If you’re treating payroll as a back office function, you’re already behind the times

Your payroll function can be a powerful engagement tool, yet many businesses don’t see it this way. Payroll is not something that can just be done in the back office, in the dark; it has an impact on the morale of your people, and you need to get it right.

However, for many organizations, payroll remains a purely administrative task, relegated to the back office — or outsourced and out of sight.

This is a dated way of looking at things. Payroll is now emerging as a key strategic asset that can boost employee satisfaction, and help drive company success. It’s time to rethink payroll management, recognizing its potential to influence much more than just financial transactions.

When payroll doesn’t run smoothly

Payroll is not just a mechanism for processing pay slips, or a process that ensures teams are paid on time and accurately — though, on the surface, it can seem this way. It’s a key touchpoint in the employee experience, and should provide transparency and understanding for each team member around their compensation.

To better understand this, we should start by looking at payroll from an employee’s perspective. For most people, pay is an emotional experience, and the implications of pay errors can be profound in this context.

If employees don’t get paid correctly, then they can't take care of themselves or their families. They can't go on holiday. They can't save for the big things that they want in their future, like school, or a car, or a home.

It also has short-term effects. In our 2024 State of Payroll Report, we found that, among those surveyed, underpayment was the most common payroll error experienced. It often caused anxiety and stress for those on the receiving end, with young workers the most likely to feel anxious and stressed about it.

In fact, almost half of workers who’d experienced an underpayment reported stress and anxiety as a result, with 38% saying they were subsequently late on bills or rent.

Alarmingly, more than half of workers who’d experienced a late payment error ended up in their overdraft, or faced late payment charges. These are serious issues that can massively affect your employees’ trust.

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Moving payroll operations up to the front line 

As these figures show, a missed or incorrect payment can lead to significant stress and dissatisfaction. And if it happens more than once, your people may be pushed into seriously reconsidering their employment options. The chances of them disengaging with work — often known as “quiet quitting” — is high.

Payroll errors are a very easy way to make someone think, “I don't want to be here, because they don’t value my contribution at the most basic level, which is holding up their end of the compensation agreed.”

By elevating payroll from a back-office function to a front line responsibility, companies can address these issues proactively, keeping workers engaged, or rebuilding trust where it’s been eroded. And remember: there are companies out there who are already getting this right, so your best performers will eventually leave if you don’t.

Prioritizing the employee experience

Many HR platforms are still focused on enablement for the organization, rather than the employee. But even when there is a focus on the employee experience, payroll functions are ignored. This is nonsensical, as payroll is — for all intents — your most frontend element.

Adopting this approach makes sense as a business, too. Your company is spending money on your employee, even before they join. So put it to good use, using payroll as a vehicle to give them the best experience, to boost their morale and their motivation to stay and grow.

Transparent, responsive payroll practices show employees that they are valued and respected, which can help increase their longevity and motivation within a company.

Employees want to learn about their money, more than anything else

In practical terms, this can mean being more transparent and open. For instance, workers often view their pay slip with questions and concerns, such as “why has my net pay changed?”, or “why were these deductions made?”

By simply providing clear, accessible explanations and demystifying potential issues, you’re already taking important steps towards building — and maintaining — trust and satisfaction.

Strategic payroll in action

In the wider sense of transforming your payroll into a strategic asset, you need to integrate it with your broader HR approach — especially in terms of employee satisfaction and engagement. This type of integration should involve:

• Transparency: Start implementing systems that allow employees to easily access and understand their pay details.

• Communication: Open up lines of communication and regularly share how payroll processes work (as well as how issues are resolved).

• Technology: Leverage modern payroll technologies that offer self-service options for workers to easily manage their pay records, benefits, and deductions.

• Feedback: Encourage and incentivize feedback on payroll processes, and use this input to make ongoing improvements.

Rethinking payroll as a strategic asset is not just beneficial; it's necessary. If you’re not, you’re already behind the times.

By shifting the perception of payroll from a back-office administrative function, to a key component of the employee experience, your company can unlock a powerful tool for enhancing engagement and boosting retention. Bring your payroll out of the dark and into the spotlight — and treat it with the strategic importance it deserves.

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