Human resources (HR) is a very interesting field for me. The primary reason is that it deals primarily with people. It is also one of the departments that is least appreciated, understood, and often deprived of resources.

In one of my earlier post, I wrote about a benchmark regarding how many people your HR staff supports. According to the data, a single HR staff can support, on average, 83 employees in the organization.

Another area I looked into was that of payroll. (Disclaimer: it’s sort of self-serving since we offer payroll solutions, but it still is an interesting area to look into).

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Aside from that obvious reason, payroll, being part of HR in most cases, is often the last place where managers and business owners look into when improving efficiencies and productivity. Our data suggests that this is an area you should look into because it affects the entire company and has a direct positive impact on employee engagement.

The State of Payroll in the Philippines 2016

When people talk about payroll, people usually think of 3 different systems working together. They are as follows:

1. Timekeeping and attendance system (TAS)
2. Human resource information system (HRIS)
3. Payroll system

TAS refers to the one that captures time and attendance of every employee. It is the one that houses all the rules and complexities of your organization. The HRIS is where the names and other relevant information of your employees are listed. This includes their TIN, SSS numbers, salary information and other stuff. The payroll system is the one that just calculates how much each employee gets paid from the information it gets from the TAS and references it with the data in the HRIS. It is also the one that creates the necessary reports that you submit to the different government agencies.

The most popular, and most often used, timekeeping and attendance device is the biometrics. The reason a lot of companies use this is because of its low-price and, if taken cared of, can last 3 to 5 years. A basic Google search shows a biometrics system costing as low as PhP 4,000. If you break this down into its useful life, that’s just over PhP 111 per month for 3 years.

Also, most modern biometrics device already comes with a software that collates the daily attendance logs of employees and calculates the number of hours they worked in a single day.

How is this important to you?

The main reason is that despite being the most popular and cheapest way to log time and attendance, it is also not reliable. Based on our conversations with the companies using biometrics, almost all companies encounter errors when they start their payroll process. Some of these errors are not logging the time-in and time-out correctly, while some aren’t logging them at all.

A lot of organizations now use some sort of software to manage their employees’ data. Now, this doesn’t mean this is working out well for them nor does it tell us that they have eliminated their need for manual copies.

How is this important to you?

Well, if you aren’t and you remain in the 23% who solely relies on manual methods, then this should serve as a wake-up call for you.

The year is already 2016. If you aren’t using some form of software to manage your employees’ data and your competition is, you will get left behind — if you aren’t already.

Now, this is where it gets more interesting.

7 in every 10 companies are already using some sort of software to calculate their payroll. Given that they are already using some form of software, what baffled me was that almost all companies are experiencing errors in their computations. Of course, there are multiple reasons for the errors such as:

1. TAS isn’t capturing logs accurately (as mentioned above) so when the data gets transferred to calculating the payroll, it results in errors.
2. TAS isn’t linked to the Payroll System and the HRIS system. This requires transfering data from one system to another which is very prone to errors. For example, TAS says employee A worked 88 hours this cutoff. The staff entering the data to the payroll system could easily typed in 77 or 99 hours instead. Another cause is entering of the hourly rates of an employee who had just been recently promoted and given a raise.

The are other reasons that causes the errors, but these are the most common ones based on our conversations.

In addition, 1 in every 6 companies still compute payroll manually. And we all know how this is very prone to error. If 70% of companies using software already have issues, what more for those computing these manually?

WHAT DOES THIS ALL MEAN?

So, what do all these numbers tell us?

One thing is clear: there are a lot of problems in the area of payroll. This also means a lot of opportunities for solution providers such as us.

For companies who encounter issues like these, the primary lesson here is to ensure that your systems are linked together and reduce unnecessary human intervention as much as possible. There are other ways to do this, but the two seem to be the only best solution at the moment. Most companies already recognize this. But because of cost constraints, they often just go for the cheapest one.

For providers, such as us, we have to be able to come up with a better solution that solves real problems of companies and not just be satisfied with the ingenuity of the solutions we provide. We provide software and a service. It’s something that we remind ourselves to make sure that we do not fall in love with the novelty of our solutions, but that they are simply reliable. This is also the reason why we developed a new solution to address this.

I’d love to hear your thoughts on this topic. If you have something to say, please let us know in the comments section below.