Are your employees working too much overtime? Who needs a raise? Are you spending too much money on a department? To get answers to these types of questions, analyze your payroll data. Use payroll analytics to make decisions, avoid overspending on payroll, and verify the accuracy of your payroll.
Payroll data analytics isn’t about mindlessly crunching numbers—it’s about gaining insight into one of your company’s biggest expenses. Read on to learn more about payroll reporting and analytics.
What is data analytics in payroll?
Payroll analytics is the process of reviewing and analyzing your payroll data, such as hours worked, pay rates, and taxes.
The goal of payroll data analytics is to improve decision-making, increase efficiency, and get a 360-degree view of your payroll expenses. Collecting and analyzing your payroll data is key to payroll forecasting, aka predicting future payroll-related expenses.
You can gather and analyze data from your timekeeping system and payroll software, including:
- Regular and overtime hours
- Pay rates
- Tax deductions
- Benefits contributions
- Attendance
- Time-off usage
- Turnover
Use the data to gain insight into your average employee cost, overtime expenses, benefits utilization, and turnover rate. You can also verify that your business complies with tax laws and uses the most up-to-date rates.
Look for patterns in the data. When do you notice your business has the highest overtime costs? Are there periods when you notice a consistent drop in attendance? When did you find the highest turnover rates?
How often should a payroll analysis be conducted?
Analyze your payroll data regularly, such as each month or quarter. Regular payroll analytics helps you stay on top of your payroll expenses for better budgeting and decision-making.
What tools are commonly used for data analytics in payroll?
You can easily gather payroll data if you use payroll software. Most payroll software systems provide calculations, automatic tax updates, data storage, and payroll reports.
The software should generate comprehensive payroll reports based on the payroll data you input. You might have separate reports for the following:
- Payroll register
- Tax withholdings
- Deductions
- Contributions
- Time off
- Employee census
Typically, you can access your company’s payroll reports in your software account with a few clicks.
Gathering, formatting, and analyzing your payroll data can be time-consuming and difficult to organize if you run payroll by hand.
Benefits of payroll analytics
Use payroll data analytics to gain a deeper understanding of your business’s payroll, which can help you:
- Manage payroll expenses: Where are your payroll dollars going? Are you spending too much money in one department? Are employees working too much overtime? Compare your payroll expenses month-over-month and year-over-year to identify opportunities to cut back.
- Improve efficiency: You can also look at data related to processing payroll, such as how long it takes to run payroll and process direct deposit. Consider switching payroll services to improve efficiency.
- Comply with laws: Do you pay nonexempt employees overtime if they work over 40 hours in a workweek? Are your tax rates current? Analyze your payroll data to verify your business is compliant.
- Make informed decisions: Use your payroll information to make data-driven decisions for hiring, giving raises, setting overtime rules, etc.
- Spot fraud: Payroll analytics can alert you to mistakes and—worse—mistakes made on purpose. You can use data to spot fraud, such as ghost employees, time theft, and false overtime claims.
Pro Tip: Although payroll analytics can benefit your business, the process can be time-consuming. Use payroll software with robust payroll reports to organize vast data amounts and streamline the process.
How to use payroll analytics in your business
Your payroll data presents a story. What’s it telling you?
Analyzing your business’s payroll data is a complete process that starts with collecting the data and ends with using the data for decision-making.
Use the following steps to get started with payroll analytics:
- Collect payroll data: You might need to pull several sources, such as your employee timesheets and payroll system.
- Analyze the data: Look for trends or patterns, such as high turnover or overstaffing.
- Summarize findings: Hone in on the most important things your data is telling you and summarize it.
- Use your findings: Use the results of your payroll analytics to help with decision-making (e.g., hiring).
- Forecast payroll expenses: Use your historical data to predict future payroll-related expenses for improved cash flow management and budgeting.
Example of using payroll data analytics
You collect payroll data. You analyze it. After analyzing the data, you notice employees work a significant amount of overtime.
You make an informed decision to cut overtime costs by cutting back on overtime worked. So, you update your overtime policy in your employee handbook.
Your new overtime policy limits overtime and requires employees to submit advance requests.
As a result, you need to update your payroll forecast because you will have lower overtime expenses.
Optimize your payroll reporting and analytics process
Transform how your business manages your labor expenses by embracing payroll analytics. You can use analytics to increase payroll accuracy and gain valuable insights about your payroll expenses.
Consider investing in payroll software to simplify the payroll reporting and analytics process. Patriot’s online payroll comes complete with robust payroll reports that make it easy to filter the data you need.
Patriot’s payroll reports include:
- Payroll details report: Get year-to-date payroll details by employee, including regular wages, overtime wages, taxes, and deductions.
- Payroll tax liabilities report: Review your federal, state, and local payroll tax liabilities.
- Manage time off report: View your employees’ used and available time off for vacation, sick, or personal time.
- Deduction history report: Check out employee payroll deductions from previous payrolls.
Payroll software with comprehensive payroll reports puts the payroll data right at your fingertips. Generate reports based on your existing payroll data in just a few clicks!
Have you just started shopping for payroll software? You can explore Patriot’s award-winning payroll through a personal demo with one of our representatives. They’ll show you around the software and answer your specific questions. Sign up for a personal demo here!
This is not intended as legal advice; for more information, please click here.
