How to Analyze Payroll Data

For HR and payroll managers, payroll data offers insights that drive strategic decisions, uncover inefficiencies, forecast workforce trends, and ensure compliance.

But how exactly do you unlock this potential? If you’re wondering how to analyze payroll data in practical and impactful ways, this guide is for you.

We'll walk through the types of payroll data you should be collecting, key strategies for analysis, and how global payroll providers like Deel streamline this process and generate real-time insights.

Types of payroll data

To effectively analyze payroll data for business insights, it’s best to start by defining the different types of payroll data.

The main categories of payroll data include employee demographics, salary and compensation, payroll expenses, time and attendance, and compliance and taxation.

Employee demographics

Employee demographics include basic but essential data about your workers, such as:

• Name
• Location (city, state, country)
• Employment type (full time, part time, contractor)
• Job title and department
• Tenure or hire data
• Employee ID

Employee demographic data is the backbone of any workforce analysis. It allows you to segment payroll data by department, region, or employee type, which is critical for identifying trends, inefficiencies, and pay disparities across your organization. For global companies, location data is especially vital for applying region-specific tax rules and labor laws.

Salary and compensation

Data from compensation management is the most visible and financially impactful component of payroll. Examples of compensation data include:

• Base salary or hourly rate
• Overtime pay
• Commissions and performance bonuses
• Stock options or equity grants
• Non-monetary perks (such as meal allowances and company vehicles)

Analyzing this data helps HR and payroll leaders identify pay equity issues, track reward strategies across departments, and align compensation with performance, tenure, and market benchmarks.

Payroll expenses

This data provides visibility over what the company spends in managing payroll, not just what employees earn. Payroll expenses include:

• Employer contributions (such as pensions, retirement plans, and healthcare)
• Payroll taxes
• Insurance premiums
• Payroll processing fees

Payroll expense data enables HR, payroll, and finance leaders to monitor payroll as a percentage of total operating costs, identify high-cost teams or locations, and conduct strategic workforce planning.

Time and attendance

Time and attendance data connects directly to labor productivity and payroll accuracy. Mismanaged time tracking can lead to overpayments, non-compliance, and inefficiencies in workforce planning.

Time and attendance data includes:

• Total hours worked
• Paid time off (vacation, holidays, and sick leave)
• Unpaid leave
• Absenteeism records
• Shift schedules

Analyzing time and attendance data reveals patterns of burnout or excessive overtime, opportunities for shift optimization, and hiring needs.

Compliance and taxation

Maintaining accurate compliance and taxation data protects your business from non-compliance fines, reputational damage, and employee disputes.

Compliance and taxation data includes:

• Tax withholdings and filings
• Social security and medicare contributions
• Compliance with labor laws (such as minimum wage and overtime laws)
• Benefits administration and reporting
• Employee classification records

Proper tracking and analysis of this data ensures your organization remains prepared for audits, minimizes regulatory risk, and adheres to local regulations.

How to analyze payroll data: 4 key strategies

Analyzing payroll data is a powerful lever for improving operational efficiency, optimizing labor costs, enhancing equity, and making more informed strategic decisions.

Below are four key strategies that HR, payroll, and finance leaders can adopt, along with practical steps to implement them successfully.

1. Segment payroll data by department, role, or geography

Segmentation allows businesses to zoom in on specific parts of the organization and understand how payroll data varies across teams, job functions, and countries. These insights can expose inefficiencies, skill gaps, or workload imbalances that need attention.

Here are some actionable ways you can segment your payroll data:

• Create custom payroll dashboards: Use your payroll software or business intelligence tools to group data based on specific metrics. Deel Payroll makes this easy, so you can create custom payroll dashboards filtered by category (like pensions or social security) to generate insights in real time

• Standardize data: Create consistent naming conventions across HRIS and payroll systems to ensure accuracy and scalability

• Conduct monthly variance analysis: Compare current payroll data against historical baselines or budget forecasts to monitor and correct deviations

2. Track payroll trends consistently over time

Analyzing trends over time helps organizations not only understand what payroll expenses are, but how they are changing and why. This leads to better forecasting, budgeting, and trend detection.

Some tangible ways to implement this are to:

• Build a payroll trendline by month, quarter, and year: Plot total payroll cost, headcount, average salary, and overtime pay over time to uncover seasonality or consistent upward or downward trends

• Utilize rolling averages: Use three-month or six-month moving averages to smooth out data volatility and highlight significant shifts in payroll patterns

• Highlight company changes on trend charts: Annotate key events like mergers and acquisitions, layoffs, or product launches to correlate with spikes or dips in payroll trends for more granular insight

• Track payroll cost per employee (PCPE): This key metric allows you to benchmark against industry standards and detect when compensation costs are rising faster than your workforce

3. Benchmark compensation for pay equity

Uncovering pay disparities across gender, race, job function, and location isn’t just about fairness. It’s also about compliance, your company’s integrity, maintaining diversity and inclusion, and employee morale.

Here are some ways you can benchmark compensation to maintain pay equity:

• Conduct regular internal compensation audits: Compare pay across similar roles, levels, and performance ratings. Evaluate whether compensation is being applied fairly and adjust as needed

• Compare against external benchmarks: Use salary benchmarking tools like Deel’s Global Salary Insights to ensure your compensation is competitive and fair

• Flag and correct gaps: Where unjustified disparities exist, document remediation steps, adjust compensation, and track progress over time

4. Evaluate the ROI of payroll costs

Payroll is typically the largest operating expense, but analyzing spend alone doesn’t tell the whole story.

By understanding the ROI of payroll, you can transform how you evaluate team efficiency, strategic hiring, and performance.

Here are some ways you can evaluate the ROI of payroll:

• Measure labor efficiency: Calculate payroll cost as a percentage of revenue per business unit. This helps measure labor efficiency and highlight teams that are under- or over-performing relative to their cost

• Integrate payroll with HR systems: Integrating payroll and HR systems leads to more consistency in data and reporting, leading to holistic insights

• Compare the costs and benefits of your payroll system: Consider benefits like time savings, error reduction, and improved compliance. Compare benefits against your payroll costs to calculate your payroll ROI

Leverage payroll data insights with Deel Payroll

Knowing how to analyze payroll data and make strategic business decisions is an essential skill for global businesses. By segmenting your data, identifying trends, benchmarking compensation, and measuring ROI, you can transform payroll from a cost center into a strategic asset.

The key is having the right tools. With Deel Payroll, you can track payroll costs with real-time reporting and analytics—all in one unified platform.

Book a demo to speak to one of our experts and learn more about how Deel Payroll delivers 67% ROI.