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If the current financial landscape has taught us anything, it’s the importance of being able to differentiate between what constitutes a ‘want’ vs. a ‘need’ in terms of spending – however, that makes the assumption that people have a basic understanding of the principles of budgeting, borrowing, and investing.

Sarah Dowzell, COO and co-founder of Natural HR, believes financial education is vitally important early on in life. Here she reflects on how a Certificate in Financial Studies in 2005 helped to shape the path she took when it came to boosting her own banking brainpower.

I think it’s easy for people in business to take for granted that others understand finance. After all, we all need money to survive – but our dependence on it is often misunderstood.

In truth, you don’t need a degree in economics to be financially aware – it’s essentially money coming in, and money going out. But, where things can get confusing, and people find themselves struggling, is around lending, mortgages, why you need a good credit score, and how interest works.

That’s why, when it comes to financial savviness, I firmly believe such skills should be taught at a very young age – if not in school – and not just in terms of how to cope with the arrival of a chunk of student loan, or you first wage, but the importance of taking a longer-term view, as early as you can.

Financial planning matters

There’s no denying that planning for your first house, starting a family, or even retirement is unlikely to be at the top of every 18-year-old’s to-do list, particularly when they are starting to see some disposable income for the first time.

While it’s easy, with the power of hindsight, to make the case that it should be a priority, there’s an argument to say those with experience are the ones who should take the time to help people during their formative years.

I’m lucky that I’ve always had a sensible financial brain and look upon my personal finances in the same way I do for business.

Growing up, I found such grounding immensely helpful when it came to money and understanding of how long-term borrowing would affect me – from the student loan I needed to get me through university, to the credit cards and extra lending ‘opportunities’ that were thrown at me as soon as I turned 18.

It was around this time that I started trading on the stock market, and soon discovered that NatWest would let me set up a stockbroker account with a £10,000 limit – with very little hassle.

The ironic thing is, because I was a student at the time, I used to get a copy of The Times at a much-reduced cost. I’d read the paper religiously and use the intel to help me decide where to invest the money I had – and soon I was making a profit of anywhere between £20-80 on each trade.

Looking back, I can see how it quickly gave me a taste for business, growth, and investment. I’d sit there, in my student halls, working out the potential return on investment while my flatmates were busy partying!

Learn to adapt your plans accordingly

Of course, another big thing to remember when it comes to financial forecasting is the need to review and adjust your plans accordingly. That’s not to say every 21-year-old needs to go and hire a financial advisor, but we should teach others – from a young age – that certain milestone moments call for different financial attitudes and approaches.

I’m a firm believer that people should be taken on that journey, and arguably walked through it even before they get there – so they know what moments to look out for. Such an approach will help them to understand where they are in life, right now, the stages they can expect to go through as they get older, and how financial wants and needs might change as a result.

Right now, it’s important that we all stop and consider the cost of living and how that affects the way we spend our income. Think of it as a business plan, but for life. It can sound quite scary, but it’s simply what’s coming in vs. what’s going out.

No matter your age or income, if you bring home X and your rent, food, and bills amount to Y, it leaves you Z to spend each month. Let’s not forget though, the importance of trying to save some of the ‘Z’ for a rainy day.

One thing I remember being taught at a young age, was to set up a standing order to syphon off savings on payday! Now, some of the great FinTech apps that exist are brilliant for allowing you to track and categorise your spending. And, once you reflect on where your money goes each month – rather than it simply being another transaction leaving your account – you’ll see where savings can be made, particularly around the amount spent on things like subscriptions and snacks.

I learnt a lot of this in 2005, when I took a Certificate in Financial Studies with the London Institute of Banking and Finance. Over the course of a year, I gained a real appreciation for monetary importance by understanding what money is as well as attitudes towards it, and how these might affect life choices – at varying ages and in different situations.

We recently held some payroll training for our ‘non-payroll’ team at Natural HR, to help them understand what our software needs to do, to fulfil payroll requirements. This was focused not on our system, but areas such as what a tax code is, what a payslip looks like, and the various things needed for someone to receive their wage each month.

A lot of colleagues left that session saying: “I can’t believe you don’t learn that in school.” Which, when you think about it, is surprising. You look at what is paid into your bank each month, and don’t consider all the deductions – and what they’re for – beyond perhaps feeling frustrated. Likewise, employers probably don’t consider that staff aren’t aware of that, too.

So, while it’s easy to assume people ‘learn on the job’ when it comes to financial know-how, it’s worth considering putting on some ‘back to basics’ training across all forms of banking – personal and professional – in order to empower your colleagues.

The post Why young people need to be taught the value – and meaning – of money appeared first on Natural HR.

In 2021 any type of fraud – but especially payroll fraud – can be costly to your business, with payroll fraud costing UK companies around £12 billion per year!

This article will answer two questions. Firstly, what are the three most common payroll frauds you could encounter, and secondly, what are nine easy to implement methods to minimise this risk to your company?

What are 3 of the most common types of employee Payroll Fraud you could face?

Preventing payroll fraud is the job of everyone in a business, but to do this, you need to have an idea of what type of fraud you could face. Specifically, both your HR and payroll teams should be aware of the following three most common payroll frauds:

1. Ghost Employee Fraud: Ghost employee fraud occurs when ’employees’ listed within your company’s payroll receive payment but aren’t working for your company. It can also happen if an employee has left but has not been removed from your company’s payroll system. The fraud is usually found in larger companies, not smaller ones, and is more prevalent when employees are spread over several physical locations, but the payroll function is controlled from one central location.

2. Sick Leave Fraud: Sick Leave Fraud refers to an employee falsely claiming sick pay from their company while either not being ill or working on another job.

3. False Expenses Fraud: A false expense claim is when a member of your staff gets paid back for expenses that didn’t happen, were personal expenses, or cost less than the employee reported, with the staff member pocketing the difference.

It has been estimated that companies will lose over £100M each year in the UK due to travel and subsistence fraud. This is in the form of inflated or falsified expense claims. Common examples of fake expenses fraud include:

• Overstating the number of miles travelled on personal car mileage claims.
• They are claiming personal expenses, for example, meals with friends, as business expenses.
• They are splitting an excessive dinner bill with a colleague and then both claiming part.
• Falsifying or manipulating receipts to claim more than charged

What are the 9 ways to minimise the risk of payroll fraud within your company?

No matter the size of your company, there will never be a be-all-and-end-all solution or prevention strategy. Instead, much like IT security, several best practices can help minimise the risk to you and your business:

1. Make sure you check references: When conducting reference checks, make sure that any references are thoroughly checked so that you can ensure your new starter poses no risks to your company.

2. Restrict access to your systems: Only your HR/Payroll team needs to see your employees’ bank details. Management doesn’t, nor does Jack in Sales. By restricting your payroll system so that only those with authorisation can see sensitive data, you minimise the risk of sensitive data breaches.

3. Ensure updated workplace policies: In any workplace policy, ensure that staff members are informed on payroll procedures, including updating expenses or personal details. You may also want to consider outlining what is considered payroll fraud and the possible implications if found guilty of committing it.

4. Enforce password management: Make sure you implement a password policy for all employees, and within it, ensure that they know what makes a strong password. Additionally, make sure that any software you use has two-factor authentication for security. In fact, Natural HR has free resources on how to make a secure password.

5. Ensure your payroll has more than two people in it: By ensuring that your top-level payroll team (those who can access the sensitive data) consists of at least two people, you’ll be taking proactive steps like ensuring that no one individual can control, create and pay the company payroll. Similarly, you may also want to consider the entire payroll process and ensure you take more robust steps to minimise risks, such as ensuring all expense claims are countersigned to provide greater oversight.

6. Always review your payroll data: It is essential to ensure that your payroll is thoroughly inspected throughout the year to ensure that no mistakes or issues are facing the company.

7. Conduct a regular, random review of submitted expense claims: This should be carried out to ensure that your expenses policy is being adhered to and should be part of your expenses policy so that it can act as a deterrent to employees who may be considering committing fraud. A best practice tip is to collect data frequently and require reports from each department regularly.

8. Aperiodic review of your company’s expenses policy: Constantly updating your policy, when necessary, can also limit exposure to expenses fraud. For example, by reviewing your policy, you could discover that you need to revise your policy due to inflation resulting in higher food and service costs.

The post The 3 most common types of Employee Payroll Fraud: How can you prevent them? appeared first on Natural HR.

Organisations use high-level KPIs to focus on the overall performance of the business. Meanwhile, low-level KPIs are prominently used to target processes in different departments such as finance, payroll and HR.

Whether you’re a standalone employee or part of a larger payroll team, these payroll performance metrics will provide you with the knowledge to track the success of key business objectives, ensure payroll resources are distributed correctly and help support your employees.

What are payroll KPIs?

In short, payroll KPIs are performance measurements that track processes and analyse respective costs to indicate the full accuracy of the process. While many businesses use different payroll metrics, it’s vital to track the fundamental KPIs to avoid any payroll inaccuracies that impact company resources and affect your people.

Building a foundation of accurate payroll processes will not only provide an indicator of how well they are performing but act as cost-benefit analysis for any of your business’ compensation-related costs.

The Cost of Payroll

Ever wondered how much your entire end-to-end payroll process costs your organisation? The cost of payroll metric will analyse the total spend and provide you with ideal solutions to make running payroll less expensive.

To determine your true payroll cost, you need to consider all the people in the organisation that contribute to any element of your payroll processes. This can range from the salaries of staff who compile timesheets for input, payroll accounting costs and any company expenses. Below is a full list of factors that could be identified to determine your cost of payroll.

• The salary of staff who complete timesheets for payroll input.
• IT support relevant to any payroll processing.
• Company expenses.
• Payroll accounting costs.
• Implementing and maintaining HRMS software or related systems.
• The salary of management for time spent on payroll processing and enquiries.
• The salary cost for time spent on any transactional payroll processing.

At the end of the day, how you create the cost of payroll metrics depends on exactly what you’re looking to get out of the data. If you want to see your payroll costs as a percentage of revenue, divide your total payroll expenses by your total revenue. Whereas, if you want to know the cost of payroll per employee, take your total payroll expenses and divide it by the number of employees you ran the payroll for.

Productivity & Effectiveness

A metric which can improve every aspect of the payroll department is productivity. Here, you’ll look into the specifics of the payroll departments productivity, while identifying individual performance and contribution. The standardised way to measure productivity is to compare the ratio of payroll employees to the number of employees being serviced. To aid your measurement, here’s a list of metrics which help identify any issues affecting productivity.

• The number of payments processed per payroll processor
• The number of payments processed outside of the normal payroll cycle.
• The number of retrospective payments.
• The time it takes to resolve input that contains unclean data.

While measuring productivity, it’s also widely considered beneficial if effectiveness metrics are evaluated in correlation. Effectiveness intends to outline whether your payroll department is achieving its desired outcomes within a timely manner and provides the factors that could be influencing how effective an employee is.
• Any payroll errors including overpayments
• Payroll enquiries vs the time it takes to respond to them.
• How much automation is involved in the processes i.e. forms/transactions, employee self-service, reporting, payslip production.
• The overall time for integration and maintenance of HMRS and related systems.

As shown, there are numerous ways metrics can help you to track and analyse the productivity and effectiveness of your payroll process, and it’s important to think about the unique methods which are central to your business that will show you how to reduce the amount of time and money spent on these processes.

Overtime

According to the Independent, one in four employees overwork by at least 10 hours each week. With this, overtime carries the potential to stress and wear down employees, providing increased pressure on payroll to ensure no mistakes are encountered when calculating overtime costs to reward their people.

The most efficient way to calculate this metric is to add up the total overtime cost paid out, then analyse payroll cost by departments and teams. Whilst doing this, you’ll be able to measure how much overtime employees work and equally, the time spent on calculating overtime wages.

Once you are positive you have the hours counted correctly, you’ll be able to make informed decisions based on staffing, reducing employees’ workloads, altering overtime schedules and identifying the need to hire more staff. Likewise, you can pinpoint if there are any performance measures your team can take to become more effective when calculating overtime.

Employee Leave

Employee absence costs UK businesses over £14 billion each year, which is astonishingly £554 per employee. This cost justifies the importance of monitoring employee absenteeism in order to make workplace adjustments that can radically reduce costs and improve productivity.

While some companies report on their sick pay, the other direct costs related to absences are often overlooked and unrecognised. Statutory sick pay is an excellent example of this, to work out an employee’s SSP, follow the example below.

The weekly rate (£94.25) is divided by the number of qualifying days in a week and multiplied by the number of days for which an employee is entitled to. For example, an employee was off sick for 7 qualifying days (of which SSP will be paid for 4 of them). Therefore, the sum to calculate the employee’s SSP entitlement looks like this:

£94.25 / 7 qualifying days = £13.46 of SSP per day.
£13.46 x 4 days = £53.84 in SSP.

Training costs

Throughout the onboarding process, training new employees can be expensive. While it will provide many long-term benefits for your organisation, the initial cost and productivity levels of employees throughout training can be detrimental.

To generate this key payroll performance metric, simply divide the total training cost by the number of trainees throughout the process. It’s vital to remember the total training cost should include the costs for instructors, facilities, equipment, travel, hospitality, food and the total time it takes to train new hires.

Once you’ve got a clear image of each cost, you’ll be able to identify ways to reduce expenditure by eliminating elements or transitioning to new processes to reduce the overall cost.

Number of errors

In the life of a payroll professional, it’s crucial to eliminate all the errors from their process. If not, each and every mistake can lead to serious consequences for the entire organisation. We’ve listed five different payroll KPIs up until this point, but you’ll never be able to use them to full effect and gain accurate data if your processes are riddled with errors. To ensure an accurate payroll process, consider the elements listed below.

• Tax and fee payments across each level.
• Accuracy of time tracking for hourly compensation.
• The differences in salary types i.e. hourly, commission, contractor.
• Applications for all the different types of leave categories i.e. maternity, sick leave.

Whilst these are efficient ways to avoid errors and improve payroll performance, Natural HR’s fully integrated payroll engine provides everything you need to ensure your people are paid on time while easily building up to an employee’s final gross pay and automatically producing payslips.

The post 6 payroll performance metrics you need to be tracking appeared first on Natural HR.

In Deloitte’s recent payroll operations survey, they targeted experienced professionals in a wide range of industries who lead or are directly involved with payroll operations. The companies ranged in size from 1,000 to 50,000 employees tend to have their payroll services lead by finance, closely followed by HR.

However, this data shouldn’t sway you into deciding who should take responsibility for payroll in your organisation. The answer resides within your business’ structure and processes.

Payroll in HR

Naturally, payroll spans across both HR and finance, but with payroll being an employee-facing function, it’s no wonder why many believe it should belong in HR’s grasp.

On a day-to-day basis, HR professionals are responsible for a significant number of key deliverables ranging from recruitment to performance management and importantly, the bulk of items processed within payroll – changes to pay, salary, bonuses, employee working hours and benefit deductions. With the majority of payroll data originating from HR activities, does this warrant an element of control?

No matter the size of an organisation, there are bound to be a few payroll processing errors along the way. Cue a bombardment of phone calls, emails and office visits from multiple exasperated employees. Although unpleasant, HR will have a vast array of experience in employee relations, leaving them well equipped to deal with any general or specific queries centred around payroll.

As we have seen, there’s more to payroll than initially meets the eye. Accurately paying your workforce is one thing, but to keep up with payroll legislation is an entirely different matter.

Thankfully, HR professionals will be no stranger to the world of legislation. In using their expertise, HR will need to keep accurate personal records, understand workplace pensions, utilise audit trails, keep in line with the payroll and international legislation while submitting payment on time to ensure complete compliance.

Payroll holds a catalogue of personal employee and business data, and with so much sensitive information on the line, it’s paramount payroll is kept confidential. As expected, HR would be identified as the most appropriate candidate to prevent any data breaches and save the information from falling into the wrong hands.

Payroll in finance

On the other side of the spectrum, plenty of people believe payroll is a numbers-driven game, and who better to deal with numbers than your trusted finance team?

To ensure payroll is processed accurately, a clear understanding is needed to effectively perform accounting functions such as reconciliations, posting to general ledger and taxation compliance. These are day-to-day responsibilities that finance intake to make sure the financial health of the organisation is intact.

Finance professionals are more than likely to have a detailed overview of the tax law, allowing them to act as expert advisors for the organisation if any taxation or compliance issues suddenly occur.

When it comes to payroll, organisations must have strong internal policies to avoid any financial risks, hence why audits of payroll financial data will need to be conducted on a regular basis. In deciding who this responsibility should fall down to, look no further than the financially educated employees.

According to Workset, payroll is the largest company expense by a long shot, at 68% of a company’s total overhead. In addition to this, 40% of workers stated that they would find it very difficult to meet financial obligations if their pay check was delayed by even just one week. These points showcase the impact a financial expert can have overseeing payroll, assisting in providing budgetary reports and consistently monitoring progress.

Does teamwork actually make the dream work?

A popular approach arising within more and more organisations, is for the payroll function to sit between the HR and finance department.

For finance and HR to be successful, both functions need to have full control over employee data. This will be the key towards developing, analysing and implementing effective policies and initiatives that reduce errors leading up an employee’s final gross pay.

Confidentiality is certainly an area where the intertwined efforts of finance and HR will make a notable difference. The decisions made surrounding pay and benefits need to be enclosed within the organisation. Especially, with the GDPR now in full swing, HR and finance need a solid, robust relationship to ensure all data ranging from home addresses and phone numbers to National Insurance details and salaries are kept secure and easily accessible when needed.

Unsure if HR and finance collaboration will actually work? Xerox noticed more than just an improvement in their payroll processes…

A previous Personnel Today article identified that HR and finance working together at Xerox had brought significant benefits. Through sharing people data and the skill sets required to derive actionable insights from it, Xerox has been able to build predictive models for identifying the employees at greatest risk of leaving.

Adding payroll to the cloud

Regardless of your opinion upon payroll’s true home, the most essential element is to ensure payroll does not function in isolation.

Deloitte further delved into the world of payroll and found that 39% of organisations currently use a cloud-based solution and, 21% are evaluating moving payroll to the cloud.

By adopting fully integrated payroll software, accurate data is seamlessly communicated while a time-saving approach is presented throughout the build-up to your employee’s final gross pay.

Fortunately, Natural HR’s all-in-one HR and payroll software does just that. Our cloud-based HR platform provides everything you need to onboard, manage and pay your people – all wrapped up in one easy-to-use system. After all, some things are just better together.

If you want to experience how an integrated HR software platform can benefit your business, book a free demo today.

The post Who Handles Payroll in a Company? appeared first on Natural HR.