Unlock the strategic value of your payroll data with Quantum Payroll

Payroll is often one of the largest individual costs in a business, and soon the Pay Transparency Directive will require you to explain pay differences, placing greater demands on structure and documentation. Nevertheless, payroll, HR and master data still exist in their own silos in most organisations. Thomas Malmros from Finance IT Services and Henrik Schøtt Kjærgaard from People & Payroll Services have joined forces to explain how Quantum Payroll can be the solution – and why it should be high on the CFO’s agenda.

Quantum Payroll is a discipline that can elevate the payroll area to the level of structure, governance and business understanding that financial data has always been subject to. When data from HR, time registration and payroll is brought together, you can suddenly see the actual patterns in the organisation: what has been paid, what has been delivered and how actual performance compares with the salary payments? This gives the CFO a decision-making foundation that few currently have within the payroll area. Henrik Schøtt Kjærgaard is a Partner in People & Payroll Services and the author of this guide to the payroll process. Together with his partner in Finance IT Services, Thomas Malmros, he explains what Quantum Payroll entails, why understanding the data makes all the difference and why payroll can no longer be treated as a blind spot alongside finance.

Henrik Schøtt Kjærgaard:

Payroll and HR involve enormous amounts of data, and the foundation of Quantum Payroll is working with the data in a structured, systematic way. When you look across the HR value chain – in other words, HR systems, time-registration systems, scheduling, payroll and finance on the other side – you see an extreme amount of complex data that together contains a great deal of value. Quantum Payroll is a concept created to understand this complexity and actually use the data to create value. Many people never realise the value of their data because they remain in one silo at a time and never consolidate data across systems.

Thomas Malmros:

That is also why we call it Quantum. It is about large amounts of data, and the name is inspired by Quantum Computing, where you use technology to get value from large amounts of data. We have always mastered the technical discipline of working with data in a structured way, from Excel level all the way through the value chain, although historically this has primarily involved financial data. The point of Quantum Payroll is that we now have the same level of expertise within payroll, time registration and HR.

Henrik Schøtt Kjærgaard:

If we take the data journey as our starting point, financial data in the ERP system can be connected to payroll data; payroll data can be connected to time-registration systems through pay codes and, for example, absence codes; and master data can be connected back to the HR solutions. This creates a coherent trail across systems that currently operate separately. But this involves more than technology. It is about the people who are responsible for the task being able to validate whether what comes in is correct, deliver meaning and ensure that the conversion is accurate. It is precisely the combination of professional expertise and data understanding that is difficult to find in one place.

Henrik Schøtt Kjærgaard:

A good example is a large transport company, where we have recently examined which master data and time data exist, what has actually happened in the workplace and what has ultimately been converted into payroll. There are several questions involved: Which agreements and rates were agreed? What did people actually get paid? And which types of employees are we dealing with?

It is about looking back, but also about understanding the structures and ensuring compliance. Many employees receive different rates or are paid differently, and if you do not understand the data set, you end up comparing the wrong things. The insight can be used for much more than reporting. You can see actual behaviour in the workplace or centrally in the organisation, decide which guidelines and policies are needed to manage it, and monitor whether the changes are moving in the right direction month by month.

This is another way of using payroll and HR data, and one that we have not traditionally used. Previously, the focus was on classic retrospective reporting, but now data can be used to genuinely change something going forward.

Thomas Malmros:

Another example is a company in the aviation industry with two very different employee groups and equally complex pay agreements. The company had to make the payroll process more transparent: how people were scheduled and how this was translated into payroll. In this industry, it is not only when an employee meets for work that determines their pay, but also take-offs from the runway, on-call shifts and where in the world the employee is located. That is why pay structures and the complexity are particularly pronounced.

Henrik Schøtt Kjærgaard:

Historically, the company had taken the output from the system and used it as payroll data without fully understanding the conversion. What we ended up building was essentially a calculation engine that sat between the systems and translated the business logic into the correct payroll. This is a good example of how the issue is not simply about extracting data, but about understanding what the data should become and ensuring that the conversion results in a structure that actually works.

Henrik Schøtt Kjærgaard:

Historically, the focus has been on looking back and reporting on what has happened. Today, it is just as much about using data to decide what should happen. In my view, this is fundamental, but it is worth emphasising that the new directives are one of the reasons why it is important to talk about Quantum Payroll. The Pay Transparency Directive is the most concrete example. It requires transparency in pay structures and presupposes control of data that is currently spread across multiple systems without being connected.

Pay transparency has many dimensions, but it starts with some very basic questions: Where is our data? Which data do we have? And do we use a structure that makes it possible to consolidate and analyse the data? If there is no link between the person in the HR system and the person in the payroll system, how can you compare or analyse them? This is precisely what the Pay Transparency Directive calls for: understanding where data can be compared and how the gaps between systems can be bridged.

Thomas Malmros:

Compliance and governance are another absolutely central part of this, and this is something we were already accustomed to working with. A CFO accepts that we build a data model that cannot simply be compared from one company, employee, machine or product to another. Everything must be valid, controlled and complete because it is used to support decision-making.

In reality, this is the same meticulousness regarding the data foundation that must be transferred to the payroll area. For example, the salary an employee receives can come from a particular agreement and, at a minimum, must be distributed among the employees. If the pay structures cannot be documented, you are not complying with legislation. Both aspects end up on the CFO’s desk. It is not just data; it is critical data, and the decisions made on the basis of it are critical decisions. Quantum Payroll is therefore just as much about governance as it is about data understanding: ensuring that models are complete, that nothing is missing, and that we always have the right basis for making decisions.

Henrik Schøtt Kjærgaard:

Payroll is often one of the largest individual costs in a business. At the same time, compliance requirements are growing faster than ever. This combination means that payroll can no longer be treated as a blind spot alongside finance. In this way, you can genuinely bring the payroll area to life through Quantum Payroll.

We are experts at the intersection of payroll, IT and finance, and are ready to help you create an overview, structure and insight into your people, HR and payroll data. Contact us for a better basis for making decisions within the payroll area, and feel free to reach out for an informal conversation.