Payroll efficiency and productivity through information technology integration

Payroll, Productivity and Information Technology: An Analysis

One of the largest drains on a businesses' bottom line revenue comes in the form of payroll, otherwise known as labor costs. It should then come as no surprise that when a company is faced with a severe budgetary crises or dealing with an external economic environment that closely resembles a combination between a Category 5 hurricane and an F-5 tornado, the first place CFO's look to retain costs is in their labor force. The advent of layoffs concomitantly rises with the decrease in economic activity-either within a specific market sector or in overall economy as a whole, take the current status of the U.S. economy; private sector jobs have been few and far between and as a direct result, unemployment has remained stagnate at 9.7%.

In tight business environments, companies take a good, hard look at what can be neutralized to reduce costs and maintain a steady flow of revenue. Examining various aspects of the business can assist management in locating those "x" factors that can minimize costs while maximizing revenue. Integrating an efficient and effective payroll software can greatly assist companies in their ability to create a paradigm that maximizes revenue while maintaining costs. There are numerous payroll software platforms that can be implemented into a business' overall software architecture in order to streamline the payroll processing and increase business' overall productivity.

The premise of this essay is to examine the role of it software and infrastructure as it relates to payroll and enhancing productivity. This essay will examine the factors that can go into evaluating software platforms that can increase payroll efficiency, streamline the process and integrate more automation within payroll. Furthermore, this essay will examine how the concept of "workplace management" can lend itself to enhancing payroll productivity and how various software platforms can assist in increasing this management. Finally this essay will engage in an overall review of the core principles necessary to increase payroll productivity, how this productivity can reduce costs and how Information Technology can assist in this process.

Discussion

Business today has taken on a more global position. The advent of modern technology, telecommunications, email, virtual teams and departments have reduced the barriers to largely irrelevant status and have allowed business both large and small to compete on the global stage. Technology and Information Systems allow business to conduct commerce in every corner of the globe. Given the rapid increase in the globalization and the converse decline in market geography; it is increasingly imperative that specific goals be implemented in order to ensure the proper information Technology platforms are integrated into the overall organization. Failing to create, maintain and adhere to these goals will ultimately result in a it platform that is irrelevant, ineffectual and cost ineffective. Currently, there are six, well established, principles that drive the creation of an adequate Information Technology platform within payroll departments of large, medium and small sized businesses (Greengard 51).

Main Goals for Determining Appropriate Payrolls

The first goal or principle is to determine which payroll method works best for the business as a whole (Greengard 51). This principle is critical given that increasing globalization demands that business adhere to just more than a ROI analysis or vendor sales-pitch (Greenard 51). It requires the business review its global strategy, its geographic presence along with the rules, laws and regulations regarding international trade and commerce within certain international jurisdictions (Greengard 51). As a result, certain payroll platforms and software architectures may not be suitable for some businesses operating within these specific circumstances. This principle does not only apply to large, multinational business, it also applies to the medium and small business. Reviewing the payroll structure currently in place and implementing an innovative it platform that incorporates the most effective attributes of the current system will ensure that any business will have adopted a new software system that can maximize payroll efficiency.

The second principle involves procuring the most up-to-date information regarding policies related to taxes, withholding and benefit contributions. The most common mistakes within any payroll and benefits department deals with errors akin to payroll taxation. If a business is engaged in interstate commerce this difference can result in the payroll of certain employees being withheld while the mistake is rectified. Furthermore, these mistakes can cause the CFO to miss vital government reporting dates regarding employee income. Additionally, another situation could present itself in that employee retirement accounts could be inaccurately funded, either to little or to much (Greengard 51). The inevitable conclusion of this situation is three fold, angry employees, angry government officials and significant inaccuracies within a companies budgetary figures.

In order to prevent this scenario from occurring, it is vital that businesses maintain the most current database on tax policy, benefit contributions and other governmental information that can impact a company's payroll productivity. Delays within the payroll process can increase costs to the business by involving more labor hours incurred by the payroll staff-increases and additional expenses that the CFO was not accounting for. Having a quality, Information Technology platform that can instantaneously update this critical information formulates the life blood of a well integrated it program that can increase payroll productivity.

Cultural Diversity

Recognizing diverse cultural backgrounds and environments is another critical aspect of a proper evaluation of a payroll platform (Greengard 51). When a business has employees spread across many different countries, integrating this factor into the payroll scheme will allow a company to make great strides in increasing its efficiency. A company that is based in the United States, paying employees in France and managing pensions of a German subsidiary must integrate all of these cultural aspects into its payroll architecture if there is to be streamlined efficiency.

Technology might not be Omniscient

Another critical principle is to recognize that technology may not provide all of the answers (Greengard 51). Technology, although a vital component, does not address the specific needs of every individual client or customer. The specific payroll issues relevant to business "A" are not necessarily relevant to business "B"; therefore the payroll platform that each of these organizations is implementing may address some of the concerns but not all. Oracle and SAP each have human resource platforms that business in most countries and across boundaries have integrated into their software architecture at one point or another. Although each of these platforms offer in-depth customizable solutions they do not come close to entertaining all possible issues related to the specific payroll concerns of all businesses. Therefore, it officers within upper management should focus on a more "hybrid" or "bifurcated" approach to modernizing and improving payroll.

In relation to the cultural factors that must be accounted for when developing an adequate payroll processing department, the various geographical difference as well as language barriers must be considered as well (Greengard 51). For businesses with a global presence, all the employees may necessarily not speak English. As a result, it is plausible for those business to develop a shared processing facility with individuals who represent the major geographic areas and can communicate with employees from these areas to address their payroll concerns (Greengard 51). Furthermore, geographic and time zone differences must also be considered. Even for medium and small sized businesses that have offices or facilities in different time zones, an effective payroll processing platform or it infrastructure will address this issue and integrate it into the overall software so that all employees can have their issues addressed in a timely, effective manner.

Maintenance

The final principle involves routine audits and examinations of the newly created payroll processing and it platform (Greengard 51). As business and technology change and constantly adapt to innovative solutions, it is imperative that business and CIO's maintain a critical examination of the newest trends and evolutions within payroll platforms and software architecture in order to ensure that the newest and most effective it and payroll solutions are integrated within the whole organization.

Workplace Management

In addition to these six broad principles, the concept of it assisting in increasing payroll productivity can be examined in a more specific light. The concept of "Workplace Management" or WPM directly links the efficiency of payroll processing with Information Technology and the overall productivity of an organization. Increasing WPM can lead to a direct correlative relationship with increasing productivity, reigning in costs and improving bottom line revenue.

In 2009, an exhaustive and comprehensive study including 100 large, medium and small sized business both domestic and international were studied to evaluate the various components of a highly productive, cost effective and efficient payroll processing department. This study integrated Workplace Management for the first time (Cheek 20). This study focused on several different sub-topics including schedule creation, work exchange, absent and leave management and time to gross pay and labor reporting (Cheek, 20). Each of these factors weigh heavily in evaluating the current payroll software and it platforms currently in place within an organization. If any of these components create a drag on payroll processing they will inevitably cause a correlative decline in performance across a variety of departments.

Effective Implementation

Given that the conceptual framework has been constructed to lay the foundation for why efficient payroll processing software and it architecture needs to be integrated into a business it is logical to turn this analysis to specific software platforms that can be utilized to improve payroll processing and improve overall productivity. These platforms will be discussed for their scalability, technical abilities and overall projections to improve productivity in the area of payroll processing.

Payroll often costs companies tens of thousands of productive hours per year and tens of thousands of dollars to process, not counting the correction of errors and the more complex tasks of managing tax reporting (Tinsley, 37, 38). There are many opportunities for using it to increase the productivity of payroll processing within organizations. The rapid growth of Software-as-a-Service (SaaS) continues to fuel adoption of payroll processing applications in small and medium business (Roberts, 24, 25). The question of whether using SaaS-based payroll applications to increase the productivity of small and medium businesses has yet to be empirically validated or refuted however. That is the focus on this proposed research.

Small and medium company business owners, their financial experts including the Chief Financial Officers (CFOs) and accounting managers all are concentrating on improving the expense to revenue ratio and are interested in SaaS as a means to gain access to accounting applications via the Internet (Roberts, 24, 25). The CFOs are the audience or sampling frame of the research effort, specifically those in small and medium businesses with sales less than $25M per year. SaaS has evolved from being tested on pilot programs to being used in mainstream accounting, finance, sales and service functions and has emerged as the fastest growing platform for it services globally (Kugel, 45, 46).

SAAS Technology: Costs and Benefits

There many ways a business can benefit from using SAAS technology. However, there are five reasons that are the penultimate of reasons why companies are opting to utilizes SAAS across all departments of their organization, including payroll and human resources. The first of these reasons is the most obvious, to save money (Maynard 3). By utilizing SAAS software, this allows business to reduce the overhead costs of Information Technology platforms by avoiding the task of installing traditional it platforms (Maynard 4). Furthermore, this allows businesses to operate within an "economies of scale" matrix. This allows companies to develop, what Maynard refers to as, "Multi-Tenancy" (5). This concept involves numerous customers running their applications on the same unit of software (Maynard 5). The final component of allowing a company to reduce costs using SAAS is that SAAS allows for companies to "pay as they go" (Maynard 5). Companies using SAAS pay only a monthly subscription fee for the service. Compared to the costs of traditional it infrastructure, the cost of implementing SAAS can be three to five time less that traditional it platforms (Maynard 3). When a business decides to integrate a traditional it network and architecture, this invariably involves the purchase and maintenance of servers, additional computer equipment and the costs associated with housing additional it staff members (Maynard 3). Implementing SAAS allows businesses to use advanced technologies that can increase productivity, efficiency and reduce costs without having to engage in traditional remunerations of installing it networks.

The second advantage to SAAS is that SAAS allows businesses to save time. In economics, time is money. Lost time is inevitably translated into lost oppportunities, lost productivity and lost sales, all this equating to lost revenue. SAAS removes the traditional processes and requirements necessary to install typical, it software. The SAAS software is already up and running through the vendor's specific data center (Maynard 6). As a direct result, there are no licensing requirements that the business must fulfill in order to begin using the it software or architecture the CIO has installed. This time savings allows the business to divert critical resources to more pressing matters. This leads us to the third aspect where SAAS can benefit a business- using the it infrastructure for more productive means.

IT infrastructure is geared toward improving overall productivity in terms of efficiency- getting the customer or clients what they want, when they want it in the most cost effective manner possible. A fully functional, finely tuned Information Technologies infrastructure devoted to this sole task is paramount in ensuring this activity occurs. However, siphoning valuable it resources from this endeavor and placing them into a paradigm where they have to focus on improving organizational infrastructure is an unnecessary drain on vital resources, from both a strategic and practical standpoint. When a company subscribes to a web-hosted application, it frees the organization from supporting high-cost, time-consuming it functions, including: (1) Purchasing and supporting the server infrastructure necessary to install and maintain the software in-house;(2) Providing the equipment redundancy and housing necessary to ensure security, reliability, and scalability and (3) Maintaining a labor-intensive patch and upgrade process (Maynard 7). This allows the Information Technology architecture and various software platforms to operate in more effective, time sensitive manner that can focus on increasing business output, productivity and enhance the effectiveness of specific departments, such as payroll and benefits processing.

Access to the latest innovations and technologies is a vital component to any it and software architecture program a business can develop. In deed it is listed as one of the six core principles for developing an effective review of payroll processing software and applications. Utilizing SAAS allows business to have access to the latest technologies and innovations occurring within the payroll application sector (Maynard 8). With traditional licensed software, you typically have to wait for the next release to benefit from the latest innovations or to move your organization to a new browser or operating system. Given the cost and complexity of moving to a new version, it may not even be practical to upgrade each time a new release becomes available (Maynard 8). With a SaaS subscription, on the other hand, the company benefit from innovations on an on-going basis. As soon as a new or improved feature appears in the application, the company can begin using it (Maynard 9). The final aspect of how SAAS can improve departmental effectiveness and overall organizational output comes in businesses joining a community possessing common interests when integrating SAAS into their software interfaces.

Purchasing a traditional software license is very much an individual affair. When businesses subscribe to a SaaS application, however, they become a member of a community that has the application at the center.

SaaS changes the relationship between software vendors and customers. In a service environment there is a convergence of interest between customer and vendor that's more intimate than that expressed in the world of conventional on-premises applications (Maynard 10).The intimacy results because SaaS vendors constantly monitor how their customers are using the application and customers easily benchmark themselves against their peers.

Awareness of how customers in the aggregate are using an application presents the vendor with a constant supply of metrics it can't ignore. Typically, this awareness translates into improved usability, performance, and functionality. In addition, when employees contact technical support internally they are likely to experience faster and better service because support professionals can look at the specific implementation to see exactly what's happening. SAAS customers can utilize the knowledge of other businesses currently running SAAS platforms. This shared knowledge allows for "insider tips" to be shared between those companies using SAAS platforms. This community can also foster developments within the software applications themselves, such as ad-ons or templates specific to previously overlook needs from SAAS customers. Furthermore, the ever expanding community of SAAS platform users can foster higher levels of quality control through the vendors that are offering and running the SAAS on their platforms.

Although SAAS appears to be a very attractive alternative to traditional it solutions and software architectures, there are some concerns that business do have when it comes to working off a platform hosted by a third party vendor. The most critical, according to Maynard is will the data be safe? (9). According to Maynard, the reliable vendors back up the data files within encrypted files in the serves, housed on the vendor's property, to assuage the fears of the clients about data being corruptible. Another concern dominating the SAAS landscape is will the service be available when the company needs to use it? SAAS is not a newly developed, untested and debugged software platform; rather this platform has been developed for the past several years (Maynard 11). As a direct result, users of SAAS can be assured that the platform will be available on as needed basis. Furthermore, vendors have placed numerous safeguards in place to ensure the application and its ad-ons and templates are available at any time, as the needs of the company demand.

Conclusion

In summation this discussion attempted to do several things. First, it laid out the essential concepts that any business must consider when analyzing their overall payroll platforms and efficiencies. In order for a business to implement the correct software and it infrastructure there must be comprehensive review of all factors attributing to the current payroll processing matrix. Therefore, it is critical to review all aspects of the process from time delays in responding to benefit requests to the time it takes to issue payroll. Furthermore, an exhaustive analysis will take into considerations the various cultural, geographic and language barriers and differences pertinent within the overall organization.

Secondly this discussion attempted to discuss the concept of Workplace Management and how increasing the efficiency of WPM ultimately leads to increases in productivity across all departments with specific emphasis on payroll and benefits. The study discussed in this analysis highlighted several key pieces of data that supported the conclusion that those companies increasing the efficiency of WPM ultimatly experience higher levels of payroll, benefits and human resource deparment productivity.

Finally, this essay concluded with a discussion of the most popular software platform available to businesses seeking to increase their productivity. Software-as-a-Service has become one of the leading it platforms. As a result, many business use SAAS to improve overall performance, reduce costs and share knowledge with other SAAS clients. The use of SAAS represents a critical aspect in terms of how it can influence payroll processing productivity.