7 critical success factors for payroll automation

Payroll automation is a major transformation project for businesses and represents a significant investment of time, money and effort. Organizations should therefore do anything they can to guarantee the project is successful—especially since payroll is a vital business function and disruptions should be avoided at all costs.

But what can businesses do to successfully develop and deploy an automated payroll system? What aspects do they have to keep in mind that are critical to succeed? Read on as we walk you through the major success factors for automating payroll.

Successful payroll automation is highly dependent on technology and software. That’s why selecting a payroll software that is fit for the purpose of automating payroll processes is crucial. When choosing a software solution to support payroll automation, organizations need to consider both their current and future payroll needs as well as think about if and to what extent they plan to increase the level of automation in the future.

The first step when choosing a payroll automation software is to define the business’s organizational needs, i. e. what are the immediate requirements and what would be a nice-to-have functionality for the future? Possible selection criteria include compatibility with HR systems and other workforce management tools, scalability and high data security standards.

As with any major transformation project, good communication is a key success factor for payroll automation. This not only applies to communication within the team charged with managing the automation project, but also to cross-departmental communication. 

In a data-driven future, the traditional silo mentality of payroll needs to be overcome in order to facilitate effective communication with HR, Finance and IT as well as with other departments that could benefit from leveraging payroll data. 

Good preparation is essential to ensure the deployment of the automated payroll system runs smoothly. Businesses should therefore do their due diligence when looking to automate parts of their payroll process to avoid any disruptions. This includes:

• Auditing current payroll processes to better understand which parts of payroll can be automated

• Providing training and information to prepare the team for the upcoming changes

• Mapping the process and preparing the necessary data sets 

• Creating the necessary support structures

• Identifying potential risks and taking actions to mitigate them

Introducing payroll automation means making fundamental operational changes that need to be managed carefully. The first step of effective change management is to secure the support of all the relevant stakeholders within the organization. In order to achieve this, payroll transformation leaders must:

• Present an inspiring vision

• Prepare a convincing business case for payroll automation

• Focus on the benefits and opportunities for improvement

After having received the approval of key stakeholders (and hence also the necessary funding), the next step towards successful payroll automation is to motivate employees to adapt to the new ways of working. It’s only when employees understand the benefits of payroll automation that they will endorse the changes.

Another crucial success factor for automating payroll in an organization is having a project team that has the necessary skills and expertise to manage the transformation project. It’s therefore important to conduct a thorough assessment of in-house payroll staff to see which skills are already available and to decide if onboarding external experts for additional support might be necessary.

In addition, it’s important to clearly define the roles of the different team members. Before launching the project, aspects such as accountability, project ownership and responsibilities should be clear.

Having clear objectives is a key driver for any major transformation project. When it comes to payroll automation, the first step towards defining realistic, achievable goals is to work out which parts of the business’s payroll processes can and should be automated. 

Payroll tasks that lend themselves to automation include payroll processing, data management, payroll onboarding, payroll validation, and payroll reporting. But every organization needs to make an individual decision on the level of automation they want to achieve. To get there, it can be helpful to conduct a detailed analysis to find out which payroll tasks are most time-consuming and repetitive.

With the results, it’s possible to identify immediate automation requirements and define a set of OKRs and KPIs to have a clear roadmap and track progress along the way. However, businesses should make sure the scope of their planned automation project matches the available budget to avoid any disruptions caused by lack of funding.

No matter how high the level of automation in payroll, it won’t replace the role of a payroll manager. Automation certainly does, however, have an impact on the spectrum of tasks that come with the role. If an increasing number of payroll tasks is automated, this leaves payroll managers with more time to focus on tasks that can elevate the value of payroll for the organization.

Instead of spending hours on end on repetitive data entry tasks, payroll managers will be able to focus more on consulting and payroll data analytics to provide other departments and upper management with detailed insights into payroll costs, workforce patterns, and more to inform business decisions. In order to prepare for these new tasks, payroll professionals need special training, new qualifications and skills that will help them realize the added value proposition of payroll that can be achieved through payroll automation.