25 Years In Payroll: Four Lessons I Learned the Hard Way

Over the past 18 months, I’ve written a good number of payroll articles. The kind that you’d be forgiven for assuming had been lifted wholesale from a tired consultancy playbook (and therefore unapplicable to real-life business scenarios).

Rather than recapping these greatest hits to reinforce a handful of key messages, however, I thought it might be fun to take a slightly different direction: reframe what I’ve learned throughout my quarter-century career in payroll using situations I’ve actually found myself in.

Not for some self-serving trip down memory lane, but to demonstrate the stark reality of the lessons we payrollers must learn – and how the all too common mistakes we tend to make can put us at very tangible risk.

Governance is a fundamental prerequisite

Picture it now.

I’d been hired as a consultant for one of the world’s largest financial services organisations – think payroll functions in 70+ countries and over 100,000 employees. My role was to examine their current landscape and make recommendations for a new global payroll strategy.

Three weeks into the engagement, I asked my sponsor (Head of HR Operations) where he went, clutching his laptop, every Monday morning at 10:00 AM sharp:

“Oh, I go to the board and review global HR operations.”

“What do you tell them about payroll?” I probed a little further.

“I tell them everything is fine.”

“How do you know that?”

“Well… no one tells me it isn’t.”

Immediate alarm bells.

Because in the weeks I’d spent interviewing countless payroll personnel at head office – and countless more business controls professionals – I’d never once encountered a single payroll matrix, scorecard, key indicators, or any risk assessment for that matter.

None of these things existed. In other words, my sponsor was essentially flying blind on the gross assumption that “everything is fine.”

Regardless of headcount, you need a governance framework that’s appropriate to your organisation. Some degree of measuring both the accuracy and integrity of your payroll; and some assurance that payroll is being executed as it should, on time, and within the law.

Ultimately, you need to know there are no serious underlying risks to payroll operations. You need control. Demonstrable evidence of appropriate duty of care.

Without any of this, you’re in danger of becoming passive. And we know that passive payrollers who aren’t audit-ready only pose an extreme risk.

New payroll engines won’t magically fix poor processes

On another occasion, I was hired by a pharmaceutical client with multi-country operations.

This organisation’s exec team tasked me with formulating a new company-wide payroll strategy, including (above all else) recommendations for a single payroll partner across every territory; with the CFO convinced my knowledge of the supply market alone could deliver the silver bullet for their payroll operations.

But the thing about developing a new payroll strategy is that you first need to understand where you’re starting from – some in-depth assessment of the “as is” situation should be determined as a baseline before you can decide the right solution or model going forward.

Soon thereafter, I designed a data-gathering template for each country and followed up with interviews to fill in gaps and investigate open questions.

That’s when a pattern quickly emerged.

The new company-wide HRM – the system of record, all-singing, all-dancing HR system – wasn’t really delivering for payroll. Country payrollers were telling me the same thing: only about 40% of payroll insights were hosted in the new HR environment.

And, you guessed it, the payrollers were still receiving hardcopy forms and multiple spreadsheets just to scrape together the details required to run payroll.

When it was finally time for an interim project review with the CFO sponsor and project steering committee – core HR operations, IT, finance, and procurement in attendance – I knew expectations were high. Which didn’t quite go to plan.

“Everybody being cooperative, Graham? What’s your early assessment of the payroll project we need? Approximate costs, realistic timelines, and a short list of partners,” they asked.

“Can we just step back a bit? In my opinion [typical consulting speak, I know], you’re not ready to implement a new payroll strategy. You won’t receive the benefit you’re after, and it won’t fix the issues you currently face, either.”

Resistance.

“That’s disappointing. I expected you to make implementable recommendations for the new payroll world. So why haven’t you?”

“Your payroll teams are struggling. They’re running around with huge manual effort to gather, correct, and rekey payroll-related data. No purist payroll provider will fix that. Until you meaningfully answer that friction, you simply won’t benefit from an expensive new payroll strategy.”

The IT lead was particularly unimpressed.

“I implemented PeopleSoft HR in every country within two years, so I’m confused and insulted that you don’t think the essential building blocks are there for a new payroll.”

I fired back: “The current PeopleSoft HR implementation doesn’t address the information required to run payroll. 60% of your costs won’t be addressed by implementing a new payroll solution.”

More resistance, which forced my hand.

“Let me be blunt – despite your investment in PeopleSoft HR, your payroll-related data doesn’t flow to payroll.”

We’ve discussed this time and time again, and the lesson remains: focus on the very sources of payroll data that ensure information is captured correctly and compliantly before it reaches payroll; payroll itself can never be fully optimised.

Companies can spend all the small fortunes they want implementing new HR solutions while still leaving payroll (and its associated processes) in the dark. Don’t put the software cart before the procedural horse.

Embrace being a “controller”

We implemented a smart ADP-managed payroll solution for a US bank, migrating from an in-house payroll to the new model.

The implementation went well (even if I do say so myself), and six months later, we were asked to conduct a post-rollout review before agreeing upon a project timeline for the other countries following the US pilot.

Part of this involved interviewing the team to understand how their roles had changed now that they were operating with an outsourced, managed-service model. What I discovered was incredibly disappointing.

Payroll was still being run through the old manual, spreadsheet-based process in parallel.

Payroll changes and calculations were still being entered into the spreadsheet.

And all of this was happening in addition to the new ADP solution.

The team simply hadn’t migrated to the new world. They had failed to become “controllers” of their updated payroll function because they were still acting as “doers” by continuing to process and calculate via the old model, then comparing the results against ADP.

What I’m trying to communicate here is that you need to be prepared for your role to change when you move to a managed service model. The opportunity is to stop being the “doer” of payroll and become the “controller” of payroll – focusing on governance, review, exceptions, and whether the outcome makes sense.

All I could think was that my client had bought a dog and was still barking themselves!

Payroll in isolation (mind the gap)

I once audited an operation based in South Africa – approximately 250 people with an in-house payroll and a standalone HRM solution.

Towards the end of the assessment, we compared the employee system of record with the payroll records for a selected month, only to discover that three more employees were being paid than indicated within the HR system.

What had gone wrong?

Those same three employees who had left the company four months earlier were still receiving an income.

The immediate reaction was understandable: payroll failure audit, followed by the inevitable blame game, fingers pointed directly at the payroll function.

But life often isn’t that simple.

Why had the three employee leaver instructions not been processed by payroll? Despite being terminated within the HR environment, instructions were never generated or passed on to payroll. So, of course, payroll continued to keep paying them.

That is the risk you run with an inadequate integration between core HR and payroll. The best environments/ecosystems closely connect the two, so that the information payroll needs can flow through seamlessly without relying on somebody to remember to send an instruction.

There is an additional lesson here – if you aren’t operating a tightly integrated environment, ensure additional controls are in place.

One very simple check is to take HR's employee count for the previous month, add new starters, subtract leavers, and compare the result with the number of people being paid. Hardly sophisticated. Though perhaps it might just save you from paying a ghost employee.

As a payroller, it’s up to you to establish the appropriate layers of control around the process and go the extra mile.

That’s really what this all comes down to.