Payroll Technology Yields Business Results
By Jim Greenhaus
One area that's ripe for review -- all too frequently overlooked in the search for business process improvement -- is that of payroll operations. The payroll function is often one that's easy to revamp, particularly with the onset of electronic technologies that not only improve efficiencies but also provide better employee service. An additional benefit is that this process can free payroll staff for higher-level responsibilities they were previously too busy to deal with.
For large employers only?
Several recent studies have documented the activities of major corporations in electronic payroll operations. A June 2002 survey of payroll managers conducted by William Blair & Company reported that approximately one-third of the 200 respondents have an employee portal, although less than one-half of these include payroll information. On the other hand, American Greetings, a company with 40,000 employees, now serves nearly 90 percent of its employees through payroll Direct Deposit and electronic pay stubs. Similarly, Microsoft has enrolled 95 percent of its 18,000 employees in payroll Direct Deposit, with online earnings statements provided at each pay period.
Does this mean that electronic payroll improvements are out of the reach of small to mid-sized employers? Current successes would indicate this is not the case. In fact, small to mid-sized employers already have a wide range of options to choose from in using technology more productively in payroll.
The choice is yours
Often the first step a smaller employer takes is the introduction of payroll Direct Deposit, the transfer of pay electronically from the employer to employee accounts at most financial institutions, including banks, credit unions and savings & loans. Today's more advanced payroll Direct Deposit now allows employees to allocate pay among a number of accounts, including checking, savings and even mutual funds or money market accounts.
The next step is web-based payroll Direct Deposit. In this process, employers upload data from their payroll system safely and securely to their vendor's processing center. Historical records of transmissions are available online.
The final step in the "paperless payroll" is the electronic pay stub. Benefits include on-time delivery without the expense of hand or mail distribution, access from any computer with a browser and Internet connection and the elimination of concerns about lost pay stubs. In addition, it's easy to email pay stub information to accountants, lenders and others needing pay verification.
For clients of National Payment Corporation, their employees receive an email with a link to National Payment Corporation's password protected EZStub web site each payday. This allows them to access the same data that would be included in a traditional paper stub. Employees can receive current pay information as well as their EZStub pay history.
With the advantages electronic payroll can offer, the question is frequently asked why the United States does not have a higher payroll Direct Deposit participation rate than 56 percent. Figures provided by the National Automated Clearinghouse Association indicate that 100 percent of Japanese workers and 90 percent of European workers use payroll Direct Deposit.
One reason for lower U.S. participation is that an estimated 20 percent of U.S. workers do not have or do not use bank accounts. New technologies can now serve this population with the introduction of the payroll debit card system. This FDIC-insured card account allows employees to use the card at ATMs to access their cash, or use the card for purchases. Cardholders have immediate access to their money, 24/7.
We can surely look to additional technological advances in the future to increase payroll productivity and lower operating costs. And, with the additional bonus of improved employee satisfaction, that's a major contributor to any firm's bottom line.