Unlike a simple decision about overheads, a management decision about human resources, new hirings, increases, bonus plans… will have an impact on the current year as well as on all subsequent financial years.
A management decision about HR therefore involves a significant long-term commitment for the company. Even if nothing changes, payroll costs are bound to increase. Seniority bonuses, wage progression agreements, holiday bonuses… a myriad of factors can cause payroll to drift of its own accord. And companies have a lot of difficulty isolating and understanding the causes of such a drift, the magnitude of which, at group level, can run into several million euros.
1. PUTTING THE CURSOR IN THE RIGHT PLACE
Overall, companies can statistically determine where they are heading, but when you break things down, into business units in particular, the answers are less obvious. Payroll is naturally difficult to foresee, as well as being in a constant state of flux: retirements, maternity leave, arrival of new recruits, etc., so many events are unpredictable. This makes it very hard to determine the reasons for differences that occur from year to year by simply looking at the payroll. It is therefore essential to have detailed information in order to explain even the smallest deviation. However, companies often launch into an HR planning and monitoring project with the idea that they can bring everything under control, but it’s important here not to fix what isn’t broken. Such a strategy is bound to fail because, compared to the usefulness of the analyses, it generates a volume of information and levels of detail that make it too time-consuming to feed the forecasting system. It is important therefore to put the cursor in the right place, ensuring that the information is sufficiently detailed, so that the differences and the causes of the deviation can be explained, while also being sufficiently aggregated, in order to keep it manageable and controllable by the organization
2. ENSURING CONSISTENCY BETWEEN THE VARIOUS SOURCES
Payroll can be explained both by the human resources director, who will have a view of it through the payroll system, and the financial director, who will have an accounting view of things. There are inevitably differences between the two: elements which the HR director will not include but the financial director will, such as provisions for paid leave, time off in lieu of extra hours… The opposite is also true. The challenge for HR is thus to provide information as viewed through the lens of both the human resources and finance departments.
It is essential for this purpose to bring several sources together: pay system, finance system and workforce monitoring system. Because interns or trainees, for example, are not treated in the same way by finance and human resources.
Given the complexity of the subject, you have to be able to count on a sufficiently flexible solution that ensures consistency between the various source systems, in order to draw the essential information from them to produce a unified view of payroll and workforce, and of the data from different systems.
For example, if you know that a new recruit is going to arrive on 1st June, this information is certain but it relates to a future event. This information will be held in one system, but not in the other. This is transactional forecasting information and, for the predictive simulation solution, these transactions must be taken into account and monitored during the forecasting and monitoring exercises.
3. IDENTIFYING HR PLANNING NEEDS PRECISELY
A successful unified software solution will be an application that allows managers to predict the arrival and departure of employees in the organisation as accurately as possible and to classify these arrivals and departures by type (retirements, sabbaticals…).
Understanding the flow of people in the organisation is essential, but involving managers in predicting and explaining these flows is also fundamental. Unified and collaborative software solutions can address this need.
Ultimately, the main challenge is to determine why you want to carry out the payroll simulation project: to control the salary scale, to control resources, to allocate resources in the business unit…
Because HR planning can go from fulfilling the simple need to know who the workforce are, for social reasons, in the context of CSR reporting, to allowing management to explain the reasons for payroll deviations.
Applications are also available to support negotiations with trade unions, based on rules such as: “If I increase the number of people in a specific category with more than 10 years of seniority in the organisation and I apply a particular rate of increase in wages, what will happen?”. Companies can in fact interact with their social partners more flexibly thanks to permanent re-forecasting rules that show what is and isn’t possible.
The question companies need to ask themselves therefore is: “For what purpose, in steering terms, should I plan and simulate my workforce and payroll?”