Payroll Analytics: What Payroll Data Can Tell You About Your Business

21 July 2015

The principle purpose of payroll is to ensure employees get paid the correct amount and to record payment information for accurate payment of taxes. For many businesses, it is a necessity that needs to be taken care of as part of the running of any business.

For other businesses, it is a source of valuable information about their company and its functioning that can lead them to potent insights and practical improvements.

The act of gathering payroll data can be a burden on a company but only if they fail to capitalise on the accumulated data and implement findings from it. Rather than seeing payroll as a burden, successful companies see it as an opportunity; the benefits of which can more than return the expense of carrying it out in the first place.

Here we look at just a few of the areas where analysing payroll data can give insights into your business.

Fraud Detection

Uncovering fraud is one of the areas where most businesses will be familiar with the benefits of payroll data analysis. Competent auditors will search through payroll data looking for the familiar signs of fraudulent practices such as phantom employees.
How payroll data is stored and recorded affects how easily an auditor can uncover fraudulent activity. Where figures are clear and precise, where categories of duties and employment type are properly established and where data can be navigated proficiently, fraud can most easily be uncovered.

Monitoring Productivity

On a relatively simple level, one can look at total payroll, compare it to revenue and say that where revenue drops against total payroll, productivity is going down. While that may or may not be the case, such a simplified approach gives no insight into how the problem might be solved.
Diving deeper into the data might show that a large proportion of payroll is going to administration while pay in front line departments has shrunk. Conversely the data might show that administration has not grown with the rest of the company leaving other departments unable to function optimally without adequate administrative support.

Salaries & Bonuses

When it comes to rewarding employees for effort, loyalty or skill progression through salary raises or bonuses, the broader payroll dimension can often be left out of the decision. Typically rewards are given on the basis of meeting quantitative targets set in advance.
However, a broader overview of payroll data should inform these decisions. A breakdown of payroll data may reveal that bonuses and raises are weighted unevenly, going primarily to a certain group of employees or to a particular department. Less obvious activities may be improving your business without being adequately recognised through a rewards system.

In Combination with HR Data

Payroll data can also provide insights as to the possible flexibility of the workforce. Where there is scope for job sharing, parental leave and other informal arrangements can be discovered with the aid of payroll data. These policies can have very beneficial effects on employee morale and motivation.
Combining HR and Payroll data, businesses can get a clearer understanding of how overall productivity, morale and motivation can be improved through the workforce.