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The Payroll Performance Metrics You Need to Track

Payroll Performance Metrics

You can’t improve what you can’t quantify, as a management expert famously stated. Developing and tracking key performance indicators (KPIs) has become a fundamental company management precept as executives throughout the world do the same. Most of these KPIs are most effective when they are tied to a particular process or set of problems. As a small or growing firm, these measures can assist you to guarantee that your payroll process distributes resources effectively while still providing the necessary support for your workers.

Which Payroll Key Performance Indicators Are Critical?

As a result, payroll KPIs were payroll performance metrics that examine both the relative cost of payroll and its accuracy. Tax-related penalties and employee unhappiness may also result from payroll mistakes that deplete the company’s resources.

KPIs are then used to analyze your company’s success in terms of payroll costs and benefits—cost analysis of your compensation-related expenditures.

Payroll Error/Accuracy Ratio: A Measure of Performance

To achieve an accurate paycheck, a payroll administrator must take into consideration a wide range of factors, including the following:

  • Differences in pay based on occupation (salary, commission, hourly, contractor, etc.)
  • For the hourly pay, accurate time monitoring is necessary.
  • Different types of leave may be applied (PTO, sick leave, maternity, bereavement, etc.)
  • Payments for taxes and fees at all levels (federal, county, state, municipal, etc.)

Payroll management is a precision art. To prevent major penalties, payroll managers must detect and remedy any errors as quickly as possible. The correctness of your payroll data is a prerequisite for all other payroll performance KPIs. Prior to using additional KPIs to examine the overall impact of the payroll performance, you must confirm that your present payroll process is trustworthy.

Payroll KPIs: How Do You Measure Them?

Payroll mistakes should be kept in a rolling tally for each paid month. Divide the total number of payroll runs by the number of payroll runs with mistakes to get the long-term payroll accuracy percentage.

Overtime as a Payroll Performance Metric

Overtime is the next efficiency indicator in the people-related expenditures to check after your hours have been appropriately tallied. To guarantee that your workers are compensated for the time they spend working beyond their normal working hours, it is also crucial to sure that poor communication and technical faults do not contribute to an unproductive working environment and additional overtime expenditures.

A team and department’s personnel needs may be reevaluated if you notice that workers routinely clock in extra hours while evaluating payroll performance. Is there anything the team can do to be more productive or effective? Is there a need for a new employee since productivity has already peaked?

Payroll KPIs: How Do You Measure Them?

Add up all of the overtime costs and then break them down by department & team to see how much each is costing the company.

Payroll Efficiency Metric: Payroll Processing Time

Even with the most advanced payroll software, it takes hours to complete each step of the process. Keeping track of how long it takes to process payroll helps you understand the costs and find new ways to save money.

Payroll KPIs: How Do You Measure Them?

Do not forget to include time spent examining data and correcting payroll problems when calculating payroll hours. When tracking payroll processing time, keep an eye out for the effects of seasonal changes like summer vacations and flu seasons. If the time it takes to process payroll is significantly increasing as a result of changes, you may want to reevaluate how you calculate and record these differences.

Cost of Payroll/Cost per Payroll Payment is a payroll performance metric

Payroll mistakes, overtime, & salaried hours for payroll preparers may all be calculated by adding up the measures for the three important payroll indicators given above. This will give you a total monetary cost. If you outsource your payroll to a professional employer organization, you should also add the cost of every software service you utilize.

Payroll KPIs: How Do You Measure Them?

It’s possible to examine the relationship between your payroll costs and a variety of factors connected to your workers by keeping track of this measure over time.

A measure of payroll efficiency is the proportion of labor costs to total revenue

You need to tally up your overall payroll and labor costs to get a complete picture of your company’s personnel costs. A common payroll benchmarking statistic is labor costs, which many organizations want to keep as low as feasible. As a side note, it’s crucial to keep in mind the link between payroll performance improvements as well as a reduction in payroll processing time and costs. Understanding these delicate balances may help avoid tiny budget-saving initiatives from leading to big costs and time increases—paying for RisePath HRTeam software may be an investment that leads to a far higher ROI in speed and accuracy.

Payroll KPIs: How Do You Measure Them?

Your whole compensation package should be included in the payroll costs. This percentage may be calculated by taking the entire income and dividing it by 100.

In order to make the right choices for your staff, mastering these payroll metrics is essential. Payroll specialists can produce outcomes that allow workers to concentrate on their job and leaders to focus on the future when you have a robust, dependable payroll process in place.


Christine Lee

Christine is a former HR manager from Fortune 500 tech companies and has managed hiring, compensation and benefits, and payroll responsibilities for multiple companies.

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