and impacting payroll efficiency in many companies as well, according to a survey by CloudPay. This is why measuring and following up on payroll KPIs is now more important than ever. 

Payroll Key Performance Indicators (KPIs) are a series of metrics to measure payroll progress toward an intended goal. Most importantly, to be able to increase efficiency in staff management and employee pay, as said by Databox.

The payroll department, in fact, plays a big role in business performance and the company’s bottom line. So efficiency is, without a doubt, crucial to managing payroll. By measuring essential aspects of payroll workflow, the company will be able to get useful pieces of information that influence decision-making. 

Here are several quantifiable measures or KPIs you can use to track payroll performance progress. Additionally, use the data to improve business effectiveness. 

Training Costs

Many business leaders consider tracking training costs separately from payroll. Because training costs are closely related to payroll and it is an inevitable process in a company when having a new hire. 

Paying an employee while they're in the training phase means an extra cost for the company. The reason for this is that new employees must undergo training and onboarding before they can establish themselves and meet all of their job responsibilities. 

By monitoring training costs, the company will be able to optimize the training process. As a result, training costs will be minimized and training experiences will be improved for both the trainee and the trainer. 

Employee Leave

Employee leave or paid time off is usually one of the benefits provided by the company for its employees. Monitoring the number of employee leaves is imperative for the company because the data can be used to assess cost-effectiveness and workplace functionality in the company. 

If the number of employee absences is increasing, it also means a higher employee cost. The company might experience problems at some point if this continues without improvement. By including employee leaves as a payroll KPI, the company can better plan when to initiate workplace improvements. 

Employee Overtime

One of the most critical payroll KPIs is measuring employee overtime. Playroll states that this data can be used to analyze the health of each department as well as the health of the company overall. If employees are continuously working more hours, there’s a chance that there are too many responsibilities or there aren't enough people to support the workload. 

In addition to ensuring that employees who work over 40 hours are paid what they are entitled to, this KPI also helps companies to take proactive measures to reduce the amount of overtime in the future.

Time to Run Payroll

This metric is extremely valuable, especially for companies that run payroll in-house. Payroll is one of the finance team’s responsibilities. So the company needs to know if the payroll process is effective and able to be handled well. 

To measure this, the company needs to count all the time that the payroll team spends on payroll activities. In detail, all the time needed to pay the correct amount to every employee at the right time.

By measuring this as one of the payroll KPIs, a company can decide when is the time to give more support to the finance and payroll team. This may suggest a need to look at other payroll solutions such as automation or outsourcing. 

Payroll Accuracy Rate

According to BambooHR, there are many variables to ensure accurate payroll. For example the differences in salary type, time tracking for hourly compensation, and application of different leave categories, in addition to tax and fee payments. 

This is why the payroll accuracy rate is a very important KPI to measure. Also, a lack of accuracy in the payroll process can put your company’s morale and compliance at stake. But mistakes can always happen, so people in charge of payroll need to make sure to find every error and correct them as soon as possible. 

In addition, the more errors occur, the greater the impact on businesses' financial and opportunity costs. So try to measure the payroll accuracy rate by dividing the number of incorrect payments by the number of total payments. Set a goal to improve this number over time.