Why should a payroll system be full of manual workarounds?

The short answer is it should not.

In this post NZPPA would like to highlight an issue we are seeing in payroll that undermines its effectiveness in regard to payroll processing cost, accuracy of payroll data and the overall risk to the business.

When you buy a payroll system you would expect that the system end-to-end incorporates the full range of payroll processing activities (calculations, reporting and storage of information) that are required by legislation or payroll best practice. What is the purpose of a computerised payroll system if it does not do this?

In NZPPA’s work auditing payroll systems and the numerous questions we get asked through the NZPPA PayTech AdviceLine, we frequently see that payroll suppliers have not included existing or new legislative requirements into their software. Instead they provide manual workarounds for payroll practitioners to complete to fill the gaps. These manual workarounds could include importing or exporting data in and out of the payroll system (including doing external calculations that the payroll system cannot perform), changing settings to do specific processing steps and resetting once done, or having to jump through multiple payroll screens to enter data or extract data to get answers to meet legislative requirements.

Now there is a balance to this issue. A payroll provider won’t update software until legislation has been passed as the intention of a bill can be changed when it finally becomes an act of parliament or an updated part of an act.

Also, legislation in general is vague and does not provide the detail required to be included in a payroll system. And it is a real problem for payroll when it is not clearly defined. For instance, because we do not have a clear direction set by MBIE (as their position is that it is not their role) payroll suppliers have been left in the dark on how a payroll system needs to calculate parts of the Holidays Act 2003. There is also little case law to help in this regard.

NZPPA believes if it is a requirement of legislation then it is not a customisation and so an employer should not have to pay for this to be included in a payroll system. A payroll supplier will argue if legislation does not state it has to be in payroll by law then they don’t have to do it, but this is short-sighted and does not add to the value a payroll system should be providing to the business overall.

A lot of the work done in payroll is from agreed terms between the employer and employee that provide better than the legislation. If this is the case then this is an area where manual workarounds may have to be done because they are out of the scope of normal payroll processing. The issue here is the powers that be (HR and management) have never bothered to talk to payroll about whether the payroll system can actually process it and if not what impact these extra payments will have on payroll processing in regard to manual workarounds, extra processing time and the risk to the business if errors occur. The key here is for HR and managers to talk to payroll first before adding new payments to be processed by payroll!

Having to do manual workarounds adds time to payroll processing and, therefore, adds to the overall cost of payroll. The issue here is payroll practitioners are processing pay and having to do manual workarounds on top of, or during, normal processing, reducing the time they have overall and causing potential processing errors, reducing checks that should be done and undermining deadlines. The purpose of a payroll system in this regard is to streamline and reduce cost not add to it. Payroll practitioners could be using this time to do added value payroll activities or other work for the business.

Furthermore, manual processing and intervention in the payroll process creates risk to payroll because errors can occur. NZPPA has seen on many occasions payroll practitioners having to use paper-based worksheets or Excel to export data out of payroll, sort and do external calculations with data before importing it back into payroll. This is highly dangerous and defeats the purpose of having a computerised payroll system.

So how do you resolve this issue with your payroll supplier if you have an existing payroll system that you believe has too many manual workarounds? As one lone voice, you will usually find nothing will happen or the supplier will state it is a customisation that you will be charged for. You will then see it repackaged in the future as a new system development (paid for by you) for all users of the system. NZPPA believes the most effective method is to approach the supplier as a group of concerned users. Most suppliers have user groups, take advantage of that network to raise the group’s concerns with the system in a vocal way. NZPPA also has records of who is using various payroll systems so, as a member, if you want to communicate with other users of your system then we are happy to help you in making contact (as long as the other member agrees).

If you are in the process of selecting a new payroll system you must investigate fully the end-to-end processing of the payroll. Clearly ask the supplier to provide details of any manual workarounds that currently have to be undertaken and get them to justify why they have to be done. You need to do an assessment of how much time and cost these manual workarounds will actually have on overall payroll processing and this should be an important factor when deciding if this is the right payroll system for your business. As stated before, get payroll involved in this right at the start. Don’t create a Novopay in your workplace!

In the past NZPPA has stated that we will not name payroll systems that we believe are non-compliant or substandard as this would put our members at risk of a challenge from employees, unions and government agencies. We have decided to change this position in the following way. Shortly NZPPA will launch our member-only NZPPA PayTech blog that will include a database of payroll-related Q&As. There will be one section in the blog on issues with payroll systems where if an issue is raised by a NZPPA member or if NZPPA identifies it, then we will approach the payroll supplier directly for comment (before the issue is posted). Both points of view will be posted on the blog so it is fair and balanced. NZPPA has decided to take this approach because our members demand accountability from payroll suppliers as there is no certification or enforcement in New Zealand to protect employers from how payroll systems process pay.

David Jenkins

NZPPA CEO