How to create payroll KPI to improve your efficiency

How to create payroll KPI to improve your efficiency


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When it comes to handling and processing your payroll you may face several challenges and complexities. For this reason, many businesses recommend to create payroll KPI that will help you improve your processes.

However, many corporations don’t know how to create and measure KPIs to get essential information. And, on the other hand, those that may do it don’t know what to do with the data gathered. As you can see, it’s important to comprehend how this useful tool can boost your business.

In this article, you’re going to learn everything you need to know about how to use metrics in your payroll department. In addition, you can gain some understanding on how a third-party could help you get even better results. Let’s observe:

  • How to create payroll KPI to improve your efficiency
  • What is payroll KPIs?
  • How can you use metrics to improve your processes?
  • How can you determine which KPIs you need?
  • Which series of KPIs should you track?
  • How can you improve your global payroll and KPIs?
  • Why is Connect Resources your best option to boost your payroll processes?

1. How to create payroll KPI to improve your efficiency

As a business owner, you want your processes to be as effective as possible. However, when it comes to payroll management, it’s not simple to achieve a high-level of efficiency.

Although processing your payroll comes down to ensuring your workers get their payments on time and in compliance with regulations, it could be even more challenging than what many may think.

Ensuring your payments are processes properly is a time-consuming task. In addition, it involves having experts to process it without any mistakes.

All of this makes your payroll department a difficult one to handle. For this reason, it’s important to know about tools and techniques that can help you achieve a successful process.

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1.1  Why should you have an optimal payroll processing?

Perhaps you may feel like there’s no point in putting so much effort into your payroll processes. Nevertheless, payroll is a crucial part of your business and if you don’t ensure its optimal processing you may end up facing troubles.

Some of the reasons why you need a streamlined and improved payroll process:

  • Ensures your employees get payments on time for each pay period
  • Ensures compliance with local laws
  • Allows you to relieve your administrative burden
  • Optimizes your processes thus making everything easier
  • Allows you to get more free time to invest in your core business activities
  • Helps you identify and get rid of inefficiencies

One of the solutions you can implement to improve efficiency is creating payroll KPI. Here in Connect Resources we can assist you on how to develop a solid process for your payroll department while implementing useful metrics.

2. What is payroll KPIs?

What is payroll KPIs?

Before starting to create your payroll KPI you need to know first what they are. KPI means Key Performance Indicator and they are highly important measurements that will allow you to improve your payroll department.

KPIs are also known as payroll metrics, and they help you to measure your payroll process. Since they are metrics, it means that they’re numeric indicators. The objective is to measure your performance so you can use the information to improve and optimize your processes.

2.1 Why would you need to measure KPIs?

Once you know they’re valuable data, you may be wondering if they’re useful for your business. For this reason, you must learn about why a business may need to consider creating KPIs.

  • Automate your global or international payroll
  • Monitor and measure the performance of your payroll systems
  • Determine how you can improve your payroll department
  • Get useful data to boost your company
  • Analyze your payroll costs
  • Evaluate the accuracy of your process
  • Avoid any unnecessary cost

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3. How can you use metrics to improve your processes?

The metrics obtained through payroll KPI can help you improve your payroll operations. Since running the payroll can be a time-consuming and expensive task, you must find the best tools available to reduce the costs and money you invest in your payroll department.

By implementing payroll metrics you’re going to be able to identify those parts of your process that can be improved so you can save time and money, while ensuring optimal processing.

3.1 What can you learn from payroll metrics?

Since creating a series of KPIs for your business helps you get useful data, you can use it in your favor. These indicators are great for determining if your payroll process is doing well or if needs to be improved.

However, it’s important to note that KPIs are not just measurements; you must use them to develop strategic plans that allow you to boost your business.

Some of the useful information you get through payroll metrics are the following:

  • Total payroll cost per period
  • Benefits for employee in a determinate month
  • Accounts and resources your payroll team uses

Each business determine which metrics they want to get, but it’s important to know that all of them will help you have a broad perspective of your payroll performance, and how it affects the overall business activity.

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4. How can you determine which KPIs you need?

How can you determine which KPIs you need?

The first thing you should know is that there is not a standard payroll KPI. It means that each business is free to use the metrics they want. Therefore, you will find different payroll metrics as suggestion.

In case you’re considering creating your KPIs so you can learn more about your payroll department, you have to know which one can suit you best.

4.1 How to select KPIs?

Keep in mind that you must learn about all of the most common KPIs so you can decide which one can meet your business’ needs.

There are many suggestions for payroll metrics, but before doing this you have to analyze and determine your current business’ requirements.

Some of the best advice to know which KPIs can be the best for your business are the following:

  • Evaluate your company’s goals and see which measurements can align with them
  • Consider including KPIs for each crucial area such as cost, productivity, etc.
  • Select broad and granular KPIs to have a better overview of the process
  • Ensure you monitor only the essentials
  • Consider the KPIs that will offer you unique insight about your payroll process

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5. Which series of KPIs should you track?

Knowing which payroll KPI could work great for your business it’s crucial. In this regard, here we have the most common metrics that are critical to give benefit to your organization.

5.1 Processing time

An excellent KPI relates to the time expended on payroll. Your payroll workers spend time on payroll and by determining how much time it takes allows you identify the areas that are inefficient.

By knowing the time spend, you can then evaluate your process step by step so you can reduce processing hours and thus save time.

You should track how long it takes your employees to process the entire payroll. Keep in mind that to make it more valuable consider the time from attendance data to paycheck distribution.

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5.2 Errors and how to aim for accuracy

Since your employees are human, it’s likely that errors may occur. However, it’s important to determine how many errors happen during payroll processing and which ones are most common.

Errors such as overpayment or underpayment are detrimental for your business. You should measure them and also learn how much time it takes your payroll team to correct them. Keep in mind that tracking your errors should be by per pay period.

Your goal should be to increase accuracy, and to spot the tasks that are causing errors so you can know how to avoid them.

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5.3 Productivity and efficiency

Since creating KPIs is the solution for improving your business, it’s logical to measure your current payroll’s productivity and effectiveness. Some of the most important metrics you could consider in this area are the following:

  • Payments processed outside the payroll cycle
  • Retrospective payments
  • Errors and fixed payments
  • Payroll inquiries

By measuring the efficiency of your payroll process you’re going to be able to fix additional mistakes. Hence, all of this will help you take your business in the road to success.

5.4 Costs

Measuring you costs it’s highly important. If you know how much your entire payroll process costs you can identify how to make it less expensive for your business.

In this regard, you must consider every cost from start to finish. Also, think about your payroll experts salary, payroll accounting software, IT support and any other additional expense.

5.5 Level of coordination

Your goal as a business owner should be to have a Business Intelligence coordination with your HR since this ensures an optimal performance overall. Your various departments should work hand to hand to ensure achieving great results together.

In this regard, a measure you could make relates to the active coordination between your payroll managers and the HR managers.

6. How can you improve your global payroll and KPIs?

How can you improve your global payroll and KPIs?

If handling and processing your payroll department is complicated, it’s even worse for those that own a multinational. Perhaps your in-house team is doing well with your domestic payroll, but when it comes to a global one, it could be very difficult for them to process it.

Even when you create your payroll KPI, you’ll see some challenges to your efficiency. This is because you face different compliance regulations and more demand on your staff. For this reason, you have to work on a solution that allows you to overcome those issues.

In this case, the best solution is to partner with a third-party that can help you avoid issues with payroll efficiency in all of your locations.

6.1 Why should you consider a third-party?

Having a global workforce can mean problems for your in-house payroll department. Even with your KPIs in place you still may have troubles understanding the data and optimizing your processes.

For this reason, a service provider can be of great help. Some of the areas in which a third-party can help you are the following:

  • Know how to interpret the data gathered with KPIs
  • Implement automation and use technology to improve your processes
  • Avoid global payroll errors
  • Ensure compliance
  • Decrease costs
  • Face any challenge that may arise and implement a solid solution

Learn more about the Payroll Outsourcing Service offered by Connect Resources.

7. Why is Connect Resources your best option to boost your payroll processes?

Connect Resources

Here in Connect Resources we want to help you improve your specific payroll processes and overcome the challenges you may face in this department. In this regard, we offer you a comprehensive solution that will allow you to boost your business thanks to payroll KPI.

Whether you’re scaling your business or you’re looking to implement a new system, our team of experts can assist you in each step of your processes. We ensure your payroll administration works correctly while we give total support to your employees.

Our payroll experts will take care of your tasks while you focus on your business core activities. We can ensure you meet your goals of productivity and efficiency while you decrease your processing costs.

Would you like to contact Connect Resources for payroll outsourcing services? You can call at +971 433 166 88 or send an email to, and you’ll talk to one of their representatives that will gladly answer all of your questions.

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