How to Use Payroll Data to Make Better Business Decisions

Payroll data holds significant power for your small business. Typically, when thinking about payroll, things like T4s, remittance filing, and paying employees come to mind. But payroll data can be used to make valuable decisions for your small business, too. While it might not be immediately obvious how this kind of data can make an impact elsewhere in your business, the insights provided can help inform business strategy, uncover staffing trends, and more. 

Once you start to see how it fits into the bigger picture, it becomes a clear, essential part of decision-making and business strategy.

What is payroll data?

Payroll data is the collection of information related to obtaining work for pay. This data includes wages, benefits, sick leave pay, vacation pay, and any other expense or information that’s part of payroll processing. Other data you can find in payroll includes employee information, such as hire dates, hours worked, terminations, and more.

The insights payroll data can uncover about your business

The first step to using your payroll data to drive short-term and long-term business decisions and goals is to shed the idea of payroll as a standalone function. When you review and analyze your business’s data overall, include payroll data as well to uncover valuable insights. 

Overall business health

Payroll is a highly regulated process with legislative compliance needs, privacy requirements, and money movement. Analyzing your payroll data gives you insights into whether or not you’re compliant with the CRA and can help you spot problems like fraud.

Having a pulse on all areas of your business, including various payroll elements, provides a better idea of your overall business health. This gives you the opportunity to make better-informed business decisions.

Budgeting and forecasting

Cash flow and budget are big undertakings when running a small business, and incorporating payroll data into these areas is critical. Pairing trends in payroll data, like day-to-day labour costs or new hire and termination expenses, with business trends, like seasonality and other financial spending, will help you better forecast costs. This will empower you to budget more effectively and navigate any challenges that come up such as unexpected expenses.

Growth decisions

When your business is growing and you’re looking to hire new employees, you can dive into payroll data to look at your current salary costs and how many hours your employees are currently working. This will help identify how many new employees you need to hire and the cost implications of doing so, giving you the ability to make a more informed decision.

Staffing trends

Staffing trends is probably one of the more obvious things you can glean from payroll data. After all, looking at the data can show you how many people used a sick day or vacation time, or simply didn’t show up for work. On the other hand, maybe you’re noticing a lot of overtime from your staff. 

Once you identify these trends, you can use the information to inform your decision making and next steps, such as hiring more workers or having difficult conversations with your current staff about their attendance.

Workplace culture and employee satisfaction

Data about sick days, overtime, employee turnover rates, benefits, and beyond can provide insights into your company culture and employee satisfaction.

Take benefits for instance. If you notice a large number of your employees are using their benefits, that’s a good indication it’s a good investment for your business and you can decide to keep the program going or see what else you might add to it.

Similarly, if you notice a high employee turnover rate, that could indicate a deeper problem with employee satisfaction and company culture that you’ll want to investigate.

Cost saving opportunities

Maybe that benefit plan isn’t being fully utilized by employees, or you’re noticing a high turnover rate. These could prompt you to look into other benefits programs that aren’t as costly or explore why employees aren’t sticking around so you don’t spend as much on hiring and training only to have to do it all over again on a regular basis. A 2024 survey notes the average cost of replacing a worker is $30,674.

Apart from that, payroll data can also highlight:

• Time theft: Look for clues like extended breaks and inefficient timesheet management.
• Expense reimbursement concerns: Watch for inflated mileage, meal, or travel expenses.
• Poor payroll controls: Keep an eye out for mismanagement of approval processes and unauthorized payroll adjustments.
• Compliance fines and penalties: Follow regulations to ensure you’re not getting hit with costly fines.

How to analyze payroll data

There has been plenty of speculation about AI’s role in the future of payroll. While you can use AI and automated tools, like payroll software, to help you gather and even analyze some data, humans are still needed to interpret that data (in other words, find the story it’s telling) and decide what actions to take.

AI and automation in action

AI and automated tools’ ability to collect, organize, and provide a high level analysis of information is a big time saver when working with data. Using payroll software as an example, it can take all the information from your pay runs and put it into reports like:

• Payroll Register Report: Shows gross-to-net pay.
• Payroll Taxes Report: Shows remittances made to tax agencies.
• Benefits Report: Shows employer contributions toward employee benefits.
• Deductions Report: Shows deductions withheld from employee payroll for tax remittances.
• Posting Journal Report: Shows payroll expenses and liabilities.

(By the way, each of these is a report in Wagepoint.)

AI tools can help identify trends in the data and provide some insights, but it’s up to you as the business owner to determine how that impacts your business and what to do about it.

Human interpretation gives value to payroll data

Humans are what give value to payroll data through interpretation and understanding its impact. It can take some practice to get the hang of pulling the story from the figures in your reports. 

Here’s how you can approach it.

1. Start with the question you’re trying to answer or the problem you’re trying to solve.
2. Collect the data from key areas that relate to that question.
3. Organize the data in a way that makes sense, such as through reports.
4. Read through the data to spot and make note of any patterns, trends, errors, or inconsistencies.
5. Take a closer look at those findings to see how they answer your question.

Who can help you analyze payroll data

Data analysis isn’t for everyone. However, you don’t want to miss out on the incredible business value provided by payroll data analysis. So, if working with data isn’t your jam, or maybe you’ve just got too much else going on, working with a bookkeeper or accountant is a great option.

You might think of these professionals as people that just manage your books, put the reports together, and make sure all your financial ducks are in a row. But they can also help you interpret your data from an advisory perspective. As advisors, they provide insights that lead to better business decisions.

Tools to work with payroll data

There are a wide variety of tools to help you collect and process payroll data, but there are two key ones that’ll change your workflows for the better.

Payroll software

In today’s tech day and age, working with payroll software is a no-brainer. Payroll software, like Wagepoint, not only makes the entire payroll process easier. It also provides valuable reporting, so you’re always in the know of what’s going on with your payroll — and your business.

Integrations

Given the purpose of integrations is to bring tools together in one data set, they naturally eliminate data silos. Integrating your payroll software with your accounting, time tracking, or people management solutions facilitates seeing your data together to better analyze it and make decisions.

No more payroll data silos

Thinking of payroll as purely administrative or functional is a thing of the past. When you start to look beyond payroll as a means to get your employees paid and lines on your profit and loss statement, you begin to see how it’s a key player in overall decision-making and strategy for your small business.

Looking for insights into payroll management? Read our Guide to Canadian Payroll Management.

Written by Laura A. Barton

Laura A. Barton is Wagepoint's Content Marketing Lead, and she has a passion for storytelling. While words and social media are her main avenues of weaving narratives, she also enjoys sifting through data to find the stories numbers can share about performance, campaigns, projects, or just about anything.

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