Employee recruitment and retention is at the center of every organization's success.
Companies focus on various factors, including company culture, employee engagement, work flexibility, and whatnot, to recruit and retain top talent. But one crucial factor in the equation that often goes unnoticed is a good payroll strategy.
With that in mind, let's take a look at eight ways a good payroll strategy can skyrocket your employee recruiting and retention.
The Importance of a Good Payroll Strategy
Payroll is a crucial part of your employee recruitment and retention plan. Payroll errors will leave an employee feeling anxious, thus jeopardizing your relationship with them.
But, the damage to an inefficient payroll process is even more extensive. It can:
- Cause stress from having to navigate archaic or perplexing practices.
- Diminish employee motivation, thus leading them to hunt for better jobs.
- Negatively impact your employer brand, which will make attracting the best talent even more difficult.
Furthermore, recent research conducted by the National Payroll Institute found that payroll inaccuracies lead to the following results:
- 64% of employees trust their employers less.
- 59% caution others to join the company.
- 51% of employees are concerned about how much their employers value them.
Scary, right? But the good news is you can mitigate all these concerns with a good payroll strategy.
8 Ways a Great Payroll Strategy Can Boost Employee Recruitment and Retention
1. Align Payroll Strategy with Company Goals
Workforce costs account for 40% to 70% of any company's overall operational cost. Therefore, every workforce-related decision (especially employee recruitment and retention) should be aligned with your company's goals and vision.
Leveraging payroll reporting and data collection, you can get crucial data insights on employee engagement, productivity, and efficiency. Moreover, it will help you learn more about:
- Cost analysis and budgeting.
- Overtime and workforce planning.
- Turnover analysis.
- Performance-linked compensation.
2. Be Competitive with Compensation Packages
By offering wide-scale remote work, employers (including the tech giants) can compete with each other for the best talents.
A Lattice report even confirmed that 55% of employees quit to take a job with higher compensation. All this makes having a competitive package even more important for employee recruitment and retention.
Therefore, regularly benchmark your compensation packages against market standards. Adjust the plans to remain competitive.
Don't limit the compensation to base pay. Make it more interesting with incentives like performance-based bonuses, stock options, rewards, and joining and retention bonuses.
3. Flexible Compensation Structure
A flexible compensation structure allows employees to modify components of their CTC (Cost To Company), like transportation and medical expenses. The goal is to give your workforce the freedom to choose.
While base pay can be non-negotiable to a certain extent, you can offer each employee a personalized benefits package as part of their compensation. Here are a few such perks you can consider:
- Work-from-home stipend: For the remote team, you can set aside a home office setup budget or provide memberships to co-working spaces.
- Wellness program: These can include online yoga classes, meditation applications, wellness retreats, or teletherapy sessions.
- Professional development funds: This includes things like additional funds to upskill by attending conferences, obtaining professional certifications, or enrolling in courses.
- Student loan repayment assistance: This is a popular choice amongst young employees, especially in the US and UK region.
Other than offering flexibility for your full-time employees, a flexible compensation structure is also a great option for businesses that consistently work with freelance or contract-based employees.
Leveraging techs such as automated invoice processing in your flexible compensation plan can help you provide better project-based compensation and flexible benefits to your freelancers.
Many companies provide even more unusual perks like donation matching or paid time off to care for a new pet–it all boils down to what aligns best with your company goals.
4. Offer Transparent and Accessible Payrolls
Your employees should be able to access their payroll-related information whenever they want through any device. It's especially true for today's digitally-driven employees who manage their lives through smart devices.
To connect with these remote-first employees, you need to adopt self-service functions that allow employees to access their payslips, compensation, and other personal payroll data everywhere.
For example, using cloud-based enterprise resource planning platforms, you can centralize critical payroll data and provide real-time payroll access.
Moreover, you want payroll systems that should be employee-friendly and easy to use for less-tech employees. Such easy-to-use solutions will create seamless payroll operations for both your business and the team.
5. Automate Manual Payroll Processes
Payroll processing is a tedious task. Small business owners spend around five hours per pay period in processing payroll.
Other than being time-consuming, manually processing payrolls, especially as your team gets bigger, leaves more margin for human error and inaccuracy, leading to disappointed employees.
In this case, you will want to adopt an online payroll process. Automate major components of the payroll process, from data entry and tax withholding to benefit administration and pension submission. Freeing up time for these recurring manual tasks means you can better focus on vital things like improving benefit packages or onboarding processes.
6. Personal Financial Management (PFM) Tools
By 2030, the personal financial software market will be worth over $1.8 billion. Employees rely now more than ever on these tools to manage their financial accounts and transactions.
That's why integrating personal financial management tools with your business payroll system can help employees gain a better grip on their finances. Imagine a tool (like FlexiPay) that not only processes paychecks but also offers real-time insights on deductions, earnings, and taxes.
For example, if an employee isn’t utilizing their full 401(k) match, the PFM tool can highlight saving opportunities.
Through the integration, you'll be caring for your workforce's financial health. Also, using these tools speaks volumes about your commitment to payroll transparency and security–further strengthening your employer brand.
7. Payroll as a Tool for Recognition and Reward
Salaries are no longer sufficient to keep your employees engaged and motivated. That's where additional incentives, like rewards and recognitions, come into play. These can help foster a culture of appreciation and contribute to increased employee retention.
Cashbacks are a direct and immediate way to recognize achievement, like for completing a project or hitting certain milestones. However, these should be processed swiftly with payroll for maximum impact.
Instead of generic bonuses, you can create a tailored bonus program to serve your company objectives. For example, if you want to boost sales, link bonus incentives directly to sales targets. If your focus is on innovation, reward employees who contribute innovative ideas to the group.
You can also reward points to employees for specific achievements or behaviors. This could involve meeting deadlines, innovation, customer testimonials, or leading a team. The points can later be redeemed for rewards, such as gift vouchers, extra vacation time, or days off.
NOTE: While reward and recognition systems work great, make sure the rules are communicated, and the programs are compliant with all relevant tax laws and regulations.
8. Payroll Compliance
The last, but often overlooked, aspect of a great payroll strategy is payroll compliance with tax laws, regulations, and labor requirements. But its role is not limited to legal necessity. Payroll compliance is crucial to building trust and a reliable employer brand that attracts top talents.
Here are a few actionable tips to ensure your payroll compliance:
- Conduct regular internal compliance audits.
- Keep payroll processes transparent.
- Organize training sessions for your HR and payroll staff on the latest compliance requirements.
- Use tech, like automation, for error-free compliance.
A powerful payroll strategy is much more than a financial needle. When implemented well, it can shape your company culture, boost employee retention, and strengthen your employer brand like nothing else.
Integrate the above shared seven tips into your payroll strategy to attract and retain the industry's top talent. It'll be an investment in your most valuable asset, your people.