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6 Payroll Performance Metrics You Should Track

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In a world where numbers and metrics determine success, it is essential to develop and track key performance indicators (KPIs) to demonstrate that company goals are being achieved efficiently.

Organizations use high-level KPIs to focus on overall company performance. Subordinate KPIs, on the other hand, are primarily used to align processes in various departments such as finance, payroll and human resources.

Whether you operate as an individual payroll employee or as part of a larger payroll team, these payroll performance metrics will help you track the success of key business goals, ensure the proper distribution of payroll resources, and support your employees.

What are Payroll KPIs?

In short, payroll KPIs are performance measurements that track processes and analyze corresponding costs to show the full accuracy of the process. Although many companies use different payroll metrics, it is essential to track basic KPIs to avoid payroll inaccuracies that impact company resources and impact your employees.

Building a foundation for accurate payroll processes not only provides an indicator of performance, but also serves as a cost-benefit analysis for all of your company's compensation-related costs.

The costs of payroll

Have you ever wondered how much your entire payroll process costs your business? The payroll cost metric analyzes total expenses and offers you ideal solutions to make payroll more cost-effective.

To determine the true cost of payroll, you need to consider everyone in your company who is involved in some element of your payroll processes. This can range from the salaries of the employees who compile the timesheets for input, to the costs of payroll, to all company expenses. Below is a complete list of factors that can be used to determine your labor costs.

  • The salary of employees completing timesheets for payroll.
  • IT support for payroll accounting.
  • Company expenses.
  • Costs for payroll accounting.
  • Implementation and maintenance of HRMS software or related systems.
  • Management's salary for time spent processing payroll and requests.
  • The payroll cost of time spent on transactional payroll.

Ultimately, how you create payroll cost metrics depends on what you want to get out of the data. If you want to see your labor costs as a percentage of sales, divide your total labor costs by your total sales. On the other hand, if you want to know the payroll costs per employee, take your total payroll costs and divide it by the number of employees you ran payroll for.

Productivity and effectiveness

One metric that can improve every aspect of the payroll department is productivity. Here, the specifics of payroll productivity are examined while determining the individual's performance and contribution. The standardized method for measuring productivity is to compare the ratio between the number of employees in payroll and the number of employees supervised. To help you measure it, here is a list of metrics to help you identify issues impacting productivity.

  • Number of payments processed per payroll accountant
  • The number of payments processed outside of the normal payroll cycle.
  • The number of subsequent payments.
  • The time required to process entries with dirty data.

In addition to measuring productivity, it is also considered advantageous if the effectiveness indicators are evaluated in correlation. Effectiveness indicates whether your payroll department is achieving desired results in a timely manner and provides the factors that could influence an employee's effectiveness.

  • Payroll errors, including overpayments
  • Payroll inquiries and the time it takes to respond.
  • How high is the level of automation of the processes, i.e. Forms/transactions, employee self-service, reporting, payroll preparation.
  • The total time required to integrate and maintain HMRS and related systems.

As shown, there are numerous ways to track and analyze the productivity and effectiveness of your payroll using metrics, and it's important that you think about the methods that are central to your business that will show you how You can reduce the time and cost of these processes.


According to the Independent, one in four workers works at least 10 hours of overtime per week. Overtime can therefore cause stress and wear and tear on employees and increases pressure on payroll to ensure that no errors are made when calculating overtime costs to compensate employees.

The most efficient way to calculate this metric is to add up total paid overtime costs and then analyze labor costs by department and team. This allows you to measure how much overtime employees work and how much time is spent calculating overtime pay.

Once you're confident you've counted hours correctly, you can make informed decisions about staffing, reducing employee workloads, changing overtime schedules, and determining the need for additional employees. Likewise, you can determine if there are performance measures your team can take to become more effective when calculating overtime.

Employee vacation

Employee absence costs UK businesses over £14 billion every year, a staggering £554 per employee. These costs highlight the importance of monitoring employee absences in order to make workplace adjustments that can radically reduce costs and improve productivity.

While some companies report on their sick pay, the other direct costs associated with absences are often overlooked and unrecognized. Statutory continued payment of wages in the event of illness is an excellent example of this. To calculate an employee's continued wage payment rate, follow the example below.

The weekly rate (£94.25) is divided by the number of eligible days in the week and multiplied by the number of days for which an employee is entitled. Example: An employee was on sick leave for 7 days (SSP is paid for 4 days).

Cost of training

Training new employees throughout the onboarding process can be expensive. Although it brings many long-term benefits to your business, the initial cost and employee productivity during training can be detrimental.

To determine this important payroll metric, simply divide the total training cost by the number of trainees throughout the process. Remember that the total cost of training should include the cost of instructors, facilities, equipment, travel, entertainment, meals, and the total time spent training new employees.

Once you have a clear picture of individual costs, you can find ways to reduce expenses by eliminating items or switching to new processes to reduce overall costs.

Number of errors

In the life of a payroll professional, it is crucial to eliminate all errors from their process. Otherwise, every single mistake can have serious consequences for the entire company. So far we've listed five different payroll KPIs, but you'll never be able to use them to their full potential and gain accurate data if your processes are riddled with errors. To ensure an accurate payroll process, consider the elements listed below.

  • Tax and fee payments at every level.
  • Accuracy of time recording for hourly pay.
  • The differences in salary types, i.e. Hourly wage, commission, contractor.
  • Applications for the different holiday categories, e.g. Maternity leave, sick leave.

IceHrm's fully integrated payroll engine provides everything you need to ensure your employees are paid on time and allows for easy creation of gross payroll and payroll reports.

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