As your business matures, so should your payroll operations. But what does that process actually look like?
Identifying the necessary steps and benchmarks for each growth phase is essential for HR, payroll, and compliance teams, no matter your business size. The journey from basic payroll operations to advanced, automated processes ensures employees are paid accurately and on time, compliance is maintained, and the company can scale efficiently.
In this article, you’ll learn what each stage of payroll maturity entails, assessment methods, and improvement strategies to help you reach the next level.
This article includes insights from our Global Payroll Summit, where Daniel Greaves, Head of Global Payroll at Klarna, spoke on combining payroll maturity and communication strategies on an international team. Watch it here.
What is payroll maturity?
Payroll maturity refers to the level of sophistication and automation in a company’s payroll processes. It encompasses the systems, processes, and people involved in payroll management, aiming for efficiency, accuracy, compliance, and scalability. A mature payroll system can handle complex scenarios, diverse employee needs, and compliance requirements with minimal errors.
3 stages of payroll maturity
There are three stages of payroll maturity: low, medium, and high. While most companies naturally progress through these stages, your pace and experience will depend on your organization’s size, financial capabilities, and growth ambitions.
Low payroll maturity
Think of this stage as payroll infancy. Many employers keep their workforce small during the initial stages of a company, with fairly basic payroll operations. They might use tools such as Excel spreadsheets to handle their employee data and usually lack clear documentation or standard operating procedures for their payroll processes.
Typically, organizations at this stage rely on one person to handle their payroll functions, due to their company size or hiring budget. However, this singular reliance is not sustainable—if their payroll manager takes paid time off or has an emergency, the entire company’s payroll cycle can be disrupted.
Other signs of immature payroll include a lack of legislative knowledge, especially if their workforce only hires domestically. Many times, these teams do not have the resources to hire and retain full-time compliance or legal experts to advise them. They likely do not have robust employee self-service options, which increases their payroll department’s workload.
Due to a lack of resources, automation, and centralization, companies at this level of payroll maturity often encounter more payroll errors, which can increase their risk of non-compliance.
See also: Benefits of Employee Self-Service for Global Payroll Teams
Stay compliant and pay your entire global workforce right from your Deel platform.
Medium payroll maturity
At this stage of payroll maturity, the organization has taken some steps to progress but has not fully optimized its operations. Their approach to payroll typically ranges from reactive to controlled. Reactive meaning that, when payroll challenges arise, they take that opportunity to find a solution, but they are not taking preventative measures or future-proofing their processes.
This stage can also refer to organizations with controlled payroll operations. They typically have good payroll software technology in place with some automations, but overall, they are focused on maintaining their current system and still have a cumbersome amount of manual work.
Companies in this stage typically use several different systems to run payroll and HR in different regions, and do not have comprehensive compliance support. While they’ve reduced some of their repetitive tasks and risk of error, there is still room for improvement.
See also: 8 Must-Have Features in Sustainable Enterprise Payroll Software
High payroll maturity
So, what does it mean to reach full payroll maturity?
In our Global Payroll Summit, Daniel Greaves, Head of Global Payroll at Klarna, said, “Realistically, payroll maturity is looking at full automation, full documentation, integrated reporting, compliance, and limited errors. That’s what you want to get to.”
Breaking that down further, a mature payroll model includes a clear payroll strategy that defines the company's pay processes, compensation strategy, and more. These teams also have self-service technology that enables employees to upload documentation, download payslips, and access additional personal information. They may even have AI functions that streamline the payroll process or provides employees with immediate answers to queries.
By achieving optimal payroll maturity, your company can benefit from strategic payroll operations that set your entire workforce up for success. This leads to:
- Lower error rates
- Enhanced automations
- Comprehensive compliance with legal, payroll, and data security requirements
- Full integration with HRIS, HCM, and other systems
- Positive employee experiences
- Real-time payroll data analytics and customizable reports
- Scalability as you grow in size, diversify worker types, and enter new markets
- Operational standardization across jurisdictions
Why is payroll maturity important?
Identifying where your company sits on the payroll maturity scale will help you understand how efficient your systems are in relation to your stage of business. For example, a small business with a low payroll maturity score will encounter different problems than an enterprise with a low maturity score.
Regardless of your company’s size or location, having a mature payroll system is vital for several reasons:
- Compliance: Ensures adherence to legal and tax obligations, minimizes the risk of penalties
- Efficiency: Automates repetitive tasks, saving time and reducing errors
- Employee satisfaction: Timely and accurate payments contribute to a positive work environment
- Scalability: Supports business growth without proportional increases in payroll management complexity
Assess your current level of payroll maturity
Determine your organization’s payroll maturity level by answering the following questions. Choose the statement that best describes your current payroll system for each feature or function.
Tally your selected statements to see which maturity level—Low (A), Medium (B), or High (C)—most of your answers align with. This will give you insight into your current payroll system's maturity and guide you toward areas for enhancement.
Level up your global payroll services with Deel
As your global workforce matures, consider whether your current approach to payroll can support you. With a global payroll solution that centralizes your processes and gives your team a single point of contact, a move to Deel will allow you to simplify your operations and scale them more effectively.
Book a demo and see first-hand how Deel can transform your payroll management.
