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Save money, reduce errors, and gain efficiency in your payroll operations

by The Tip Doctor

December 9, 2010

From The Tip Doctor...

This SAP payroll tip comes courtesy of by Tom Hallewell of ROC Consulting, a speaker at SAPinsider's HR 2010 event held in Barcelona, Spain. With practical advice and quick steps you can take to maximize your operational payroll efficiency, this tip looks at ways to improve existing payroll operations, typical payroll errors, and how to avoid common pitfalls.

Pinpoint Payroll Errors

The sources of payroll “errors” include:

  • Transactional data errors: Mistyped information
  • Late or incomplete data entry: Missing approvals
  • Master data errors: I ncorrect organizational /cost assignmentsm abd incorrect or missing key infotypes
  • Resurfacing of historic errors: Quick fixes often come back to bite, especially under retrocalculation
  • Confusion due to complex business rules: Do employee and employer both understand what is paid?
  • Configuration errors: Normally easy to spot, but not so easy to fix
  • Product errors: Software patches sometimes get it wrong!
  • ?

Tip: Reducing payroll errors

The use of interactive forms and workflow can significantly help in, reducing data errors, improving process compliance, and reducing effort. Interactive forms provide:

  • An intuitive UI that is easily adopted
  • Online validation throughout the process
  • An auditable alternative to manual paper processes
  • Better visibility to employees and managers – so late data is less likely to be blamed on Payroll


Look at Your Payroll Efficiency

What's your service delivery model?  Centralized service centre(s) for Payroll can facilitate significant efficiencies, but there are some key ground rules:

  • Use common pay element naming conventions (across payrolls, across countries
  • Clearly divide activities requiring local payroll knowledge  from generic payroll processing
  • Enforce common technical standards and styles across payroll schemas/rules even if these are in different countries

Ensure standardization. Behave like a “bureau” payroll provider. BPO and third-party payroll providers who use SAP as their backbone stick to the following maxims:

  • Standardization is everything:
    • Common Wage Type numbering
    • Common schema structure
    • Sensible configuration limits
  • Just because you can, does not mean you should…
  • Simplicity is beautiful: Simple, standard solutions are far easier to support
  • Testing is paramount: Automated regression testing is vital to avoiding the nasty surprises that cause inefficiency

 Tips: Improving payroll efficiency

  • Time-related payment entry:
    • Despite having systems which can give almost 24-hour availability, many payroll departments still operate along old batch processing lines and even encourage their customer departments to do the same:
      • Follow the Sun services expand opening hours
  • Hire and fire processes: To complete data entry within a tight deadline, the lack of contemporaneous input means, for a hiring/termination, that the employee may not be available to confirm missing or incomplete details.
    • Valuable time obtaining those details is needlessly lost without system verification of forms
      • System workflows remind approvers
  • Payroll timings and cutoffs: Is all data entry performed in the last week before payroll? Why? All data for the next payroll run can entered at any time. No need to wait, act now.
    • Data for the current period can be entered at any time up to the payroll cut-off.
      • Timely data entry promotes efficiency.
      • Automating process also provides real-time data visibility
    • Data entry is restricted only for data which amends previous payroll runs or the current run, and even then, the restriction only exists whilst the current payroll is running
  • Processes (e.g. overtime, sickness, maternity, etc.): Similar pitfalls occur with delayed action in these processes.

    • If details are entered as soon as they are known, then any necessar y clarifications or approvals can be sought, rather than payroll having to guess whether to include or exclude payment for a particular period. Mislaid overtime claims for half or one hour can actually cost more than the overtime concerned
    • Going back to re-check and correct payments from last pay period is costly. Every time a process is re-visited, more time and cost accrues.
    • Avoid involving third-party staff, e.g., checking that it was sent in time, approved, etc.
      • Automate third-party payments to streamline processes

Looking for more tips on improving payroll processes? Visit Insider Learning Network and join the HR Group. For a preview of the next SAPinsider HR conference, SAP HR 2011, visit the HR conference groups for the US and Europe.

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