Payroll Performance Metrics You Should Know About

Does your payroll process include tracking KPIs? Learn about the key metrics you need to include in your payroll processing.

Written by Anja Simic
September 29, 2021

Payroll Performance Metrics You Should Know About

Does your payroll process include tracking KPIs? Learn about the key metrics you need to include in your payroll processing.

Written by Anja Simic
September 29, 2021

Payroll Performance Metrics You Should Know About

Does your payroll process include tracking KPIs? Learn about the key metrics you need to include in your payroll processing.

Payroll Performance Metrics You Should Know About

Does your payroll process include tracking KPIs? Learn about the key metrics you need to include in your payroll processing.

The payroll process is a necessary cost to the company, but it doesn’t need to be an expensive one. There are ways to save time and money by refining the payroll process using key performance indicators (KPIs).

Payroll performance metrics are useful measurement tools for optimizing payroll. Human resource professionals and payroll managers can benefit greatly by using payroll KPIs  - and here’s how!

What is payroll performance?

Paying employees accurately and on time plays a larger role in business operations than anticipated.

Consider that an American Payroll Association survey suggests nearly 70% of employees struggle to meet financial obligations if paychecks are delayed by a week. Efficient and error-free payroll is important for business success and employee satisfaction.

Metrics and data are highly valuable in all business aspects, including payroll.

A KPI is a critical indicator of a project or team’s progress towards a goal. Payroll metrics have the important task of measuring the payroll process. An effective metric will use the SMART (specific, measurable, achievable, realistic, and time-based) model to bring about results.

By using payroll KPIs, the success of the payroll can be determined, and weaknesses can be improved.

The value of payroll KPI

Tracking KPIs is an important step in streamlining payroll processing, saving the company time and money. KPIs set the stage for strategic and operational improvement, providing an analytical basis for future decision-making.  

Payroll KPIs have the potential to:

  • Assess the current state of the payroll process
  • Determine the future state of the payroll process
  • Judge the quality of the process
  • Highlight potential solutions for weaknesses
  • Assist with timely payment
  • Save the business money through optimization
  • Monitor overtime
  • Drive performance of the payroll process

Pay your team effortlessly with mass payments

Pay your global team in one click, with mass payments. We support payroll in over 150 currencies with flexible payment methods.

Learn more

7 payroll performance metrics to track

Now that you are familiar with the benefits of payroll, you need to know how to track them. Here are seven useful tracking metrics to incorporate.

1. Cost of payroll

The payroll process takes time, and time is money. Just as other business activities cost the company time and money, so does the payroll process. Tracking the total cost of the process from start to end is an important metric to consider. There are aspects used to determine the cost of payroll.

These include the following:

  • The financial cost of payroll errors
  • Overtime paid out
  • Salary of the payroll department
  • Software used for payroll operations

Calculate these costs over a period of time and compare the total number of employees, the company size, and the payment schedule. In the end, the metric can be measured as the cost of payroll per employee or total payroll costs over a time period.

2. Effectiveness of payroll

The level of effectiveness and productivity of the payroll is an important metric. A standardized system should reduce friction. Yet sometimes there are additional payments to be made and additional time needed to resolve unclean data.

Each deviation from the system can reduce the effectiveness of the payroll. Measuring productivity is beneficial to ensure that the payroll department is achieving a unified goal in a timely manner, with minimal error.

The efficiency of the payroll process can be determined by measuring certain details. Consider the time to fix mistakes, the number of retrospective payments, and the number of payments processed outside of the normal cycle time.

3. Time to run payroll

The payroll process takes time, especially if done correctly. Although there are effective tools and software available to improve automation, it’s not an entirely instant operation. A valuable payroll metric is measuring the time it takes to complete each step in the process.

Assessing the time it takes will highlight inefficiencies and indicate room for improvement. Employees that work full-time on payroll can keep tabs on this metric by recording the number of hours spent completing payroll. Including reviewing data and fixing errors.

Take special note of variations that emerge throughout the year, and those that deviate from the expected cycle time. For example, during holiday breaks and flu season. Reducing the amount of time spent on the payroll through an effective system can improve the bottom line.

4. Number of Errors

In an ideal world, the perfect payroll process exists as error-free.

A benchmarking review from American Productivity & Quality Center (APQC) reported an interesting find. There is a noticeable gap between the time it takes for top performers to fix payroll inaccuracies compared to bottom performers. The most responsive organization resolves errors in a few days, while it can take up bottom performers as long as 10 days.

Resolving errors takes time and, in turn, costs money. It can also be frustrating and debilitating for the employees waiting to be paid.

The accuracy rate of payroll is an important metric to track. It includes differences in salary type, accurate time tracking for hourly compensation, consideration of different leave categories, and tax and fee payments.

5. Overtime

Rewarding employees for the extra hours that they invest in the company is important. Equally important is the accurate tracking of these hours.

Effective communication and dependable technological tools will reduce mistakes and prevent extra overtime costs. Pay attention to emerging trends. For example, if a department consistently logs overtime, then human resources may need to assess workload or consider new hires.

The easiest way to track overtime is to add all overtime costs and compare the expenses according to the department and team. The time employees take for leave offers valuable insight.

7. Employee leave

A legally compliant company offers different types of leave for employees. Including annual leave, maternity leave, sick leave, and bereavement leave. Every hour that an employee has time off of work while being paid is a cost to the company.

While this leave is owed to the employee, it needs to be recorded in the payroll process. Measuring the number of leave days taken during a certain period is an important metric in the payroll process.

Analyzing the patterns of employee leave will also reveal trends such as minimum, maximum and average number of leave days used. It will also highlight seasons of leave. This information could inspire adjustments in the workplace for enhanced efficiency.

8. Training Costs

Hiring new employees is an investment and an important staffing cost. It costs money to train staff, despite productivity being lower than ideal. Incorporate training costs as a payroll metric to determine the average amount of time to train new hires. Determine whether there are ways to reduce the cost.

One of the easiest ways to produce this metric is to divide the total training cost by the number of trainees. These costs include the likes of instructors, equipment, time, and travel.

A well-structured training period will offer long-term benefits and reduce turnover rates. It’s possible to identify a return on this investment by analyzing certain metrics.

Tips to apply KPI metrics effectively

In order for KPIs to be effective, they need to be applied properly. There are a few key details to consider when setting metrics and using them to monitor performance management.

  • Define the metrics using the SMART model
  • Determine benchmarks or targets for the KPIs
  • Ensure that you have buy-in from the rest of the payroll team
  • Understand the payroll data that needs to be gathered
  • Take time to measure the results and share them with the payroll department
  • Consistently revise metrics and make room for improvement

If you want to leverage the potential of payroll performance, then implementing a professional platform can be an effective asset. Payroll professionals work in harmony with these tools to improve the process.

Uncomplicate the payroll process with Deel

At Deel, we strive to make payroll an easy process. Whether you’re onboarding new employees, finding your feet as a small business, or simply want to streamline the payroll run, we have a solution for you to boost your total revenue with the payroll process.

Our all-in-one-place global payroll and compliant hiring platform is built for remote teams. We empower small and large businesses to build their international team while remaining compliant.

Request a demo and see how Deel can help you stay compliant with local laws, reduce inefficiencies and improve the bottom line.

The payroll process is a necessary cost to the company, but it doesn’t need to be an expensive one. There are ways to save time and money by refining the payroll process using key performance indicators (KPIs).

Payroll performance metrics are useful measurement tools for optimizing payroll. Human resource professionals and payroll managers can benefit greatly by using payroll KPIs  - and here’s how!

What is payroll performance?

Paying employees accurately and on time plays a larger role in business operations than anticipated.

Consider that an American Payroll Association survey suggests nearly 70% of employees struggle to meet financial obligations if paychecks are delayed by a week. Efficient and error-free payroll is important for business success and employee satisfaction.

Metrics and data are highly valuable in all business aspects, including payroll.

A KPI is a critical indicator of a project or team’s progress towards a goal. Payroll metrics have the important task of measuring the payroll process. An effective metric will use the SMART (specific, measurable, achievable, realistic, and time-based) model to bring about results.

By using payroll KPIs, the success of the payroll can be determined, and weaknesses can be improved.

The value of payroll KPI

Tracking KPIs is an important step in streamlining payroll processing, saving the company time and money. KPIs set the stage for strategic and operational improvement, providing an analytical basis for future decision-making.  

Payroll KPIs have the potential to:

  • Assess the current state of the payroll process
  • Determine the future state of the payroll process
  • Judge the quality of the process
  • Highlight potential solutions for weaknesses
  • Assist with timely payment
  • Save the business money through optimization
  • Monitor overtime
  • Drive performance of the payroll process

7 payroll performance metrics to track

Now that you are familiar with the benefits of payroll, you need to know how to track them. Here are seven useful tracking metrics to incorporate.

1. Cost of payroll

The payroll process takes time, and time is money. Just as other business activities cost the company time and money, so does the payroll process. Tracking the total cost of the process from start to end is an important metric to consider. There are aspects used to determine the cost of payroll.

These include the following:

  • The financial cost of payroll errors
  • Overtime paid out
  • Salary of the payroll department
  • Software used for payroll operations

Calculate these costs over a period of time and compare the total number of employees, the company size, and the payment schedule. In the end, the metric can be measured as the cost of payroll per employee or total payroll costs over a time period.

2. Effectiveness of payroll

The level of effectiveness and productivity of the payroll is an important metric. A standardized system should reduce friction. Yet sometimes there are additional payments to be made and additional time needed to resolve unclean data.

Each deviation from the system can reduce the effectiveness of the payroll. Measuring productivity is beneficial to ensure that the payroll department is achieving a unified goal in a timely manner, with minimal error.

The efficiency of the payroll process can be determined by measuring certain details. Consider the time to fix mistakes, the number of retrospective payments, and the number of payments processed outside of the normal cycle time.

3. Time to run payroll

The payroll process takes time, especially if done correctly. Although there are effective tools and software available to improve automation, it’s not an entirely instant operation. A valuable payroll metric is measuring the time it takes to complete each step in the process.

Assessing the time it takes will highlight inefficiencies and indicate room for improvement. Employees that work full-time on payroll can keep tabs on this metric by recording the number of hours spent completing payroll. Including reviewing data and fixing errors.

Take special note of variations that emerge throughout the year, and those that deviate from the expected cycle time. For example, during holiday breaks and flu season. Reducing the amount of time spent on the payroll through an effective system can improve the bottom line.

4. Number of Errors

In an ideal world, the perfect payroll process exists as error-free.

A benchmarking review from American Productivity & Quality Center (APQC) reported an interesting find. There is a noticeable gap between the time it takes for top performers to fix payroll inaccuracies compared to bottom performers. The most responsive organization resolves errors in a few days, while it can take up bottom performers as long as 10 days.

Resolving errors takes time and, in turn, costs money. It can also be frustrating and debilitating for the employees waiting to be paid.

The accuracy rate of payroll is an important metric to track. It includes differences in salary type, accurate time tracking for hourly compensation, consideration of different leave categories, and tax and fee payments.

5. Overtime

Rewarding employees for the extra hours that they invest in the company is important. Equally important is the accurate tracking of these hours.

Effective communication and dependable technological tools will reduce mistakes and prevent extra overtime costs. Pay attention to emerging trends. For example, if a department consistently logs overtime, then human resources may need to assess workload or consider new hires.

The easiest way to track overtime is to add all overtime costs and compare the expenses according to the department and team. The time employees take for leave offers valuable insight.

7. Employee leave

A legally compliant company offers different types of leave for employees. Including annual leave, maternity leave, sick leave, and bereavement leave. Every hour that an employee has time off of work while being paid is a cost to the company.

While this leave is owed to the employee, it needs to be recorded in the payroll process. Measuring the number of leave days taken during a certain period is an important metric in the payroll process.

Analyzing the patterns of employee leave will also reveal trends such as minimum, maximum and average number of leave days used. It will also highlight seasons of leave. This information could inspire adjustments in the workplace for enhanced efficiency.

8. Training Costs

Hiring new employees is an investment and an important staffing cost. It costs money to train staff, despite productivity being lower than ideal. Incorporate training costs as a payroll metric to determine the average amount of time to train new hires. Determine whether there are ways to reduce the cost.

One of the easiest ways to produce this metric is to divide the total training cost by the number of trainees. These costs include the likes of instructors, equipment, time, and travel.

A well-structured training period will offer long-term benefits and reduce turnover rates. It’s possible to identify a return on this investment by analyzing certain metrics.

Tips to apply KPI metrics effectively

In order for KPIs to be effective, they need to be applied properly. There are a few key details to consider when setting metrics and using them to monitor performance management.

  • Define the metrics using the SMART model
  • Determine benchmarks or targets for the KPIs
  • Ensure that you have buy-in from the rest of the payroll team
  • Understand the payroll data that needs to be gathered
  • Take time to measure the results and share them with the payroll department
  • Consistently revise metrics and make room for improvement

If you want to leverage the potential of payroll performance, then implementing a professional platform can be an effective asset. Payroll professionals work in harmony with these tools to improve the process.

Pay your team effortlessly with mass payments

Pay your global team in one click, with mass payments. We support payroll in over 150 currencies with flexible payment methods.

Learn more

Uncomplicate the payroll process with Deel

At Deel, we strive to make payroll an easy process. Whether you’re onboarding new employees, finding your feet as a small business, or simply want to streamline the payroll run, we have a solution for you to boost your total revenue with the payroll process.

Our all-in-one-place global payroll and compliant hiring platform is built for remote teams. We empower small and large businesses to build their international team while remaining compliant.

Request a demo and see how Deel can help you stay compliant with local laws, reduce inefficiencies and improve the bottom line.