National living wage: how to tighten payroll and enhance productivity

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Despite it being in place for several weeks now, many employers are still getting to grips with the costs and administration associated with the new national living wage. Neil Pickering, from Kronos, looks at some efficiency measures that could ease the transition.

Preparations for the national living wage should have begun several months ago, but it would be wrong to assume that there is nothing more to do when the legislation comes into force.

The increase has added almost £11 billion to the UK’s wage bill overnight.

Businesses will have to implement long-term plans to counteract this extra payroll cost but, if approached in the right manner, the legislation gives them the opportunity to drive efficiency measures that will strengthen their financial performance for years to come.

Central to turning the national living wage into a positive will be a focus on every organisation’s key asset – its employees. Increasing their productivity will be vital to counteracting this extra cost and safeguarding a prosperous future for the business.

Before organisations can reap these rewards, however, there are key steps that need to be taken.

A fair day’s pay for a fair day’s work

As wages rise, making sure that each member of staff is correctly remunerated will be vital. Unnecessary expenditure must be eliminated and payroll is a great place to start.

Paying staff accurately is crucial for two reasons. In the first instance, there is the immediate financial gain. Taking the step of automating payroll procedures will cut out the human error and confusion that can lead to staff being either paid too much or too little.

By eliminating these inaccuracies, businesses can immediately free up resources to help support the payment of the national living wage.

Beyond the financial benefits, tightening up payroll processes can also have an impact on employee motivation, an area that will be critical to improving productivity at a key time. If an employee is not paid correctly and on time, their motivation will undoubtedly drop and their time will be diverted taking complaints to payroll.

Yet, automating payroll is about more than just the short-term financial gain, it has a strong role to play as businesses work to improve staff productivity to combat the national living wage.

A question of trust

Once this solid foundation has been created, organisations can start to look at ways in which their HR departments can work with employees to impact productivity further, turning the department into a revenue driver.

Introducing employee self-service elements is one way in which HR practitioners can be liberated to add more value to the business.

Giving employees control over workforce data, such as working schedules or time and attendance tracking will lift a great administrative burden from the department and ensure data is more accurate.

HR teams will then spend less time dealing with shift swaps, holiday requests and overtime claims, and take more time enacting measures that will improve productivity and help the business continue to handle the change.

Additionally, the trust that the self-service model delivers can have a positive impact on morale. Offering employees a greater say in their work-life balance is undoubtedly a strong factor in increasing both engagement and productivity.

Applying the data

The insight that business management can gain from accurate workforce data is pivotal to improving performance. It can allow management to allocate resources and build schedules of work more effectively but only if organisations have a clear plan for how this data is going to be analysed and applied.

If they do not, HR departments risk being swamped and unable to apply the insight effectively. This is where liberating the HR team from some of its administrative tasks will bear fruit and help bring clarity across the entire business.

While the new pressures that the national living wage imposes on payroll may seem daunting, a focused approach to managing the workforce can play a big role in making the adoption of the new legislation a success.

HR departments will be central to this process and, above all, it is vital that they are given the freedom to focus on adding value to the business rather than just keeping it ticking over.

This approach will not be easy and certainly requires an investment of time and money but, applied effectively; it can give businesses a great chance of making a success of the national living wage and create solid foundations for future growth.