Future Payroll – A New Payroll Architecture

I like SAP R3 payroll, with all its strengths and weaknesses. But I’m ready – the industry and customers are ready – for a new payroll. I’m calling it Future Payroll.

Future Payroll has to be new, from the ground up. R3’s foundation of schemas, rules and wagetypes is great. It’s powerful when you know how to use it, but it’s also antique compared to what we have available today. Maybe more important than the technical foundation is what the business value, the end-result needs to look like.

In my experience from consulting large companies and institutions on SAP Payroll the common desires for their payroll functions are that they are 1) on-time, 2) accurate and 3) effective. Future Payroll has to start there – it has to satisfy those important customer needs. Payroll managers, IT managers and employees don’t care as much about the technical foundations, in my experience. They care about the end result because no one wants to be the one to deal with late payrolls (that just can’t happen!), payroll errors or a payroll system that doesn't ‘work well’. Let’s look at those in more detail.

Completing payroll on-time is really, really important. You just can’t be late. Employees depend on getting their pay on time. Being on-time is just as much an issue about the payroll system as how a company structures its payroll. For example, you could have a pay period ending on Sunday that is payable on Thursday – I have some customers who do that, and it doesn't leave any room for mistakes. But you could pay on Friday instead, gaining a day of processing time. Some very large companies have found it challenging to run their SAP Payrolls in a comfortable timeframe, and SAP has addressed that by moving more steps into parallel processing. But we can’t expect customers to wait a day for their large payroll to process. Future Payroll has to be fast.

Accuracy is also non-negotiable. Payrolls are either correct or incorrect, there isn’t much space between. If we get everything right but miss on a tax calculation, the payroll is incorrect. If we get everything right but miscalculate child support withholdings, then the payroll is incorrect. When we make mistakes like this, there are real impacts on employees that can lead to dissatisfaction and even in some cases labor unrest if it’s not handled well. This accuracy is a shared responsibility between the customer and Future Payroll. Some calculations are customer-specific, so that configuration has to be done correctly by the customer. Other things though – taxes, social insurance, garnishments, benefits, savings plans and etc – are nationally regulated. Future Payroll has to support and enforce the correct calculation of these country-specific regulations. In my opinion, Future Payroll needs to have delivered content that handles this and makes it easy– why should each customer have to deal with compliance issues?

What does an ‘effective’ payroll system look like? Effective means it gets the job done in a cost-efficient, flexible and powerful way. My goal for every payroll implementation is that the system fits well with the company, it is easy to use, easy to integrate acquisitions, spin-off divestitures and so on. I never want to hear that the payroll system is holding the payroll business function back, keeping it from responding to the company’s needs. So Future Payroll has to be easy to use, flexible to change, and complex enough to handle big company requirements. That’s not an easy requirement!

In future blogs I’m going to dig into more details on what I think Future Payroll needs to look like. I hope you come back for that – and please leave your comments on what you think Future Payroll needs to look like!