The Best Kept Secret to Employee Engagement and Satisfaction? It May Be Your Payroll Team.

by FEI Daily Staff

Many payroll professionals are forced to rely on manual processes and legacy technology in the organization.


Think quick: What departments have the biggest impact on employee engagement and satisfaction?

If you said HR and operations, you’re spot on. However, there is a third department that few executives think of when discussing employee engagement: that’s payroll.  If you think about it, it makes perfect sense.

An employee’s most basic expectation of employment is that they’ll be paid fairly, accurately, and on-time for the work they have completed. While processing payroll correctly every pay cycle won’t win you any favors with your team, getting it wrong has the power to quickly undermine not just engagement, but retention.

Payroll errors and their impact on employee engagement

According to “Engaging Employees Through Payroll” survey by The Workforce Institute at Kronos Inc., a staggering 54 percent of American workers have experienced a payroll problem ranging from late payments to flat-out incorrect total earnings. Worse, seven percent of American workers have had a payroll check bounce. Considering these responses, it’s not surprising to learn that 56 million American workers have paid a personal bill late because of a payroll error. Not good, especially as organizations continue to emphasize building an engaged workforce as a key to success.

It may be tempting to chalk these findings up to occasional errors, dismissing them as no big deal as long as the problem is fixed. But rationalizing payroll issues could be a big mistake since they actually have a significant adverse effect on employee engagement and retention.

For example, the same survey reveals that 25 percent of employees will seek new employment after a single payroll mistake. (All of a sudden the saying, “You never get a second chance to make a first impression,” rings especially true, doesn’t it?) More significantly, nearly half will look for a new job after just two payroll errors.

Younger generations of workers show less patience for these types of mistakes. The survey data shows that baby boomers are the most forgiving of payroll errors, with 44 percent of workers aged 55 and above saying that they would stick with their job after a payroll mistake. But in the youngest generation, those 18-29, just 13 percent reported that they would be willing to give their employer a second chance after a single payroll problem.

Where are you investing?

As the survey demonstrates, just a single payroll error has the potential to encourage top talent to seek new employment, undoing tireless work and the large investment being made to build an engaged workforce.

Now, think about your own company’s payroll department. When was the last time your organization updated its payroll applications or systems? Are your payroll processes automated, or are they tracked manually with paper forms or spreadsheets?

A casual scan of a LinkedIn news feed says it all. Today, companies of all sizes are making investments in employee benefits, reward and recognition programs, and upscale workspaces. All of this is effective in attracting top talent.

But on the other hand, many payroll professionals are forced to rely on manual processes and legacy technology in the organization. This means that while large budgets are being invested in the programs that attract the best employees, not enough is being invested to manage this forgotten key element to keeping employees engaged.

Make the case for change

It’s important to note that payroll should not be blamed for these errors – within many organizations, they usually perform miracles with the outdated tools that are at their disposal. This is especially true when you consider the always evolving compliance landscape they must keep up with.

Replacing legacy payroll tools with modern technology, such as a unified human capital management cloud platform that combines HR, workforce management, and payroll will help payroll improve accuracy, process payroll quicker, and ultimately, eliminate the time-consuming paper pushing so that they can use their tremendous knowledge to develop programs that are capable of empowering employees through payroll.

Malysa O’Connor is a senior director of the human capital management practice group at Kronos Incorporated