Manual administration can create many problems for HR, as working with spreadsheets and paper-based systems are cumbersome and difficult.
The negative impact of all this labour-intensive administration is most obvious in the amount of time and effort involved in people doing these tasks. This translates into higher costs and missed opportunities i.e. preventing teams from working on more impactful HR initiatives.
Yet this is just the tip of the iceberg, as there are a host of unseen costs related to manual HR administration that may be sucking up resources and causing problems without you even realising it.
Here are seven of the most common hidden costs of manual HR administration:
Human error
No matter how efficient they may be, people will always make mistakes – it’s human nature. And this can be very costly for your company, especially when it leads to non-compliance. Even relatively minor mistakes can result in harsh penalties and fines – such as the Californian events-planning company fined over $600,000 simply because an employee failed to complete a form properly. The fall-out from this type of human error can also lead to expensive remediation work, increased audit costs, and the untold damage that reputational harm can do – e.g. in the event of a GDPR breach.
Productivity problems
If processes are slow and difficult, then employees across the organisation are going to spend much more time than is necessary for carrying them out. Relatively simple HR-related tasks – such as booking a holiday, requesting leave, organising training etc. – can take an age when done manually. And this has a direct effect on your productivity, as employees could spend this time far more usefully and profitably, doing what they are actually paid for.
Inflated reporting costs
Often with manual HR, things take place on a fragmented basis – with different systems for different tasks. So, when a report is needed that takes data from multiple systems – it is time-consuming and costly to produce.
Payroll errors
Relying on HR to manually provide employee data to payroll can lead to serious and costly mistakes. According to a report by accountancy firm UHY Hacker Young, payroll errors cost UK firms over £700million each year through overpayments to HMRC. As well as tax implications, there is also the hidden cost of unreported over-payments. While many employees will report an obviously inflated wage bill, some won’t – and if it’s not spotted elsewhere then the money is lost.
Fraudulent activity
Unscrupulous employees may also cost you through fraudulent activity. Figures uncovered by accountancy firm RSM show that employee fraud costs UK businesses more than £40m in the 2016/17 tax year alone. And manual HR processes make fraud easier to carry out. For example, a manager could pay salaries to twenty people, when only nineteen real people exist on the payroll, and pocket the difference. Without a system to reliably control financial transactions, this kind of fraud would be relatively straightforward to carry out.
Quality of work
When people are overwhelmed, the quality of their work suffers – and too much manual admin can be overwhelming. This is particularly likely when you have an HR team using manual systems in an expanding company – as they are often expected to cope with growing staff numbers without extra help. And if the HR team is also responsible for a key strategic initiative – such as integrating new staff from a merged or acquired company – this critical programme may not get the attention it truly needs.
High HR team turnover – Inefficient manual processes could leave a bad impression on your key HR talent – the very people you are most anxious to keep, but are most likely to be ambitious and looking elsewhere. In fact, according to a recent survey by HR magazine, a 1/3 of HR professionals are considering quitting their jobs due to spending too much time on administration. This can leave a big and costly hole in your team and leave you at the expense of a new recruitment process. Also, losing an employee means existing workers must increase their own workload to cover the gaps.
High HR team turnover
Inefficient manual processes could leave a bad impression on your key HR talent – the very people you are most anxious to keep, but are most likely to be ambitious and looking elsewhere. In fact, according to a recent survey by HR magazine, a 1/3 of HR professionals are considering quitting their jobs due to spending too much time on administration. This can leave a big and costly hole in your team and leave you with the expense of a new recruitment process. Also, losing an employee means existing workers must increase their own workload to cover the gaps.
In summary
Although manual HR processes are becoming increasingly outdated, they are still operated by many small and medium-sized businesses.
Struggling with spreadsheets, juggling paper forms and rooting through endless files for documents is not only costly but unnecessary. The new breed of HR software packages can automate and simplify these processes – and save you from all the hidden costs that eat into your both budget and productivity levels.
Introducing digital HR systems is not about cutting overheads – it’s more about alleviating the tedious burden of manual processes. And this leaves your HR team to get on with useful tasks that actually boost your business performance, rather than hurting it.
