Inefficiently managed payroll services cost companies £4,000 per employee

Poorly managed payroll services are costing UK companies almost £4,000 per employee by failing to effectively follow pay policies, according to a new study from HR consultancy firm Mercer.

The firm looked at the data of 4,990 employees from 16 UK multinationals that earned salaries up to £150,000, then matched the data against their internal database that contained 40,000 datapoints from 191 organisations. According to the research, the wasted money amounts to almost 8% of payroll costs over the course of the year.

The major source of the costs is due to over re-numeration of employees, estimated to add an average of £3,262 to a company’s annual wage bill per employee. However, under re-numeration is also a significant problem as it adds around £800 to a company’s bottom line due to the de-motivating effect it has on staff.

The main source of inconsistent pay appears to be due to the contribution of line managers to payroll administration. According to Mercer, line managers are often less discriminatory in awarding pay increases than their company policy encourages them to be.

Chris Johnson of Mercer told Personnel Today that high performance and employee engagement was undermined when many employees are aware that ''some of their colleagues are over-paid and others are under-paid.''

''Our research shows that companies spend nearly 40% of their revenues on employee pay,'' said Johnson, ''and yet they fail to deliver their pay policies effectively.''
 


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