Let us face it: payroll management is a thankless job. When was the last time you thanked payroll folks in your organization for crediting your salary on time or calculating your income tax or provident fund deduction accurately? Running a payroll organization is like running an electric utility. No consumer thanks the power company when they receive uninterrupted power supply. Let there be a power outage even for a second, you will instantly hear consumers swearing at the power company.
Just because the payroll function is underappreciated does not mean that the function is unimportant. Payroll mistakes can be very expensive – both in monetary and non-monetary terms. Incorrect payroll calculations and delays in executing payroll tasks can lead to cash loss, fines from statutory authorities, audit qualifications, and employee dissatisfaction. Payroll today is at the crossroads of HR, Finance, and Statutory Compliance functions in an organization and is increasingly coming of age as a standalone function. Given that the employee cost is the single largest item in many organizations’ expense list, companies are hiring payroll professionals not only for routine administrative tasks related to payroll and compliance, but also for strategic tasks such as compensation design, reward and recognition planning, and budget and business plan preparation. As a payroll software and service provider with some understanding of the payroll industry, we can say with confidence that high quality payroll professionals are not available in plenty.
Just what are the traits of a high quality payroll professional? What should recruiters look for while hiring people for the payroll function?
1. Analytical skills
Payroll can be taught but intelligence cannot be. A good payroll professional is analytical and has the ability to synthesize facts, make hypotheses and arrive at sound conclusions. Whenever we meet candidates while hiring for payroll operations at Hinote, we evaluate the problem solving skills of the person. Pose some logical/numerical riddles and see if the person shows the enthusiasm to solve it. Check the soundness of the person’s approach to arriving at the solution as much as the solution itself.
1. You are given a 5 litre water jug and a 3 litre water jug. There is a tap from which you can get as much water as you wish. Can you give me exactly 4 litres of water?
Go ahead, give it a shot. This is a very easy riddle to solve. Hint: Watch the movie Die Hard 3 for the answer.
2. Can you write a nested IF function in a spreadsheet software to calculate Profession Tax as per the slabs specified by the Chennai Corporation? Enter any six-monthly salary figure in a cell and get the Profession Tax figure in another cell by using the nested IF function.
3. If you are given a net pay figure, can you work backward to arrive at the gross pay after making assumptions for statutory deductions?
Even if you have a high quality payroll software at your disposal, you will still need to do some offline calculations in a spreadsheet software at times in order to do quality checks. If you are not a numbers person, payroll is not the profession for you. Payroll professionals may have to implement complex business rules imposed by their organization for the purpose of pay calculation. Unless they are analytical and have the capability to think through the logic, they may implement such business rules incorrectly, leading to wrong pay calculations.
2. Knowledge of statutory compliance
We come across many payroll professionals who do not have adequate knowledge of payroll practices and the statutes governing payroll. Unfortunately, many payroll professionals reduce payroll to just uploading some HR data onto a software and downloading some reports for the consumption of the finance or the HR team. Ask them a basic question about how or why certain calculations are done, you would receive unconvincing answers. A payroll professional should have sound knowledge of key statutes such as the Income Tax Act, PF Act, ESI Act, Payment of Bonus Act etc. in terms of calculations, filings, and deadlines.
1. Do you know how to calculate Provident Fund arrear deduction as per the PF Act?
2. Can you please explain how loss of pay impacts statutory bonus calculation as per Section 13 of the Payment of Bonus Act?
3. Please explain the deductions available for income from house property as per Section 24 of the Income Tax Act.
4. Can you help the HR team in your organization in making compensation structuring tax efficient?
Knowledge of statutes also means keeping abreast of important case laws in the statutes governing payroll.
3. Communication skills
We cannot overstate the importance of communication skills for a payroll professional. There may be occasions when payroll personnel, even those who are not very senior, may have to explain calculations to very senior managers – including heads of finance, HR and even the CEO – in their organization. A payroll person can easily lose credibility in the eyes of the other stakeholders if his communication skills are not up to the mark.
There may also be occasions when a payroll person may have to explain statutory deductions to employees whose knowledge of statutes may be negligible. Good payroll professionals are never condescending or impatient but instead are empathetic to their colleagues who seek their help. For example, a higher income tax deduction in a month, even if it is fully as per law, leads to a reduction in net pay and consequently an employee may feel uncomfortable about the same. It is the job of the payroll professional to provide the reasons behind the increase in tax deduction to the employee in order to convince him of the need for the same. People skills and diplomacy can help a payroll professional handle tough situations which involve irate employees.
4. Process orientation
An important determinant of payroll efficiency is the extent to which payroll personnel are committed to process discipline.
Great payroll professionals:
- Work on the basis of a well defined payroll calendar which specifies dates and time limits for monthly attendance closure, receipt of payroll inputs, submission of payroll reports and completion of statutory formalities. In short, payroll professionals should worry as much about timeliness as about accuracy.
- Insist working only on the basis of duly authorized company policies.
- Seek authorization in writing for payroll inputs in case of exceptions.
- Store and submit all supporting documents such as receipts and approval emails in case of payroll audits or statutory inspections.
Commitment to accuracy is paramount in payroll. Mistakes can happen even if the payroll team uses a great payroll software. The payroll process should be designed in such a fashion that even when mistakes happen, they are identified before payroll finalization. Good payroll professionals create extensive checklists for payroll output verification and go through the points in the checklist each month diligently.
The payroll quality process should:
- Check if payroll output reflects the input accurately.
- Check if periodic statutory compliance requirements are met.
- Verify payroll reports by looking at reconciliation reports which present data for the current month vis-à-vis last month.
- Ensure that all relevant reports are correctly updated whenever a new head of pay or deduction is created.
Great payroll professionals never shortchange quality checks due to time constraint.
6. Ability to work under pressure
A payroll professional should be prepared to face delays in arrival of inputs and consequently work under tight deadlines. For example, how many times have we seen delays in compensation revision decisions, and despite delays in inputs, payroll professionals having to ensure that payroll output is delivered on time. Even in organizations which have clear-cut deadlines for payroll tasks, there will be occasional last minute rush. Great payroll professionals work to tight deadlines without compromising on output quality.
7. Commitment to confidentiality
No amount of non-disclosure agreements, security systems, security certifications etc. can help if a payroll professional is careless about maintaining data confidentiality. Haven’t we all seen emails going to wrong recipients due to usage of the auto-complete feature in email software or because of the sender clicking the “reply all” button by mistake? A payroll professional should treat both employee and employer information with utmost care and ensure that information does not reach unauthorized recipients.