Workshop: Benchmarking Performance Study Results

May 19, 2009

Speakers:
Felicia Cheek, the Hackett Group
Bill Parker, AES Corp.

Top Payroll Performers Maximize Technology Use, Survey Finds

Companies that rated as top performers in the American Payroll Association’s 2008 Benchmarking/Performance study did so because they excelled in increasing efficiency and effectiveness, focusing on paperless payroll, promoting self-service utilization, and leveraging technology, speakers at a May 19 session of the 27th annual APA Congress said.

The speakers were Felicia Cheek, payroll advisory lead of the Hacket Group in Fayetteville, Ga., which did the survey with APA, and Bill Parker, vice president of shared services with AES Corp., a long-time APA volunteer leader who has been involved with the member survey for many years.

Cheek noted the diversity of this year’s survey of payroll practices at 120 APA member companies of various sizes representing a wide range of industries. Among the companies participating were Harrah’s, Sprint, Pepsi, Progressive, Wal-Mart, and Wells Fargo.
 
Respondents said they spend 35 percent of their time on analysis, 48 percent on transactions, 9 percent on technical functions, and 8 percent on process improvements. Cheek noted that companies were still spending “a lot of time” on transactions, not a best practice.

Parker agreed, expressing surprise that with all the developments in self-service and  technology, the number of companies taking full advantage of these options was “so low.”

“You can be a hero,” Parker told attendees, “by taking home and implementing just one or two of the ideas you learn about” at the conference.

Parker noted that while most companies have the functionality for self-service, very few have implemented the policies and procedures to really make the most of it. He said he wonders whether the recessionary times “will force our hand” in implementing more best practices.
 
The survey showed a vast difference in cost per payment per employee between “top performing” companies and others, with the former paying just a bit more than half as much as the latter.

An area for future growth, noted Cheek, is access to self-service via the Internet, not just the company intranet. According to the survey, many companies currently do not have Internet access.
 
An “overwhelming”  percentage—84 percent—of companies participating in the survey do payroll in-house, Cheek noted, with 9 percent outsourcing and 7 percent “co-sourcing” (meaning mostly in-house, but with certain functions outsourced, most frequently pensions and international payroll).
 
In answer to a question about which best practice is growing faster—shared services or outsourcing—Parker replied that shared services has been.

In other areas, Cheek noted that “[b]elieve it or not, there are still a lot of organizations with no certified payroll professionals in their organizations.”

She also observed that when companies hit the 90 percent mark of direct deposit, they often consider the goal achieved. But she noted that companies realize more savings if they do not settle for the 10-percent gap.

Cheek noted that using best payroll practices produces measurable results in terms of lower costs, faster cycle times, fewer mistakes, and less off-cycle payment.

Parker urged payroll professionals to become aligned with the business objectives of their organizations and not to limit themselves.

“You can provide valuable information” to upper management, he said, because payroll people know how long a company takes to do the things it needs to do.

In answer to a question about large employers’ ability to keep per-payment cost low because of volume, Parker noted that while it is true that they have the volume edge, smaller employers can use strategies and techniques to get their costs down. They need to promote self-service, organize shared services, and re-engineer their processes, he said.
“Big doesn’t automatically mean ‘top performer,’” he added.

Whatever their size, top performers in the survey used 79 percent less staff per thousand employees to administer the payroll process. They do it by eliminating the need for intervention at every part of the process, said Cheek.

Top performers also had only 0.054 percent tax penalties per 1,000 employees, less than 1 percent of direct deposit rejects, less than 1 percent of W-2 corrections, and less than 1 percent off-cycle payments.

To be top performers, companies also need to outsource the appropriate areas, even if they do not want to. “You need a strategy,” Cheek said, since some things are more effectively done in-house.
 
Cheek said that a positive development showing up in  the 2008 survey is that many child support payments are paperless. In 26 states, she said, companies may also take receipt of child support orders electronically.