Payroll: the Key to Employee Experience
- Last updated: October 16, 2024
Employee retention has recently become a subject of greater concern for employers. Faced with the aftermath of the pandemic and movements such as “The Great Resignation” – which, in theory, would see workers quit their full-time jobs for greener pastures – employers are, understandably, concerned by their turnover rates. As such, many Organisations are exploring new avenues to create a better employee experience. But there is one often overlooked HR function which employers can improve upon to strengthen their employee experience: payroll.
Read on to find out how and why payroll plays a crucial part in the employee experience, and how to leverage this tool to your company’s benefit.
What is Employee Experience (EX)?
As the term suggests, employee experience (EX) is concerned with the way employees feel about their role and the treatment they receive within a company. This encompasses all aspects of their experience: from the tools and equipment they are given, to meritocracy within the workplace, their relationship with management, overtime work and so much more. As such, a good employee experience is key to retaining an employee. Indeed, research conducted in 2020 by McKinsey & Company shows that employees who report having a positive experience are 16 times more engaged than those with a negative experience, and they are also eight times more likely to want to stay at a company.
Other factors are also at play when it comes to improving employee experience. Indeed, previous generations had a near-blind loyalty to the companies they worked for, making it easier for these Organisations to create a satisfactory employee experience. But now, younger generations do not possess that same attitude. In fact, millennials – who currently make up the majority of the workforce worldwide – tend to value their own benefit over company loyalty. Research by McKinsey further shows that even pre-pandemic, Gen Z employees were putting a greater premium on workplace well-being because they already felt disengaged from their jobs.
Companies, therefore need to do more to provide the same level of employee satisfaction as they did before.
How does payroll affect employee experience?
In an attempt to enhance employee experience, well-meaning companies often invest in well-being programmes, reward schemes, and the creation of an ‘inspirational’ working environment. While these measures may prove to be efficacious to boost morale, they may ultimately fail in the absence of a robust payroll system. Put simply, if the basic conditions of an employee’s contract are not respected, there is little point in trying to provide more sophisticated benefits.
Studies by The Workforce Institute from 2017 have shown that 49% of American workers would start a new job search if they experienced only two problems with their paycheck – a fact which brings to light the correlation between a functional payroll system and employee retention.
Issues with payroll can affect employee experience in these 3 ways:
In the short term
As an employee is preoccupied with the consequences of a late or incorrect pay check, their morale may, understandably, falls. Indeed, studies by The Workforce Institute report that over a third of workers claimed they were compelled to make late payments on their mortgages, credit cards, auto loans, and other bills – a situation which brings about considerable anxiety. When at work, these employees may also be focused on finding a solution to the problem instead of carrying out their duties, resulting in lower productivity. Now, one can only imagine how much more serious the consequences would be if a whole team was impacted by an issue with the payroll system.
In the mid-term
Repeat issues with payroll – even minor ones – can build up and fester into mistrust towards the employer. Employees may begin to feel as though their contribution to the workplace is not respected, or worse, that their employer is being unfair to them. Once an employee’s trust begins to erode, they may start considering other job opportunities.
In the long term
Looking back on their experience, some ex-employees may keep in mind that there were issues with the payroll system, showing a lack of seriousness from the company. Whether it be in terms of delayed salary payment or in terms of miscalculating overtime hours and leaves, employees tend to remember negative experiences more easily than positive ones. Word spreads fast in the age of social media and websites such as Glassdoor provide a ready platform for employees to air out their grievances to a public of potential candidates for their replacement. As a result, the company’s employer reputation is damaged.
Manual payroll vs Automated payroll
Many of the issues companies face with payroll stem from their manual payroll process. Collecting, collating, and otherwise processing the data for all the labour force, while striving to meet a deadline is bound to result in human error. This process gets infinitely more complex once companies cross the border and expand across the world – in Africa for instance. The laws change; language barriers crop up, and taxation must be processed differently. Still, payroll must imperatively keep up or the company may face fines or other sanctions as a result of non-conformity with the local labour laws. The chance of errors grows considerably in these cases.
Partnering with Africa HR Solutions
Switching to an automated payroll system is not the only option. Now, companies may choose to adopt this new system in-house, but they will then have to shoulder the accompanying costs of hardware, software, and training. Instead, as a more cost-effective alternative, businesses may partner with an Employer of Record (EOR) who will take on the responsibility of payroll and compliance with local regulatory frameworks, among others.
Africa HR Solutions has considerable experience as an EOR service provider, helping clients from across the world get their operations running across Africa. Partnering with us means entering a secure arrangement and having the peace of mind that your HR operations are in good hands.
Get in touch with us now to find out how we can help you with your EOR needs.