For well over 20 years, there has been a conversation at CHRO level about demonstrating the value that HR brings to the business. How can HR be seen as a profit centre rather than a cost? How can we apply the principals of financial accounting to people costs through HR accounting? Even with the advent of HR analytics, these questions have remained due to piecemeal data, disparate systems and a lack of accessibility to current, credible data. Could it be that a simple data source holds the answer to understanding the financial cost of HR decisions?

One of the major challenges in measuring the value and impact of HR is that a lot of HR expenses are either unpredictable or less tangible than costs in other parts of the business. Like the impact of engagement on productivity or the difference an investment in career development has on staff retention. This means that calculating the ROI of the HR function, predicting future costs and measuring the success of HR decisions is difficult.

HR accounting is a discipline that has been in existence since the 1970s and is one which attempts to quantify and report on HR investments and activities. It should enable investors, leaders and managers to make decisions about investments in the workforce and workplace. However, as it is entirely dependent on the availability of credible data, it usually does not live up to the expectations of senior stakeholders in terms of accuracy, availability and timeliness.

Could it be that the last piece of the HR value jigsaw is applying powerful analytics tools to the most accurate, credible data that a company has about its people – payroll?

Why payroll data?

What if your clients could better understand the financial cost of HR decisions using their payroll data? Payroll data is a largely untapped source of impactful people insights. It is is data-driven by nature and covers metrics that HR data typically does not cover, such as overtime.

Payroll data which is updated regularly and accurately allows the workforce to be analysed in new ways, such as:

• How do our salary ranges vary by location, role and tenure?
• Are we paying equitably for the work being done, regardless of age, gender, ethnicity or background?
• Are there links between pay rises, bonuses and retention or attrition?
• What does payroll data on new starters tell us about salary cost trends in our industry?
• Is absence a leading indicator for staff turnover?
• What is the cost of absence to the business?
• What is the most cost-effective way to fill resource gaps?

The power of using people analytics for payroll data lies in the truly credible people decisions that it enables. Analysing payroll data allows issues to be discussed in financial terms, giving HR leaders and people managers a stronger voice at the decision-making table. For example, comparing and evaluating in financial terms the cost of a new hire versus the cost of additional overtime for existing staff during seasonal peaks.

The range of payroll data available for an organisation may be slimmer than that for HR, but payroll data is typically more accurate than HR data due to its impact on the employee as well as compliance laws, meaning the insights it can provide are immediately powerful and credible.

Analysing payroll data either on its own or in conjunction with other limited data sets can still have a huge impact on areas such as diversity, equity, inclusion and belonging, employee wellbeing and strategic workforce planning.

Using illumin8HR to analyse payroll data

illumin8HR is designed to provide impactful, automatically found insights to the people managers who need them but don’t necessarily have the time or technical skills to trawl through the data looking for them. illumin8HR allows for deeper insights to be unlocked, without cumbersome manual effort.

illumin8HR empowers managers throughout the business to access analytics. Access to data within the solution is set and managed by HR, enabling people managers to view insights on their teams and help to build a more data-driven organisation.

Applying the powerful analytics capabilities of illumin8HR to your client’s payroll data can uncover surprising insights about the workforce that wouldn’t be available elsewhere.

Find out more about people analytics from payroll data: