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6 ways your payroll data can save you money

payroll data

For many businesses, paying your people is the single most expensive bill you’ll incur – representing up to 60% of overheads. Despite this, most overlook the value of the data that is available in your payroll system – and its ability to save you money in the long term.

Undoubtedly, companywide initiatives that focus on interrogating HR data, talent metrics and performance analysis are crucial; but combine this with your payroll data, and you’ll have an entirely new view of your business.

As a function, payroll is uniquely placed between your HR and finance departments. While many businesses have a generally good understanding of the data being collected by these departments; payroll data is often an area that is overlooked.

And it could be costing you.

Here are 6 ways your payroll data could save you big money.

Track overtime and absence

While you will have a clear insight into rates of pay and employee costs such as National Insurance and tax; your payroll data also allows you to drill down and evaluate often overlooked costs such as overtime and absence.

Better understanding trends and patterns in employees doing overtime can not only help your finance department to better manage cash flow (through a busy Christmas or seasonal period, for example) but could help your HR team to identify where their focus for recruitment should be.

Combining this payroll data with information on changing working time patterns can help your HR team to determine whether some hours could be changed from overtime to basic pay.

Tackle any expensive issues

Similarly, with a complete overview of your payroll data, you will be able to pinpoint any costly issues or areas before they become problematic.

Pricey hotel stays being claimed for, erroneous mileage claims, expensive equipment being purchased and claimed on expenses; the list goes on.

Without any understanding of exactly where and why expenses and mileage claims are being paid; you stand to be haemorrhaging a significant amount of money.

Not only will your payroll data throw up any claims that have hit a certain upper limit, but you can identify which departments are the most costly to your business overall – and even which individuals!

What’s more, armed with this data you can identify the vendors that are being used frequently and enquire about a corporate discount, for example.

Monitor costly business units

Your payroll data can help you to understand precisely where you are spending the most. From site, department and project level down to the cost of individual employees; this data will enable you to assess the cost-effectiveness of your entire workforce.

From there, you can identify the areas which are costing money and those which are saving it. Armed with this data, and together with your HR team, you may look to restructure your workforce. There may be an option to off-shore some teams and benefit from lower costs and reduced tax liabilities.

Understand employee performance in relation to pay

Renowned psychologist and one of the most influential names in business management, Frederick Herzberg cited two key factors that equated to job satisfaction or dissatisfaction: hygiene factors and motivators.

A lack of hygiene factors (the likes of job security, work conditions and salary) have the power to contribute to overall job dissatisfaction and ultimately, a fall in motivation and performance.

It’s a given that a well-compensated employee is likely to stay in their jobs long term. There is often a direct correlation between compensation and performance.

Together with data on employee performance from sources such as reviews, 360 feedback, target attainment, goals and progression, your payroll data opens up an entirely new viewpoint on your team.

You can track employee performance alongside their remuneration and identify any employees that are high-performing and underpaid or vice versa. Not only can this insight help you to pinpoint where any underperforming staff may need developing, but you will also be able to reward those high performing employees that may be underpaid.

As a whole, this insight will help your HR team to monitor the impact of their employee retention strategies and work to make changes, where necessary. After all, the cost to replace a senior staff member can be anywhere between £40,000 and £100,000 (Croner, 2018).

Reduce the risk of non-compliance

Remaining compliant is part and parcel of running a business. Government legislation must be adhered to avoid hefty fines, and payroll is one of the most regulated parts of running a business; regardless of where you are based.

Your payroll data can help you to track employee working hours and shift patterns in line with legislation such as the Working Time Directive.

Mistakes in your payroll can be costly for both you as an employer and your employees. Often, with hundreds of employees, identifying
accurate timekeeping and prevent any fraudulent claims and time theft can prove troublesome.

What’s more, having this data in black and white will enable you to quickly spot and under or overpayments and rectify these before they become an issue.

Plan for a cost-effective future

Analysing payroll data over a period of time can help to improve your business’ yearly forecasts and plan for the future. In periods of change or rapid growth, this information can help you to manage budgets and cash flow.

Your payroll data should be at the core of any periods of growth or rapid change. After all, without your people and their associated costs, it is likely that your hopes for growth will be dashed.

If your business is aiming to increase output by a significant amount in a given year, historical payroll data can help you to effectively plan the potential people costs of growth in headcount, along with any added tax or compliance implications.

With this insight, every leadership team will be in a prime position to make cost-effective decisions that are fuelled by data, rather than ‘gut instinct’ alone.


Natural HR

About Natural HR

Natural HR is a cloud-based HR software company for growing businesses with 100+ employees. Since launching in 2010, we’ve been building a comprehensive suite of HR functionality that equips the small to medium-sized enterprise with everything needed to build an effective and efficient HR operation.

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