14 min read
Public sector payroll is different from private sector (obvious, I know). Various factors can make payroll management more complex and challenging. But, you like a challenge, don't you? You wouldn't have gotten into the public sector if you didn't... In this article, we'll look at the current state of payroll in public organizations. And how you can come up on top in the industry.
Mind the Gap (Not GAAP)
Let's start with the growing pay gap between public and private sector employees. According to a report by the Economic Policy Institute, "the public-sector pay gap has widened over the past four years, especially for workers with a bachelor’s or advanced degree—the majority of public-sector workers."
That hurts. That means the recruiting process is harder than usual (sigh). Even with generous benefits, public sector compensation doesn't compete with private sector wages. And that makes it more difficult to attract and retain qualified talent. Especially in states with limited (or no) collective bargaining rights.
Just a few days ago, the Bureau of Labor Statistics released their employment projections for 2023-2033. These are based on data across 832 occupations.
"Computer and mathematical occupations are projected to grow the second fastest of any occupational group, at 12.9 percent," the report said. "The growth of computer and mathematical occupations is expected to stem from demand for upgraded computer services, continued development of artificial intelligence (AI) solutions, and an increasing amount of data available for analysis."
The rise in STEM occupations is not surprising. Payroll software and human resources tools are becoming more technical. So industries need more people to fill computer-heavy positions.
From this report, the Bureau compiled skill categories for each occupation they studied:
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Adaptability |
Computers and information technology |
Creativity and innovation |
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Mechanical |
Critical and analytical thinking |
Customer service |
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Fine motor |
Physical strength and stamina |
Detail oriented |
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Interpersonal |
Problem-solving and decision-making |
Project management |
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Leadership |
Speaking and listening |
Science |
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Mathematics |
Writing and reading |
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The Department of Labor said, "Employers can use this information to craft job announcements that target specific skills, and to help inform what training to offer to employees."
That's a way to help write the job description. But how do you get the personnel to sign on? SHRM suggests data analytics software. "Making pay decisions that attract and retain top talent against that backdrop requires compensation management software that can help HR leaders track ever-shifting market pay trends, diagnose the root cause of pay equity issues, and better inform talent strategy."
The use of advanced analytics in payroll management is becoming a trend. By analyzing payroll data, you can see workforce trends. You can also identify areas for improvement and make more informed decisions about compensation and benefits. From analytics, you can figure out what resonates with candidates (and later, employees).
There is also software out there that is dedicated to recruitment and onboarding. These tools really help in advertising positions and sorting through resumes. And the whole interview process. There's also software for payroll once they become an employee, too.
Basically, having the right tools for your HR and payroll operations will help you stand out in a sea of companies. Especially with the younger, tech-savvy, generation.
Be Beneficial
How do you keep your workers, though? The quick answer to retaining employees is improved benefits. Especially if you can only pay them so much.
But there's an unfortunate trend happening. Employees are opting out of certain benefits. SHRM notes, "Major drivers for the decline in employees’ benefit spend include inflation and tighter household budgets... [employees'] willingness to spend is going down at the same time benefit costs are going up." Makes sense.
So if benefits won't keep employees around, and you can't compete with private sector wages, how do you retain valuable employees?
Maybe it's more sick days or vacation. Maybe it's the ability to work remotely. Maybe it's free snacks and drinks in the break room (donuts, anyone?).
One surefire way of keeping employees around is good communication and company culture. Some candidates care more about these things than money. If employees feel valued and heard (this takes some action), then it benefits the company culture as a whole. Find good methods of surveying employees, and act on those answers. Create an environment that encourages innovation and creativity. This will help your organization thrive and retain its talent.
In the public sector, employee satisfaction is also tied to payroll management. Timely and accurate payroll is not just a matter of compliance; it is also crucial for maintaining morale and trust among employees. Payroll errors or delays can lead to dissatisfaction and decreased productivity. And even higher turnover rates than normal.
Given the public sector's unique challenges in retaining top talent, you need to prioritize payroll accuracy and efficiency. First and foremost.
As Forbes points out, "Strong employees can find work elsewhere, so it’s important to retain your team and make sure their pay is always done correctly and on time."
This is where technology can make a significant difference. You can improve your overall payroll experience by making it more efficient and more effective. Provide employees with easy access to their pay information through self-service portals. Transparency boosts trust and employee satisfaction. And it cuts down on employee questions and phone calls. It's a win-win.
Staying Regulated (Insert Joke Here)
The regulatory environment for payroll is complex and changing constantly. There are a wide range of laws and regulations: federal and state tax codes, labor laws, benefits administration requirements... And if you make an error, it can lead to fines or lawsuits (yikes).
You need to stay informed about regulatory changes and make sure your payroll operations are up-to-date.
Let's use Florida as an example. "A series of recent legislative changes, including the introduction of a union recertification requirement, played a role in Florida’s improved [public sector labor laws] rating," The Capitolist noted recently. Florida public servants now have new regulations. They need to recertify according to law, or not be in compliance. Sometimes this kind of information is announced by the state, but other times, you just have to keep up on the laws.
Staying up to date on regulations requires ongoing education and training. Some good resources for this are:
There are others, but these are pretty robust.
Staying informed also takes close collaboration with legal and compliance teams. Find a team that understands your industry (and thus the laws). Hold a weekly or monthly meeting with them to go over new (or current) legislation. This will be an added protection and resource for future needs.
Technology Trends
Technology plays a pivotal role in addressing many of the challenges you face in the public sector. But there are challenges with technology, too. There's the technology learning curve. Artificial intelligence trends and legislation. Talent management techniques and payroll automation options. The abundance of self-service tools. Hiring employees that can handle technology along with the normal job responsibilities... The difficulties seem endless.
But technology can help. Payroll software, in particular, has become indispensable for automating processes, ensuring accuracy, and maintaining compliance.
Modern payroll software solutions offer a range of features that simplify the payroll process. These include automatic tax calculations, direct deposit, employee self-service portals, and real-time reporting. By using these tools, you can reduce the time and effort required to manage payroll. This protects your organization from most errors. And it frees up resources for more critical tasks.
Forbes highlights that payroll software "will handle most of the payroll process on your behalf" and "can save time, be cost-efficient and ensure timely payments to both your employees and to the various government agencies collecting payroll taxes."
This is particularly beneficial for those of you where compliance with complex regulations is non-negotiable.
Cloud-based payroll solutions offer benefits, too, like enhanced security, scalability, and accessibility. Want to offer remote options for positions? Cloud hosting is the way to go. The ability to access payroll systems from anywhere also supports the increasing trend toward remote work. And it's still secure.
"Since processing payroll involves a vast amount of personal data, payroll security should be top of mind," a recent Forbes article states. "The payroll process involves a great deal of sensitive information. If one hacker makes their way into your system, they’ll have access to your employees’ addresses, Social Security numbers, bank account information and more. This can lead to cyberattacks that can cost you a significant amount of money to recover while putting your reputation on the line."
With cloud hosting, sensitive payroll data is more protected against breaches. You can also easily scale your payroll operations as your workforce grows. But as with any technology, it's only as good as its weakest user. Best practices need to be top-of-mind, too.
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Audit your payroll security
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Keep employees trained in your payroll software
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Do regular (or automatic) software updates
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Change login credentials often, or use 2FA
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Limit software access to only those who need it
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Be careful with sensitive information
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Have a checklist to remove access when employees leave
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Divide up payroll duties to protect your data
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Train your employees on cybersecurity best practices (especially for email)
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Purchase extra cybersecurity
Another area of focus will be the integration of payroll with other HR and financial systems. You can gain a more comprehensive view of your operations by creating a seamless flow of information between payroll, HR, and finance. This integration will be important as you face increasing pressure to do more with less.
Choose a payroll software provider that offers automatic updates and constant support. It can help you stay on top of the technological trends.
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The Future
Looking at the future, the role of payroll in the public sector is likely to become even more complex. You will have to adapt to new challenges and opportunities. There's the increasing adoption of remote work. The rise of gig and part-time employment. The growing importance of data security...
You will have to navigate a complex regulatory landscape and address the growing pay gap with the private sector. You will need to leverage technology to improve payroll processes and employee satisfaction. You will challenge and be challenged. And it won't be easy.
But by staying informed on the latest trends and tools in payroll management, you can say, "Challenged accepted." Overcome these challenges and make yourself well-positioned for the future. By doing this, you support the broader mission of serving the public effectively and responsibly. And that will put you on top.
Or look at some common payroll challenges and solutions.
Other sources:
https://www.shrm.org/topics-tools/news/benefits-compensation/inflation-cpi-july-2024-
https://webapps.dol.gov/elaws/PayBenefits.html
https://www.census.gov/newsroom/press-releases/2024/public-employment-payroll.html