Hidden payroll work: 7 steps to audit your payroll process

Hidden manual work in payroll is the spreadsheets, checks and re-keying that build up around a payroll system over time. It often goes unnoticed because payroll still runs.

In our conversations with payroll teams in Australia and New Zealand, we’re noticing that payroll problems rarely arrive as one major moment. 

First, it starts small. Someone finds a gap in the process and adds a manual step outside the existing payroll system, say creating a spreadsheet to track leave dates. 

However, when a manual step gets added, more often than not another manual step gets added on top of the first one, and it snowballs over time. These tasks then become extra steps running alongside the payroll system.

As Amity Reece, Payroll Specialist at ELMO with 20 years’ experience puts it, “It’s not necessarily a specific process. It’s the manual things that people don’t realise they need to do.”

Are you maintaining a multiple-tab spreadsheet to check your payroll?

Amity recounts a conversation with an Australian organisation who bought a payroll system years ago. 

The payroll system could do almost everything they needed. But at some point, someone started checking payroll against a spreadsheet before each pay run. As time went on a second tab appeared, and then a third. 

Today, that same spreadsheet has seven tabs. One tab tracks changes in dates, one tab tracks leave end dates and another tracks when allowances should start or finish. 

On the surface, the payroll is working. Employees get paid and things move on. But the way it is ‘working’ may be consuming time, creating risks and making the process harder than it needs to be.

These workarounds can cause a few issues: 

• Manual work compounds. One workaround could lead to another. If one item needed to be checked manually, the team decided another item should be tracked too. 
• The manual way becomes the way things are done. New team members learn the spreadsheet, not learning the payroll system.
• The risk is more concentrated. If one person holds all the knowledge, a sick day or a resignation can slow payroll down.
• They add time. Each check, copy and reconciliation adds to every pay run.

Why do payroll teams build spreadsheets around their payroll system?

Payroll teams usually build spreadsheets for one of two reasons. When she dug deeper and asked more questions, Amity discovered: 

1. Payroll teams had either not received the right payroll software training as they had not been part of the original implementation.
2. Their existing payroll system was old, outdated, and could no longer serve their needs. 

If your workforce has grown or your payroll process hasn’t changed, it’s worth taking the time to check whether your current system still fits your organisation’s needs and operations.

How to audit your payroll process in 7 steps 

A good place to start is to spot any time drains in the process. Hidden manual work may be building up if:

• Payroll checks happen in spreadsheets.
• Data is copied or re-keyed between systems.
• One person owns critical payroll knowledge.
• Reports are created outside the payroll system.
• The team spends more time validating payroll than processing it.

1. Map where payroll data starts
Document where each piece of payroll data comes from and who owns it. This can help you identify unclear accountability and unnecessary handovers.

2. List the work happening outside the system
Record every spreadsheet, manual check, email or workaround used before, during and after each pay run. Note what each step is designed to achieve.

3. Trace every manual handoff
Look for places where information is checked, corrected, copied or re-keyed. Pay close attention to leave, allowances, public holidays and employee changes.

4. Find out why reports are being recreated
If your team builds reports outside the payroll system, understand why. It may indicate that people do not trust the data, cannot access the right information or have not been shown how to use the system effectively.

5. Measure the effort behind each pay run
Track how long it takes to prepare, check and finalise payroll. Include the number of people involved and how much time is spent processing payroll compared with validating the information around it.

6. Check whether the process can scale
Consider whether the current process still suits your organisation’s size and workforce. A process that works today may become difficult to manage as the business grows.

7. Test the process without your payroll expert
What happens when the usual payroll specialist is away? Could another team member follow the process without relying on undocumented steps or individual knowledge?

These steps help pinpoint any payroll time drain or blind spots. 

Don’t wait for a bad pay run to happen 

The most expensive payroll problems can be the quiet costs that become normal. Having this discovery helps verify if your current payroll setup is fit for purpose, or if any of your workarounds have snowballed. Once you’ve documented the work around payroll and have a clear understanding of the current state, the next thing to do is to define your desired payroll outcome.

Frequently asked questions

How do I know if I need a new payroll software? 

You could need a new payroll software if your organisation has grown, added entities or locations, or your current payroll system is approaching the end of its contract or life. Or if your team is constantly checking spreadsheets manually against your payroll system or having to rekey in the same information across multiple systems, it could be a sign to consider a new payroll software to streamline the process.  

What are the signs my payroll system is creating hidden manual work?

Signs of your payroll system creating hidden manual work include constantly maintaining spreadsheets outside of the payroll system, copying data between systems, HR and payroll data not tallying, or using spreadsheets to check payroll before each pay run. Other signs include difficulty with reporting and poor self-service experience for staff. These can start with one manual task and snowball into many more.

How can I audit my payroll process?

Start by understanding your current state, your current pain points and your desired outcome. Look at how the processes have evolved, which tasks are being done manually and which systems need to connect. It is also important to involve the appropriate people and understand what each team needs. Once the problems are clear, you can show how the system could address those specific pain points rather than assuming that new software alone will solve them.

When should I replace my payroll system?

Organisations may review their payroll system when it reaches end of life, when the business has grown, or when the system is no longer the right fit. Look at how processes have evolved rather than automatically upgrading or choosing the easiest option. Some signs that your payroll may no longer be the right fit include reporting problems, poor self-service, integration issues, unmatched leave balances, public holiday errors and manual processes created because people do not know how to use the current payroll system. 

Can a payroll software like ELMO help reduce manual checks and data entry?

Many manual spreadsheet checks can be handled by a connected payroll offering. ELMO matches you to the right payroll engine from the ELMO Payroll Network, then keeps mapped employee data aligned with ELMO HR Core through two-way sync. Intelligent conflict detection flags mismatches before they reach a pay run, so your team spends less time checking and more time on higher-value work.