Benefits March 2, 2004

Study: Doing Payroll Right Can Save up to 70%

March 2, 2004 (PLANSPONSOR.com) - By streamlining the flow of payroll data, increasing control, and creating end-to-end owners for payroll processes, companies can cut their payroll expenses by up to 70%, a consulting firm said.
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The key is adhering to certain payroll best practices, a ccording to a survey of 90 largeUS companies performed by The Hackett Group. Hackett’s research shows that fourth-quartile companies spend an average of $407/employee on payroll, while first-quartile companies spend about 70% less, or an average of only $117/employee.

A breakdown of these costs shows that first-quartile companies spend significantly less in several key areas. In time reporting, first-quartile companies spend an average of 79% less than fourth quartile ($28/employee versus $129). System costs, employee data maintenance, and inquiry/response are other areas where the most significant cost differences exist. Payroll staff at first-quartile companies are also enormously more productive than those at fourth-quartile, supporting 3.4 times more employees each (averaging 715 employees/payroll staffer versus 207.6).

“There are clearly some large gaps here between the best and worst performers, and real opportunities for cost reductions and efficiency improvements,” said Hackett Business Advisor Allison Caron, in a statement. “A company with 27,000 employees can save nearly $8 million each year by moving from average fourth-quartile to average first-quartile in payroll. That’s significant.”

There are also contrasts between first-quartile and fourth-quartile companies, in terms of the number of pay and time codes they rely on, and how they have simplified processes and leveraged systems to push data through their systems much more efficiently, Hackett said. Fourth-quartile companies use 2.8 times more pay and time codes than first-quartile companies. First-quartile companies are also about 2.5 times more likely to require minimal or no supervisor review of professional employee time and 61% of all first-quartile companies have completely eliminated time reporting for professional employees.

Further, according to Hackett, 77% of all first-quartile companies work proactively with their internal customers to differentiate needs from wants, while only 43% of fourth-quartile companies do the same.

For more information Hackett at (866) 442-2538 (toll free) or write info@thehackettgroup.com .

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