Has Technology Fully Solved Time and Payroll Administration?
Some HR tech experts say that technology has essentially solved time and payroll administration. A quick look at the news, however, shows that there’s more to the story.
- Exhibit 1: Phoenix, the Canadian federal pay system, is in complete disarray. Canada’s auditor general has said that stabilizing Phoenix will take years and cost more than $540 million, according to The Canadian Press.
- Exhibit 2: After burning through $50 million, the State of California terminated an $89.7 million contract to modernize its payroll system after the effort foundered.
- Exhibit 3: Marin County in California voted to stop an ongoing $30 million ERP software system because it “never worked well.”
What’s the true story? The “experts” get it mostly right, but it’s easy to be misled. Most time and payroll solutions DO handle administration effectively—but only if requirements are not complicated. When time and payroll administration gets complex (such as in the examples above), major problems can result, especially if you’re using a “one-size-fits-all” solution.
What Factors Make Time and Payroll Administration Complex?
Time and payroll administration gets complex when organizations have complex work environments. Common characteristics of such environments include:
- Jobs/positions are budgeted. The way people are paid is highly structured based on the role.
- Jobs/positions carry differing rules that govern how time, pay, attendance and benefits are to be administrated.
- Positions have incumbents. Certain positions might have budgeted minimum and/or a maximum number of incumbents. For example, a manufacturing facility might have 12 budgeted journeyman No. 1s and 20 journeyman No. 2s, with different rules for each.
- Individuals can hold multiple positions that dictate different pay, benefits, time and attendance policies.
What Types of Organizations Often Have Complex Time and Payroll Administration?
You may have noticed that all three examples at the top of this post involve public sector employers. This is not a surprise because governments are highly likely to have complex time and payroll administration requirements. An individual local government typically encompasses and operates many different types of functions, including:
- Health services
- Protective services (fire, law enforcement, courts)
- Human services
- Public works
- Administration (HR/accounting, IT, tax collection)
Each individual function may have separate policies that govern time and payroll administration. For example, even within protective services, the fire department and the law enforcement agency might have different rules that determine overtime pay calculations or pension eligibility.
Other examples of employers that have complex time and payroll administration:
- Educational institutions (school districts, schools, and universities/colleges), whether public or private. The most obvious example of a complexity is when teachers work 10 months of the year, but many are paid over 10 months while others are paid over 12 months. But we also see other complexities, such as variances in benefits and overtime and vacation rules among adjunct instructors and full-time professors.
- Private employers that use union labor—especially from multiple unions. Most commonly this is seen in manufacturing, where an employer might have to follow policies set by multiple collective bargaining agreements, a significant administration challenge.
What Can Go Wrong With Complex Time and Payroll?
Employers with complex time and payroll requirements face the same tasks as other employers: they need to administer pay accurately and on time while considering all the rules associated with overtime, vacation (accrual and carry over), sick time (accrual and carry over), benefits and pensions. The issue they have is that the complexities make the task much more difficult.
Even when using generic payroll and timekeeping technologies, organizations with complex challenges can run into the following problems:
- Many payroll and timekeeping systems are unable to handle workers who are “exceptions” to general rules, which leads to errors. Payroll errors are a leading cause of eroding trust with an employer and a major contributor to low employee engagement.
- Significant manual work. Most organizations recognize the importance of not making time and payroll mistakes. As a result, they find themselves performing a ton of manual work each pay period to verify that every worker’s pay, overtime, etc., is administered correctly.
- Implementation problems. Complex challenges make it more difficult to set up a payroll system properly. This can result in significant IT costs in addition to errors, wasted time and other problems.
- Many generic, one-size-fits-all solutions, don’t have the level of flexibility required when configuring rules, leading to “workarounds,” and also lack the comprehensive reporting that enables employers with complex requirements to make efficiency-raising improvements.
What Should You Do if You Have Complex Time and Payroll?
If you have complex time and payroll requirements, you need to be extremely careful when choosing a technological solution. This likely means avoiding a “one-size-fits-all” solution. While such solutions work well for many organizations, they often are not suited for organizations with complex challenges.
The right solution should be flexible, configurable, and provide automation across the entire process. Also, the provider should offer extensive, “high-touch” customer service to ensure a successful implementation and the required knowledge transfer to give administrators the know-how to become “super users” of the solution. With the right solution, you’ll eliminate errors, save a ton of manual work, improve accuracy and provide your organization with a solid platform that provides real-time insights for management.