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Payroll has remained unmanaged from within the organization, perhaps
because outside entities took the first steps to dictate how labor
expenses would be paid. States and localities have imposed numerous
industry standards and practices on employers. The resulting rules and
responsibilities for compliance on the organization and the Payroll
Department have been substantial. Each state has a unique set of guidelines
dictating the terms of employment and impacting such things as rest
breaks, overtime, minimum wage, how minors are treated, the types of
activity different classifications of employees can perform, total hours,
and so forth. Add to this the complexities of union contracts which must
be applied to the payment, scheduling and treatment of employees. No
wonder we have been lulled into thinking someone else is managing labor
costs. By way of proxy, Payroll has thus become the administrator for
these outside management guidelines.
When regulators imposed rules on labor practices and payments, they
did so from the perspective of the worker, the state and the public. Few, if
any, of the wage and hour guidelines or union contract mandates were
designed to use labor resources more efficiently or to improve operations.
Certainly, no one outside the organization can be credited with collecting
any data, designing compensation programs or constructing work scenarios
that are designed to make the company more profitable. Allowing the
process of administering third-party regulations –– which Payroll does
quite nicely –– to substitute for conscious management of labor expenses
and utilization by the company seems absolutely absurd to me. So why
have we been allowing it to be this way for so long?
Payroll data is the natural convergence of labor cost and business
activity. It’s where the mechanism for getting an organization’s product to
the market –– employee performance –– meets the cost of that undertaking in the form of production labor costs. When rules were imposed from
the outside, payroll administration was logically identified as the most
efficient place to
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monitor and administer them. To comply with these controls, which are more accurately described as constraints and penalties, takes time and effort. They are written in the way laws that tell us what penalty will occur if we exceed the speed limit are written. The result is, emphasis is typically placed on making sure whatever is triggered by exceeding a limit is complied with, rather than putting mechanisms in place to be sure the limits are not exceeded in the first place. This is a lot like someone driving a car with the attitude that “I’ll slow down when I get a speeding ticket.” At this point, it’s too late. A penalty has been incurred, and points have been posted on that person’s driving record. That’s why most of us don’t go much over the speed limit. It’s safer, it’s more fuel efficient, and we will avoid the extra cost of the speeding ticket –– or better yet, a costly or deadly accident. It doesn’t make sense to slow down only if and when we get pulled over by the man in blue. Wouldn’t it likewise be better if we operated our businesses the way we drive our cars? But we keep paying the proverbial “ticket” every pay period, over and over again. As though our business only operates at one speed –– reckless! Let’s step back and consider why Payroll is the best place to begin to manage these constraints. Let’s face it, employee activity determines everything. Machines don’t run on their own. Customers don’t buy a product with robots standing by. Patients don’t get well just by lying in a hospital bed. Widgets don’t travel to stores on their own two legs. The point is, your organization uses people to make it happen, and it costs money every time they show up at work. Every strategic initiative the organization undertakes requires employees to get it done. Because Payroll is the point where activity and costs merge, it’s the right place for integrating all the information and decisions related to labor activity and expense. The truth is, it has held this position for a very long time, but without the ability to take advantage of it –– until now. Recent developments in workforce management technology
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