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How Does Payroll Impact The Employee Experience?


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Updated on:
March 15, 2024
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Updated on :

March 15, 2024
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How Does Payroll Impact The Employee Experience?


It is no secret that companies with a highly engaged workforce perform better than their competitors. This makes ‘employee experience’ a critical factor that defines how in sync the employees are with an organization’s goals and values.

But before we begin to understand the impact of payroll on employees, let’s first understand the meaning of employee experience and its significance.

What is Employee Experience?

An employee’s touch-points throughout the corporate journey is the employee’s experience of the company. This means, the way an employee feels about the organization and their job defines their perception and attitude towards it.

But why is employee experience and engagement significant?

And, why are organizations spending a considerable chunk of money to generate employee engagement?

It is because the engagement of the employees is directly related to the company’s productivity which contributes towards the profits made by the company.

According to a Gallup study, companies with highly engaged employees are 22% more profitable.

In their endeavor to improve employee experience, companies concentrate on workplace designs, well-being programs, reward schemes, so on and so forth. But what they forget is that the bedrock to build this foundation needs to be strong. And that bedrock is the primary salary.

Any mix-ups or errors in employees’ payroll can have a direct impact on the productivity and efforts of the employees.

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How exactly does Payroll Management impact employee experience?

Here’s the thing – your employees would not be able to appreciate the ping-pong table or spa coupons if they constantly worry about the delayed mortgage payment.

In today’s world, with the increased cost of living, many employees live from paycheck to paycheck. And any delay in that puts them in tough spots.

If your organization’s payroll system is not consistent or error-free, it can have negative effects on your relationship with your employees, resulting in a drop in their productivity or motivation to work.

In the long run, it can increase employee turnover and dent a company’s aspirations.

What problems arise during Payroll Management?

It is a fact that the tedious task of payroll management feels like a bane to the already burnt out HR management.

Countless issues crop up during rolling out the payment – mostly when it’s done manually.

The gravity of the problem worsens when the payroll needs to be managed at an international level.

Few challenges organizations encounter with Payment Management:

Administrative burden: In most cases, in-house payroll is manually managed. However, this method is inefficient and prone to mistakes. A great deal of paperwork along with human errors complicates the process.

Organizational issues: Organizing massive amounts of data is a tough task; maintaining payroll, employee records, and several other crucial and sensitive information can be challenging. Managing the data and ensuring there is no glitch in the storage, along with keeping the data safe and secure, is important. Often organizations face many issues maintaining it as the difficulty increases when it has to be organized at an international level.

Fragmented use of software: Even if individual companies use software for specific tasks or different software for different tasks, compiling everything together can still be daunting. Not all software are compatible with each other and the lack of integration increases the working hours unnecessarily.

Compliance-related issues: Adhering to local labor laws is non-negotiable. However, it can get overwhelming when you have to manage a global team. It isn’t easy to understand and follow tax laws in one country, let alone deal with multiple international taxes and labor laws. And to add to the workload, there is a language barrier that can cause significant delays and mismanagement.

How does poor Payroll Management affect employees?

Your employees are your company’s greatest asset.

Your company’s productivity, rather, is the sum of your employees’ productivity.

Organizations spend enormous sums of money to increase employee productivity, be it wellness sessions, flexible timings, or sponsored international trips. What happens when the company, while engaging in all these employer branding techniques, falters at a task that matters the most to their employees? Their bread and butter – their payment.

Poorly managed payroll can have severe ill effects.

It causes financial stress to the employees as a very sizable part of the employee ratio lives hand-to-mouth. They have their bills and everything else planned according to their payment cycle. Even a slight delay in the payment can disrupt their entire system. Most people don’t have high savings to fall back on either.

Money-related problems also cause emotional stress and deteriorate mental health. All this can have an enormous impact on an employee’s motivation to perform their job well.

Effects of poor payroll management on your organization:

Poorly managed payroll can not only hurt your organization’s image, but also its productivity and profits.

Here are a few negative effects of poorly managed payroll:

Productivity issues: An organization where employees don’t feel motivated to work and have several other worries are likely to sink in their performance.

According to research, “Companies and organizations with highly engaged employees have 2.6 x higher earnings per share level when compared to companies with low engagement scores”.

Employee retention issues: Trust in the organization is the major reason for employee retention. Irregular payments and regular dispensaries in payment can break the trust of employees. It affects your capability to retain your employees.

Frequent changes in job roles not only affects your company’s productivity, but also increases your cost per employee and expenses to find and hire new employees.

Hurts your reputation: Employees now have multiple places to share their grievances and negative experiences they encountered during their tenure. Online platforms like Glassdoor have a review section where employees can share their experience, and potential applicants can read about company culture. In these reviews, you will seldom notice people complaining about not having a Ping Pong table in their office; however, the comments are more related to basic requirements, like overworking hours, inadequate and irregular compensation, poor management, etc.

Missing out on talent: Ever wondered why companies invest such a huge sum in employer branding activities? The reason is relatively straightforward – to attract talented applicants. There is a massive demand for qualified individuals and a short supply of the same. Employees who have the caliber to take your company to greater heights might give your company a pass because they have heard negative reviews about you.

What’s an effective solution?

Given the problems faced during payroll management and its impacts on a company’s productivity and profits, the employer must take careful steps to ensure that the process is seamless.

The process is complicated, whether done manually or by using multiple software that includes maintaining several spreadsheets, employee records, etc.

This situation worsens when there are international teams. Along with different reporting styles and delays in getting the reports, you now also have to deal with various languages, local laws, and regulations, making the entire process messy and prone to several and severe mistakes.

However, one of the best ways to ensure that there are no hurdles in payroll management is to outsource your payroll process.

Working with a professional company whose expertise lies in managing payroll will not only make your job easier but also save you a lot of time and money you would have spent otherwise. These companies can automate the process, making it error-free.

It will help if you also consider working with an Employer of Record (EOR) as they can take care of all the different international local laws applicable in other branches.

A payroll management service can act as a boon to a company as your HR can spare more time on activities that can increase employee engagement and productivity.

How can Skuad help?

Skuad can effectively manage all the processes related to employee management efficiently. While you concentrate on expanding your business and making it profitable, we take care of the tedious task that would otherwise take up a lot of your time.

Our global HR and payroll platform will help you navigate the sea of international taxation and labor laws with no friction in any process whatsoever. We can streamline all the employee data in one view, which can also give you an insight into the payroll spending of your company.

About the author

Nathan Williams is a Global Payroll Specialist and Finance Consultant. With a background in banking and finance, he is passionate about modern tech practices in payroll management and using global payroll platforms for global payments.

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