The Payroll 10%

Upon reflection of the past few months, our Advisory business has had the incredible opportunity to access a range of real-world scenarios and challenges that businesses of all shapes and size are working through with the implementation of JobKeeper.

From this we cannot deny Covid-19 has shone a new light on the payroll function and payroll industry. We now have the unique opportunity with this new lens applied, to take some learnings back to our BAU, our day to day.

We would like to coin a phrase, and whilst we are not oblivious to the fact this exists in most business functions, sporting teams and professions already, let us talk about the ...

Payroll 10%.

Really, a Payroll 10%?

The implementation of JobKeeper Scheme into Australia payroll - as thorough and comprehensive to work to 90% of real world payroll scenarios, it was impossible and unrealistic for the ATO and Fair Work to have the fall out of 10% to be ever considered.

The 90% that we could get right, was so very right in terms of practical guidance, scenarios, methodology and implementation, but the very specific, very individual operational and human based scenarios, meant the remaining 10% required detailed interpretation, amendments to guidance or prospective clarification. There is also the delay in subsequent advice and legislation being passed (think SGC), and a mix of state-based directions which was a challenge.

Many payroll vendors, through the Digital Service Provider collaboration has delivered outcomes that are truly remarkable to these timelines. But not all changes have such collaboration in our payroll BAU environment.

Can we perhaps now say that any change to employment legislation, employment taxes or other impacting legislation will naturally always have a probable Payroll 10% on the table?

What is “Payroll 10%” in BAU?

What we see as the Payroll 10% is what needs to be solved, to be reviewed off system, to manage the implementation of change, and this usually results with ongoing manual checks, manual notifications, manual calculations. No algorithm or formula could provide the answers.   

This is not just in crisis mode of Covid – but in everyday payroll situations. A change to operations. A proposed restructure of rosters or contracts. A new range of benefits or packaging. A new system. A merger or acquisition. A Government funding change, or incentive. The retrospective legislation change. A system deficiency.

The Advisors and support functions who provide the direction to Payroll are invaluable, but sometimes we fall on the ability to execute.

The 10% often then requires solving against touch points - so this 10%, is where 90% of the time spend takes place - and it is sometimes the hardest place to get direction and clarity on, as the timing of decisions do not line up. Payroll executes to deadlines. Missing deadlines impacts employees. Missing deadlines impacts brand reputation.

So how does this shine a lens over our traditional payroll function – the risk with underpayments, overpayments, missed interpretations, an actual inability to automate, and generally complex payroll? This means there are still human touch-point requirements in at least 10% of what we do, no matter how ‘automated’ your process are.

We are by no means wanting to open the ‘underpayment’ debates or ‘complexity’ issues at this time, many, rightly so, have very strong opinions on this - but if we apply the logic in real world BAU payroll - if we can now visibly see 90% of logic is black and white and fits, but 10% is up to scenario based interpretation, in the grey and with both operation specific and human elements - could we not assume this is real-world payroll?

Are we really equipped to be solving the 10%?

Payroll are generally solely responsible for managing and reducing the risk or solving this 10%, but we feel this is the first time it has been so widespread to see this as scenario based fall out, with such visibility. Of course, this is the role payroll play, but we need to make sure they are equipped to do so, with the voice to go with it.

Does the Payroll profession have enough support and is it sufficiently regulated to allow for payroll teams to have the skills to be making such complex decisions? Do they always have everything on hand to minimise risk and still meet deadlines? If it is executed, but with error the first time, does it naturally compound? Can there be a new framework for an agreed holding pattern method for the 10% we all work against whilst the solve is coming? More focus on methodology coming from our governing bodies, alongside our vendors?

This 10% could be the commercial competitive advantage of a business through its operations or unique workforce, but may hold 90%+ of their payroll risk appetite. Payroll are reverse engineering commercial decisions and human elements - because we probably now know 90% makes sense - and 10% is always going to difficult to navigate.

When we are talking implementing this, it is all steps within the HCM system or source of truth on data, the T&A system, the leave handling, the Payroll system for net pay, and to finally reflect correct financial GL outcomes to the Accounting Standard.

Now we have called out the 10%, can we support our profession even more?

So how do we work to make this 10% fit in the real world? Can we acknowledge there is a 10% solve risk point for payroll to deal with? How do we all work together so that our systems, processes, methodology for implementation and legislation handle the 10% better? With more visibility, with more focus?

How does payroll get a voice to talk through this 10%? How do we lessen the need for spend with systems for scoping workarounds for the 10%?

How do we regulate and frame our profession to be more aligned and ensure there is a CPD necessity or more robust qualification framework to now improve the 10%?

What part of our operating framework or system landscape needs to be built to be more flexible? How do we acknowledge that in the payroll job function and time spend you need to always be solving the 10%?

How do we now, as industry professionals, all work together to help businesses and help payroll with this 10% moving forward ... let us not lose this unique situation to give us an insight into our ‘normal’.

Reducing the Payroll 10% to even a Payroll 5% could make a commercial difference to many businesses. It is going to be all about efficiencies.

So, now let us take this opportunity to work on reducing our Payroll 10%.

We would be interested in your feedback.