Payroll errors are inevitable. After all, humans are known to err and payroll miscalculations or even system errors occurs. However, that does not mean that there is no way to resolve such payroll problems.
One proven effective way to identify and prevent common payroll errors is to use root cause analysis.
Broadly defined, root cause analysis is a method of problem solving that emphasizes on gathering and examining data. From a payroll manager point of view, this involves identifying gaps between expected and actual performance of payroll personnel, systems or even payroll processes.
Essentially, there are five key steps to performing root cause analysis to resolve payroll processing problems.
1. DEFINE A PROBLEM
The first key step is to identify the problem. Detail how undesirable the current payroll situation is as opposed to the desired or expected payroll situation.
2. COLLECT QUALITATIVE OR QUANTITATIVE DATA
It would be particularly valuable to collect payroll data that indicates how long each component of the payroll problem has been in effect. For instance, if the payroll system has been inaccurate in computing employees’ allowances for the past consecutive three months, draw out data that is as old as the past three months while concurrently collecting the current allowances figures as well.
3. EVALUATE THE COLLECTED DATA
After collecting your data or “evidence”, the next step is to make sense of it. Essentially, the key here is to draw out possible patterns or factors that could have contributed to the manifestation of the payroll problem. For instance, were some of daily allowance not multiplied by the number of days in a month?
4. ASSESSING THE DATA AND CONTRIBUTING FACTORS
After evaluating the data and identifying the contributing factors, the next step is to assess the contributing factors to identify the root cause or causes of the payroll problem. Could the miscalculation be due to a failure to update a certain component of the payroll system? Or could it be that your payroll vendor has failed to provide you with a system upgrade?
5. RESOLVING THE ISSUE
The final step after identifying the root cause(s) of the problem is to provide recommendations to the relevant personnel, be it to your staff from the payroll department or your payroll vendor. After working with the relevant parties to determine which recommendations would be the most viable in tackling the payroll problem, it is time to implement that recommendation.
There are plenty of tools that you as a payroll manager can use as part of your root cause analysis. Visual tools include flowcharts and fault-tree analyses. Of course, if you are using your preferred root cause analysis tool but it does not help you find the solution to your payroll problem, perhaps you might consider using a different tool instead.
