Impact of Payroll on Employee Experience

It is no secret that companies with highly engaged employees perform better than their competitors.

Employee experience is, therefore, a critical factor that defines how in sync the employees are with the company’s values and goals.

What is Employee Experience?

An employee’s encounter with all the touch-points throughout the corporate journey is the employee’s experience of the company. The way the employee feels about the organization and their job defines their perception and attitude towards it.

But why is employee experience and engagement significant? Why are organizations spending a considerable chunk of money to generate employee engagement?

It is because the engagement of the employee 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 the payroll can have a direct impact on the productivity and efforts of the employees.

How exactly does Payroll Management impact employee experience?

Here’s the thing, your employee will not be able to appreciate the ping-pong table or that spa coupon if they are constantly worried about the delayed mortgage payment.

In today’s world, with the increased cost of living, many employees live from paycheck to paycheck. Any delay in that, and they are in tough spots to meet their basic needs.

If your organization makes payroll errors regularly, it can have negative effects on your relationship with your employee, resulting in a drop in their productivity.

If your employee is constantly worried about the payment deadlines they have to meet, it can have a direct impact on their concentration, creativity, and productivity. In the long run, it can increase employee turnover and dent a company’s aspirations.

What are the problems faced 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 while 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.

Here are a few challenges involved with payment management:

• Administrative burden: In-house payroll is more or less managed manually. 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 a lot of issues maintaining it because 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 is compatible with each other; various software doesn’t integrate which increases the working hours unnecessarily.
• Compliance issues: This is especially true when it comes to a global team. It isn’t easy to understand and follow related taxation laws in one country. Imagine dealing with different international tax and labor laws. And to add to the workload, there is a language barrier that can cause a lot of delays and mismanagement.

How does poor Payroll Management affect employees?

Your employees are your company’s greatest asset. Your company’s productivity 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 employment 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 - a very sizeable 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 and their entire system falls apart. Most of them don’t have huge savings to fall back on.

Money-related problems also cause emotional stress and deteriorate mental health. All this can have a huge impact on an employee’s motivation to perform his 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 its profits.

Here are a few negative effects of poor payroll management:

• 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 affect 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 with your company. Online platforms like Glass Door 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, rather 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 steps to ensure that the process is seamless.

The process is too complicated, especially when it is done manually, or by using multiple software which includes maintaining multiple 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 different 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 — Your HR can spare more time on activities that can increase employee engagement and productivity.

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