The payroll industry is nowhere near as efficient as it could or should be. There is still far too much mess, far too much complexity and far too many manual processes.
What is Lean Payroll?
Lean Payroll is a concept derived from Lean Manufacturing, which aims to minimise waste and maximise productivity. It applies Lean principles to payroll management by evenly distributing work, reducing complexities, and alleviating burdens. This results in a streamlined and optimised payroll system that improves team performance and overall productivity.
Understanding the payroll bottleneck
The payroll bottleneck happens at the end of the payroll cycle when a large amount of work must be completed quickly. It’s like a traffic jam, causing delays and congestion in payroll operations. During this time, the payroll team rushes to finish tasks, increasing the risk of errors. Typically, only a few processes are automated before the payroll cut-off date, leaving the majority of tasks to be done in a short period.
The payroll bottleneck is caused by several factors:
Unevenness of work: Tasks are crammed into a short time frame rather than being evenly distributed, leading to increased chances of errors and stress among the payroll team.
Timing and organisation challenges: Strict payroll cut-off dates can create pressure and inefficiency, as changes after the deadline still need to be handled, adding to the workload.
Unsustainable centralisation: When too many tasks are handled by a small team or individual, it slows down the process, increases pressure, and raises the risk of errors.
Impact of errors: Mistakes in one payroll cycle often need to be corrected in the next, creating a cycle of fixing errors that adds to the workload and pressure on the team.
The three pillars of Lean inefficiencies
The core principles of Lean methodology—unevenness, waste, and overburden—are highly relevant to the complex realm of payroll, despite their origins in manufacturing:
- Unevenness: Refers to variability that disrupts smooth operations, leading to inefficiencies and errors. It arises from unbalanced workloads, irregular scheduling, or unpredictable demands, causing bottlenecks that slow down the entire process.
- Waste: Encompasses any activity that consumes resources without adding value to the product or service. This includes wasted time, materials, or unnecessary movement or steps in a process. For a payroll manager, the final product is a payslip, so any activity that doesn’t directly lead to a payslip getting produced is considered waste.
- Overburden: Occurs when employees or systems are pushed beyond their limits, resulting in strain and potential negative consequences. It often arises from excessive workloads that lead to mistakes, breakdowns, and burnout among both machinery and personnel.
Addressing payroll inefficiencies with the three pillars
Applying the three pillars of Lean to the payroll process reveals an integrated and systematic roadmap for improvement.
Step 1. Make work visible: Begin by mapping out your entire payroll process and utilising visual aids such as Kanban boards to gain insight into ongoing activities. This initial step allows for a comprehensive understanding of the workflow, setting the foundation for subsequent improvements.
Step 2. Level out the workflow: You can achieve this by distributing payroll tasks evenly throughout the month. Conduct a thorough analysis to identify peaks and troughs in activity, adjusting task allocation accordingly to minimise waste and alleviate overburden. This may involve redistributing tasks across quieter periods or implementing automation to streamline processes.
Step 3. Identify and eliminate waste: Identify and eliminate areas of waste, particularly focusing on reducing ‘waiting time’ within the process. Utilise the process map (from step 1) to pinpoint bottlenecks and time-consuming steps, and implement strategies to enhance efficiency. This could entail integrating systems for faster data transfer or establishing clear timelines for approvals to mitigate delays.
Step 4. Evaluate resources and manage capacity: Evaluate both human and system resources to ensure optimal allocation and capacity management. Conduct a comprehensive assessment of team workload and system capabilities, addressing any resource gaps through measures such as recruitment, training, or outsourcing. By optimising resource allocation, you can facilitate smoother and more stress-free payroll execution.
The key benefits of Lean Payroll
- Improves efficiency by eliminating unnecessary steps and redundancies.
- Increases accuracy by minimising manual interventions and complexities, leading to fewer errors.
- Accelerates processes by fostering proactive planning and organisation, helping to hugely speed up the payroll process.
- Evens out the workload by eliminating the frequent pressure surges that payroll faces around cut-off dates.
- Cuts costs by saving on operational expenses, labour costs and correction costs due to more accurate and efficient processes that requires less resource.
The future of payroll is Lean
Implementing Lean principles in payroll shifts the focus from unnecessary strain to crucial areas, prioritising efficiency, reliability, and accuracy. By tackling unevenness, waste, and overburden, Lean Payroll transforms the industry, shaping a more effective payroll management system.
For more information on Lean Payroll practices, download Cintra’s lean payroll guide
By Anthony Tete, Communications & Content Manager at Cintra
