How does capability affect payroll proficiency?
Some companies manage their payroll on automatic pilot, others break out in cold sweat every month. To which group a company belongs largely depends on their access to adequate payroll expertise, knowledge and experience – whether it’s in-house or via a payroll partner. Under the umbrella ‘capability’, we’ve examined which European countries score best for this driver, enhancing their payroll proficiency.
Scores by country
Mastering payroll is a matter of getting priorities straight
Aiming for enhanced payroll capability is largely a matter of choosing between two approaches. The first option is to have dedicated people work on the task, giving them access to regular training and the right tools: the Spanish way. The second option is to work with an external payroll partner who can provide continuity, compliance and competence: the Belgian way. Needless to say, there are hybrid solutions as well. For instance, it can be effective approach to outsource only the most complex or challenging payroll subprocesses while keeping the rest in-house. The key, however, is to always think long-term and adjust your priorities accordingly.
Tom Saeys, Chief Operating Officer at SD Worx
Capability: top 3 countries
Ranked from most proficient to least proficient
Almost 7 out of 10 Spanish companies praise the disposition, attitude and skills of their in-house payroll professionals. They often also use their own software and technologies to manage the payroll process instead of relying on standard SaaS solutions. These two findings are rooted in the same cultural background: southern European countries are less inclined toward outsourcing than northern European countries. They are willing to invest more time and effort in developing capabilities and solutions on premise rather than relying on external expertise.
But as the labour market tightens and numerous seasoned employees are nearing retirement, internal payroll experts are increasingly seen as critical employees. Many businesses are afraid of the potential damage and costs of losing their expertise if they retire or leave. To avoid this, Spanish companies progressively think of outsourcing payroll processes, so as not to put all their eggs in one basket.
The fact that Polish companies score very well on internal capability has a lot to do with its citizen’s high level of education. This makes it possible to hire highly specialized employees for payroll and HR, which are often separate departments in Polish companies. Future payroll and HR employees in Poland can shape and hone their skills within very specific fields and subprocesses thanks to the possibility to choose between public and private universities, the high quality of these higher education institutions and the broad variety of curricula offered.
What’s more, despite constant recent legislative changes, numerous Polish employees maintain access to specific knowledge through continuous training, making payroll easier.
Croatian companies – particularly mid-sized and large enterprises – highly value payroll as a way of sustaining employee engagement and job satisfaction. They also like to keep control over essential and high-risk processes, preferring to manage them in-house as much as possible. In this regard, Croatian businesses understand the importance of integrating the right technologies while simultaneously enabling their internal payroll professionals to stay up to date and hone their skills. How? Through certified training, subscriptions to tax and legal knowledge portals, and regular contact with local tax and legal consultancies – to highlight just a few examples.
To keep their strong payroll capabilities up to par, Croatian companies will need to face the future head-on. After all, there are some challenges on the horizon. These include several significant changes in income tax regulations, the rise of hybrid work, and a new Labour Law adding complexity to payroll processes and demanding payroll experts to learn fast and apply new rules aptly. Meanwhile, future regulatory changes and the increasing complexity of payroll processes will likely boost the need for integrated payroll services and end-to-end HR services in general.
Capability: bottom 3 countries
Ranked from most proficient to least proficient
More than half of French companies don’t think their access to specific knowledge and knowhow is making payroll easier. One in five even claim to lack the necessary expertise altogether. Large French enterprises, in particular, struggle with building internal capability in this regard. Their internal complexity, coupled with an overly complex and fast-changing legislative context, reduces their overall payroll proficiency. Meanwhile, smaller companies often simply do not have the required teams and bandwidth to manage the legislative complexity.
In part, this situation explains why France is among Europe’s most outsourcing-inclined countries when it comes to payroll processes.
Fewer than 4 in 10 German companies believe their in-house payroll expertise and knowhow is making things easier. This comes as no surprise: German legislation is complex, and the number of legal changes seems to be on the rise continuously.
Meanwhile, there is also a lack of payroll and legislation experts on the German labour market. This leads to payroll staff shortages and – consequently – to excessive workload for the in-house specialists currently employed. What’s more, several payroll processes are often still carried out manually by German companies due to the absence of effective software systems or the right skills to deploy them efficiently.
More than 1 in 5 Danish companies are unsatisfied with the knowledge and skills of their in-house payroll professionals. This is most likely due to the lack of formal education in this domain. At the same time, more and more payroll professionals are being contacted for a job change in other companies. Payroll professionals find it hard to navigate an increasingly competitive labour market, a trend that’s been going on for decades, and face the need to upgrade their knowledge and skills. All eyes are on them, and management expects them to take on a growing number of responsibilities.
For Denmark to move up in the capability ranking of the Payroll Proficiency Index, the focus should be on education and training. In addition, emphasis should also be on enhancing companies’ and people’s understanding of what payroll is in all its facets and why it matters for HR as well as broader business objectives. This should make the payroll profession more attractive and bring about a general upskill of payroll professionals.