Setting payroll KPIs and metrics isn’t just a box-ticking exercise—it’s a strategic move that enables companies to manage one of their most complex and costly functions.
As Sagar Khatri, CEO and Co-Founder of Multiplier describes, “Payroll is the largest expense any company has and if you don’t understand it, you don’t understand where your company is going.”
In this article, you’ll learn how setting KPIs and metrics can help improve global payroll performance, ensuring accuracy, compliance, and efficiency. You’ll also discover what some of the most popular payroll KPIs are, with input from industry experts.
What are payroll KPIs and metrics?
A metric is a measurement that tracks a specific aspect of a process or activity. The number of payroll errors per cycle is an example of a payroll metric.
A Key Performance Indicator (KPI), on the other hand, is a type of metric that’s strategically aligned with an organization’s goals and objectives. Payroll accuracy rate is an example of payroll KPI.
While all KPIs are metrics, not all metrics are KPIs. Metrics are general measurements and KPIs are key indicators that help businesses track progress toward specific outcomes. Both are essential, used to:
- Evaluate the effectiveness and efficiency of payroll processing
- Ensure accurate, timely payments
- Minimize costs and errors
By tracking the right payroll KPIs and metrics, companies can:
- Ensure the smooth operation of payroll systems by identifying problems and bottlenecks (e.g. recurring payment delays or high error rates).
- Maintain payroll compliance with automation and tracking for country-specific tax deductions and regulatory deadlines.
- Assess their overall approach to compensation management by evaluating compliance, accuracy, and efficiency – as well as broader issues like pay equity.
For the rest of the article, we’ll speak about payroll KPIs and metrics as one function for ease.
Why are payroll KPIs and metrics so important?
Put simply, payroll KPIs and metrics help companies avoid making payroll mistakes. For Hillel Shalev, COO of payroll auditing platform Celery, the importance of this cannot be overstated: “Payroll errors directly impact financial stability, compliance, and employee satisfaction,” he points out.
However, tracking payroll KPIs and metrics isn’t only about identifying operational or one-off errors – it can also help companies identify wider, more systemic issues in their approach to compensation management, like wage compression, inconsistent pay structures, or gender-based disparities.
Today’s businesses are grappling with more complex regulatory requirements, with the rise of remote and hybrid workforce that span multiple jurisdictions. Payroll KPIs and metrics are becoming increasingly important because they provide the data companies need to maintain accuracy, efficiency, and compliance.
Key metrics and KPIs for global payroll performance and how to track them
Each company’s payroll metrics and KPIs will vary slightly, depending on factors like their goals and workforce structure. However, all payroll metrics and KPIs should be specific, aligned with business objectives, and linked to factors that payroll teams can influence, such as accuracy, efficiency, or compliance.
Shalev stresses the importance of ensuring that payroll KPIs support broad company goals, such as profitability and employee retention. “If payroll KPIs aren’t aligned with these bigger objectives, teams may miss opportunities to drive overall business performance,” he warns.
Here are seven payroll KPI examples that can offer particularly helpful insight into global payroll performance:
1. Total payroll cost
Total payroll cost is the total expense a company incurs for compensating its employees, including salaries, benefits, bonuses, taxes, and administrative costs.
Tracking this metric can reveal insights like:
- Payroll’s impact on overall company profitability
- Cost trends across different regions or business units
- Areas where costs can be optimized
- Opportunities for strategic workforce planning and cost allocation optimizations
Despite this, total payroll cost is a commonly overlooked metric. Khatri says, “It’s surprising how many companies can’t forecast payroll costs, understand payroll costs three months from now, or dissect costs at the department level.”
Payroll cost is relatively straightforward to measure:
- Add up all the payroll-related expenses over a given period
- Compare against revenue or budgeted payroll costs
2. Error resolution cycle time
Error resolution cycle time is the average time it takes to resolve payroll errors once they’ve been identified.
To measure this KPI:
- Measure the time from when an error is reported to when it is fully corrected.
- Track across different types of errors (e.g., tax miscalculations, incorrect deductions).
Error resolution cycle time is a valuable metric because it reveals insight into:
- The efficiency of a company’s payroll issue resolution processes
- Common payroll errors that could indicate a need for process improvements
- Employee satisfaction with the company’s payroll service
Errors in global payroll can lead to compliance violations and serious repercussions including fines and reputational damage. For this reason, error resolution cycle time is a particularly relevant metric for global payroll teams.
3. Overtime cost
Overtime is the cost of the extra hours employees work beyond their standard working hours and the associated costs.
To measure this KPI:
- Take the sum of overtime hours worked, either per employee or per department
- Calculate the cost of this overtime as a percentage of the employee or department’s total payroll
Overtime is a valuable global payroll metric because it can alert companies to:
- Problems with payroll compliance
- Potential understaffing or workload distribution issues
- Rising labor costs due to excessive overtime
- Issues with compliance in relation to overtime regulations
- Opportunities for workforce optimization and better shift planning
4. Compliance rate
Payroll compliance is the extent to which payroll adheres to local labor laws, tax regulations, and company policies.
There are a few different ways to measure payroll compliance as a metric:
- The number of compliance violations or penalties incurred
- The percentage of payroll reports filed correctly and on time
- The findings of audits and regulatory checks
Measuring compliance as a global payroll metric provides insight into:
- The company’s exposure to risk in relation to complying with each country’s unique employment laws, tax structures, and reporting requirements
- The effectiveness of the company’s internal controls and payroll governance
- Requirements for training or updates to policy wording
5. Accuracy rate
Accuracy rate is the percentage of payroll transactions the company processes correctly without errors.
To measure this KPI:
- Divide the number of correct payroll transactions by the total number of payroll transactions
- Multiply this number by 100
Accuracy rate is a valuable KPI to track because it reveals insights such as:
- The effectiveness of the company’s payroll processing controls
- The impact of human errors or system inefficiencies on the overall accuracy of payroll
- The need for interventions that reduce payroll errors (e.g. additional training, the introduction of payroll automation software)
6. Payroll leakage
Shalev offers an additional KPI for global payroll teams to consider: “A highly valuable but often neglected KPI is payroll leakage – the unintended or unnecessary payroll expenses that occur due to errors, fraud, or inefficiencies,” he says.
Why is payroll leakage a useful KPI to track? Many payroll teams fail to analyze where money is lost in the payroll process. Shalev explains: “By measuring payroll leakage, companies can identify preventable financial losses, improve forecasting, and enhance payroll efficiency.”
To measure this:
- Audit payroll records regularly to detect discrepancies or overpayments.
- Compare actual payroll costs against budgeted or forecasted amounts.
- Track error correction trends—such as retroactive adjustments, reversals, or manual overrides.
- Analyze payroll exceptions (e.g., unusually high payments, one-off bonuses without approvals).
7. Payroll processing time
Payroll processing time is the time it takes to complete payroll processing from data collection to final disbursement.
To measure this KPI:
- Measure the number of hours or days from the start of payroll processing to the completion of payments.
- Compare it against payroll deadlines and cycles (e.g., biweekly, monthly).
Payroll processing time is a valuable global payroll metric because it reveals insight into:
- Efficiency of payroll operations
- Bottlenecks in payroll workflows
- Opportunities for payroll automation or process improvement
- Regional delays that can impact global payroll consolidation and reporting.
However, while payroll processing time is undoubtedly an important and invaluable KPI for payroll, Shalev urges companies to avoid placing undue emphasis on it. “Many teams focus too much on processing payroll on time,” he says. “While this is important, it can overshadow key areas like ensuring data accuracy and compliance with local regulations.”
Drive continuous improvement against global payroll KPIs
Once set, payroll KPIs should be used to drive continuous improvement, rather than simply tracking the performance of payroll. When it comes to measuring payroll errors, for example, Shilav advises companies to be proactive: “It’s not just about tracking payroll errors after they occur,” he says. “Payroll teams should be using metrics to predict and prevent issues before they arise.”
Having a complete view of payroll data across multiple locations is essential for this. When payroll teams have access to real-time, data-driven insights they can identify trends, spot potential problems, and take early action.
With Multiplier’s streamlined global payroll solution, teams can track their payroll KPIs and monitor progress easily, viewing data from across locations in one simple payroll dashboard and creating customized data reports for more detailed analytics. Empower your team with insight-driven data, including headcount, gross to net, and cost center reports.
Meanwhile, automation keeps you compliant in every country – and across country-specific labor laws and regulations – as you grow your international headcount.
Make global payroll a breeze. Book a demo to find out more.
