What are the Payroll Performance Metrics?


Among all of a company’s operational aspects, the payroll process is one of the most complex yet important. A mistake in payroll can do more damage than one can expect. A simple payroll error could cost an average of $291, according to a study


Companies strive hard to stay on top of their payroll process such that payroll performance metrics are crucial to help the HR team develop accurate employee information and compensation system. 

What is payroll performance?

Payroll performance refers to a company’s ability to pay employee compensation and benefits on time, accurately, quickly and cost-efficiently. However, these may depend on your current process. For instance, payroll outsourcing may lead you to prioritize cost efficiency and accuracy instead of speed. On the other hand, in-house payroll processing may demand you to implement the process to avoid employee distrust and disappointment perfectly. 

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Why should you measure payroll performance?

Measuring your company’s payroll performance ensures that your employees are paid correctly and on time for the exact number of hours rendered each pay period. Having payroll key performance indicators allows you to improve your processes in the workplace and maintain employee confidence. Other benefits of measuring payroll performance are:

  • Maintaining compliance with government policies on wages and compensation and labor laws. Accurate employee compensation pay that adheres to local policies saves your company from paying fines and penalties. 
  • Limiting errors. With payroll performance metrics, you can identify how errors happen and you can implement ways to avoid them or reduce them
  • Keeping employees happy and motivated. Imagine an employee who worked hard for thirty days then end up receiving only a fraction of his supposed salary. How would he feel? Keeping your employees happy will motivate them to work properly and accomplish their tasks on time.

What payroll performance metrics should HR use?

To track and measure the efficiency of the payroll system you’re using for the company, here are a few important metrics to be considered:


Payroll takes up the majority of the company’s expenses covering up to 70% of your business overhead. Knowing how much you spend each time you process payroll will help you project future needs and make more desirable financial decisions. Some of the payroll costs you should consider include:

  • Employee compensation
  • Withholding taxes
  • Employee benefits
  • Leave 
  • Reimbursements
  • Insurance
  • Wages of staff who are part of the payroll process including managers, IT support, accounting and payroll admin

Time consumed when processing payroll

How long does it take for the payroll and HR departments to prepare employee wages and benefits each month? Manual payroll processing may require your team to devote a week or enough time to compute deductions and benefits and to satisfy taxation requirements for each employee. Automated payroll systems may take about 2-3 days to implement adjustments and release the payroll on time. If your team has been consuming too much time processing the payroll, then maybe you should consider automating the entire task. 

Number of errors incurred

Is your payroll system accurate? Do you receive complaints or adjustments from employees who believe they should have been paid a little more? How many errors were your team supposed to rectify? 


Knowing what errors were made and reviewing the nature of these errors will help you keep track of mistakes and will give you a guideline of what you’re supposed to do next time. You can check which part of the process needs to be reviewed, modified, or improved to avoid recurring mistakes.

Training costs

How many people are working for the completion of payroll processing each month? How much time and money is spent for each staff to be trained? Training costs should be an integral part of payroll performance metrics to know whether you need to trim down tasks and simplify the process. 


Overtime is usually an indicator of an employee’s dedication to working. The willingness to stay longer than the required work duration is reflective of the employee’s desire to contribute more to the company. In return, paying their overtime accurately will boost their confidence in the company. 


On the other hand, the ability to track overtime will help you assess which department may not be efficiently assigning tasks, or performing them. Overtime also helps you decide whether certain tasks may be redesignated for other departments.


Productivity is one of the most important payroll performance metrics you should consider. To measure this, you need to get the ratio of the number of employees in the company against the number of employees preparing the payroll. Some of the factors that may affect productivity include the time consumed to resolve issues and the amount and number of payments processed per payroll cycle. 


Efficiency refers to the level of achievement you have set for your goals within the company. The efficiency of payroll is usually affected by payroll errors which include overpayment and missed payments. Efficiency will also cover the time spent in processing payrolls. How long does it take for the entire team to accomplish forms, comply with workflows and prepare payslips?


Perfection is the ultimate goal when processing payroll. There are a lot of variables to consider when trying to improve payroll accuracy:

  • Differences in benefits and compensation - Not all employee rates are the same. Some are compensated on an hourly basis while those on regular employment are paid bi-monthly or monthly.
  • Time tracking - How do employees log in and out of the workplace? What kind of timesheet is being used? 
  • Leave categories - Sick leave, paid time offs and other types of leave benefits differ in compensation depending on employment status
  • Tax payments 

Should you automate your payroll system to improve performance?

Although payroll automation may seem to let you spend more, you will actually save time and money in the long run. Payroll automation can help reduce human errors especially when it comes to inputting information. This can also speed up payroll processing allowing better time management for the entire payroll department. Finally, payroll automation can also help the company maintain and secure company information. 



Payroll processing is an integral part of maintaining sound employee and employer relationships. A faulty system ruins trust and confidence which is why evaluating your payroll process through performance metrics can transform the company procedures. This will also trim down your costs on time, resources and skills. Companies who wish to improve their payroll performance can opt for HR platform services rendered by companies like Zebra. 


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