Improving Employee Engagement with Payroll Software

 

An increasing number of forward-thinking companies have recognised that payroll has the potential to either damage or improve employee engagement.

Being paid fairly, correctly and in line with contractual agreements and employment legislation is a legitimate expectation of any employee. A failure to achieve any of these expectations can lead to employees losing trust in their employer, which is a basic requirement for building an engaged workforce. Payroll system failures can quickly undermine the efforts of other employment engagement initiatives.

Damage to employee engagement following payroll issues is generally one of the drivers for an employer to review or replace their existing payroll system. In this situation, it’s important to focus on eliminating the problems to remove payroll failure as a factor in poor employee engagement. However, this ignores the fact that some modern payroll systems can actually also be a positive factor supporting employee engagement - here's what you need to know about how smart payroll software can improve employee engagement.

Why is having engaged employees important?

Research shows that an engaged workforce is more productive and willing to put in discretionary effort. They're also likely to stay longer which reduces the cost of churn.

Productivity, discretionary effort, the cost of churn… these are factors that have a direct impact on a company’s financial success and so employee engagement should be of concern to every business. However, Gallup studies indicate that only 30 percent of workforces are truly engaged - so how do you get the other 70 per cent on board?

Employee engagement starts at the bottom level by ensuring that employees have what they need to do their job, know what is expected of them, and are not blocked from doing their work properly in some way.

Once those basics are dealt with, engagement at the next level comes from employees feeling that management cares about their performance and well-being and encourages their development. At the highest level, engagement depends on employees feeling that the work of their employer is important, and their contribution is valued and also that they enjoy being at work.

 

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There are many companies who provide specialist services to measure and improve employee engagement that use models that consider variations of the factors described above. However, these models do not consider many of the ways that payroll can negatively or positively impact engagement.

 
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Payroll can undermine other employment engagement efforts

Payroll failures can result in employees not getting paid or paid late. This is the worst of all payroll scenarios. Employees in this situation are forced to sort out the consequences of not being paid on time – from the inability to make payments for rent or mortgages, to not having enough money to pay for food and power, or even petrol to turn up to work the next day! Under these circumstances it is easily understandable that an employee will not be at all focused on doing their best for their employer.

Underpaying an employee will also have a similar although less severe impact as above. Even overpayments can cause major issues and stress for employees as these generally must be repaid to the employer and the money may already have been spent, possibly without the employee even knowing there was an overpayment at the time.

Clearly the impact of payroll issues such as these will result in employees being disengaged. This is even if the employer has invested significant effort and money in building an engaged workforce. All such investments will be undermined by such payroll issues.

Engagement requires trust

Employers need to gain the trust of their employees if they want to achieve an engaged workforce. It is very unlikely that an employee who does not trust their employer will ever deliver the higher productivity or discretionary effort that is being sought from an employee engagement programme. Lack of trust from employees of their employer will also likely result in a higher than desired staff turnover.

Employees depend on their employer to calculate their pay correctly and to pay it on time. Failures to do this will obviously damage trust and so addressing such issues is fundamental to gaining the trust of employees.

Payroll calculations can be complex, and these calculations are often not understood by employees. The absence of transparency and clarity around these calculations can also reduce trust. Often, this results in a lot of queries between employees and either the payroll team or their line manager over calculations – this can be an early indicator that you have a problem in this area.

Payslips are often designed to meet legislative requirements, as opposed to provide transparency and clarity of payroll calculations. However, these are not mutually exclusive goals. Well-designed smartphone apps and employee portals can provide a simple high level view of an employee’s pay and also allow the employee to drill down into any area that they don’t fully understand.
 
 
 
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Engagement means not obstructing employees

Most engagement models accept that a factor in employee engagement is the extent to which employees can easily do their job without this being made unnecessarily difficult by the employer. This is another place where payroll can be a factor. 

 

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Employers should be looking to reduce the “friction” in payroll processes, streamlining and automating the collection of information and checking processes to allow employees and managers to concentrate on doing great work instead of worrying about getting their payroll tasks done on time.

Employers who require employees to complete complex timesheets manually in order for payroll to be calculated are making things unnecessarily difficult. Such a process is likely to require manual approval by managers, with the paper trail eventually ending up in the pay office. Mistakes such as misinterpreted hours, lost and missing timesheets lead to errors and unhappy employees. This is similar for leave as well, which also needs to be requested and approved and then processed by payroll.

Modern, well designed payroll systems should facilitate the easy capture of timesheet and leave requests and should also make checking and approving easy. A well thought through system is unlikely to involve paper forms and must not include the re-entry of any data. Re-entry of data is both an expensive waste of effort and a source of errors in payroll.

Note that an important aspect of eliminating errors in payroll is to ensure appropriate checks are in place during payroll processing. This checking is generally done during a trial run stage in the process, and should involve not only the payroll team but include the managers who are familiar with their team members and can confirm that calculations look correct before pay runs are finalised. This checking can be made easy with well-designed reports that are thoughtfully designed and which highlight things that should be checked together with the ability to distribute this information easily.

Engagement means designing for employees

Employees interface with payroll systems in a number of ways. At the basic level, employees submit timesheets and leave requests, update personal information and receive payslips. However, they also make enquiries about payroll calculations, their earnings and their leave.


Well-designed employee portals and apps should be designed for employees and make all the above interactions easy. They should surface the most important information up front, make all required functions easily accessible, and empower employees to get or manage the information they need when they need to. A side benefit of this is that it reduces the cost to the employer of having information requests going to a payroll team.

Remember that managers are also employees, just more expensive ones, but ones requiring additional functionality to perform their roles. Managers should also have portals and apps that are designed around their needs. They should be able to switch between an employee view and a manager view with the manager view surfacing the most important information relevant to them as a manager, including information about their teams and actions that they need to complete.

 
 
 
 
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Both employees and managers should have analytics available that provide relevant views of key information in easily understandable formats. E.g. employees should be able to create simple reports of their earnings or deductions over any period and managers should have access to analytics that help them track key performance indicators of their staff.

What else can payroll do to facilitate employee engagement?

Popular thinking about the current generation of employees is that they place a higher priority on working for “good” employers. These are employers who are doing important or worthwhile work or who are good for society at large. This is one reason more employers are putting corporate and social responsibility (CSR) programs in place.

Governments in Australia and New Zealand have both enacted legislation that enables donations to social causes to be made via payroll systems from pre-tax earnings. Many employers do not enable this practice because of the administrative burden on the payroll team, but well-designed payroll software can enable employees to manage this themselves.

Payroll systems can also provide managers with analytics that support their employee engagement efforts. For example a simple view of the generational diversity of their workforce may provide a better understanding of likely behaviours or motivations of different teams depending on their generational makeup.

Employees are also going to think better of their employer if they are provided modern and well-designed tools that are employee focussed. As online, mobile and social applications become ever more entrenched in people’s personal lives, they expect these conveniences to be part of their work life as well. Email or printed payslips are a relic of the past, whereas modern apps on smartphones provide “cool” and practical functionality that will make it likely that employees think better of their employer, helping employee engagement.

And so...

It must be a priority for any business to eliminate payroll errors because of the substantial harm that this has on employees’ engagement and the business itself. Employers must ensure transparency and clarity of payroll calculations, as well as accuracy to ensure trust. Trust is critical for employee engagement.

Having removed the negative impacts of a poor payroll system, an employer should also seek to gain the advantages that a great payroll system can provide to enhance employee engagement. This should include “frictionless” processes for payroll inputs and checking, and deploying employee focussed designs on all systems connecting to employees.

Employers should also look for other innovative features of modern payroll systems from vendors who understand employment engagement.

For more information on how to get your staff to engage with a new payroll system, contact the Datacom Payroll team today.

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