Payroll emerges as a key business function during lockdown

Working from their kitchen tables, attics or garages, the pandemic has forced finance teams all over the world to set up makeshift offices.

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Payroll teams were thrown the ultimate test when the pandemic forced entire companies into lockdown. And while the scramble was on to keep the corporate wheels turning, payroll emerged as one of the most important elements of keeping businesses on track.

Some companies thrived, but others struggled to ensure their payroll system provided the level of detail required to manage and pay remote teams in a timely manner.

Enabled by cloud technology, it is nothing new for the team at Datacom Payroll, which has been the payroll provider for thousands of businesses across Australia and New Zealand for more than 50 years.

The company develops payroll solutions and delivers efficiencies and value through cloud technology. It is recognised as one of Australia and New Zealand’s largest locally owned IT service companies, has added 650 new jobs in South Australia on the back of strong growth in recent months.

Payroll challenges

Datacom sales manager Ross Fodie says businesses have faced new challenges around how the pandemic impacted the fundamental operations of companies during lockdown. In many cases payroll staff had to return to the office to ensure staff were paid.

Finance teams handling payroll played a crucial role in guiding and leading their organisations. But lockdown revealed inefficiencies in some companies as they struggled to maintain staff records and pay workers in a timely manner, Fodie says.

It’s hardly surprising. Payroll and staff costs are often the largest line item in a company’s profit and loss statement, so it’s not a function businesses can afford to get wrong, he says.

As governments responded to the pandemic with subsidies and new types of leave, the payroll team’s role became even more complex. Suppliers using a cloud payroll system could respond quickly with updated software, but businesses who were not, had to install and test these upgrades while dealing with the complexity.

“The payroll function was put under immense pressure as a result of new complexity, difficulty accessing tools and data necessary for their role, and dependency on suppliers and IT for support during a challenging time. Many companies realised too late that a reliable cloud payroll system was a crucial element of running a company as lockdowns continued for many weeks,” Fodie says.

Now, as we return to the ‘new normal’ world we now live and work in, working remotely should serve as a crucial factor to companies considering how to step up their operations in the event that further lockdowns are introduced.

“We can see that as the economy struggles, companies are putting an even greater focus on the importance of accurate and timely salary payments,” he says.

“There’s nothing more destructive to a company’s employee engagement than not paying staff accurately or on time. In most instances, payroll teams did an amazing job across a range of industries to make sure their staff were getting paid during lockdown, but many realised there was room for improvement,” he says.

Hidden costs

“The fact is that there are significant costs to a business if they don’t get the payroll function right,” he says.

Keeping track of employee movements on a daily basis across a company is a complex business function.

“If an employee calls in sick and they’re asked to fill out a form next time they’re in the office, you can end up with a bunch of forms that you’ve got to then input into your payroll system. You’re inevitably going to end up with inaccuracies over time, particularly during periods where teams are working remotely,” Fodie says.

“Meanwhile, if you’re not paying staff properly, there’s a real liability risk to your business. These inaccuracies compound because of the number of leave payments that are calculated as averages over preceding periods. It’s not a good space to be in, so it’s really important that those calculations are precise.”

Optimising payroll

Companies looking to prepare for the possibility of another pandemic lockdown requiring staff to work from home will need to consider how best to optimise the payroll function so the process is seamless every time.

For starters, make sure that payroll is in the cloud and is secure. Ensure suppliers are staying on top of changing legislation and quickly implementing software updates for no additional charge and as soon as required or aligned to legislation changes, along with useful supporting advice.

“There have been a number of organisations over the years that have been subject to significant payouts due to ongoing issues, where calculations have gone back six years. It’s not a good space to be, so it’s really important that your payroll calculations are accurate, with starts with having the right system in place,” Fodie says.

“With Datacom, all payroll details are held on our servers in our secure data centres and is available to our customers at any time for seven years,” he says.

Finance teams also need to keep a clear eye on regulatory changes in the payroll space, particularly around government recommendations around certification, Fodie adds.