Leaders are leveraging technology to improve payroll for a dispersed workforce.
By Simon Kent
With employees working from more dispersed locations, under a wider variety of arrangements and with multiple tax and compliance regulations, the act of paying someone for the work they do has become increasingly challenging. Add to this the extra pressure brought by the cost-of-living crisis and the need to ensure compensation is competitive to attract and retain talent, and it becomes clear just how important staying on top of payroll is.
According to Chris Kirby, senior manager of payroll transformation at LACE Partners, payroll is undergoing a “seismic shift of purpose” with the principal concerns resting in addressing its complexity and the blurred line between payroll and HR. And despite all the challenges being thrown at the function, organisations still expect a “streamlined and seamless user experience,” he says.
Essentially, the job of payroll has always been the same—to accurately and promptly calculate and distribute pay—but Kirby sees innovation in the function to provide global coverage, data validity, and reporting. “We have also started to see more in the way of new developments to support payroll staff in the demands now placed on them by organisations,” he says. In other words, the payroll services market has grown to match the needs of employers.
Matt Trueman, chief product officer at MHR, gives two other areas where payroll has advanced: automation and real-time delivery. In the case of the former, technology now saves time and money whilst actively reducing errors. “According to our own research, it is estimated that in an organisation with 500 employees, payroll errors cost up to £150,000 per year, an unnecessary cost that can be prevented through automation,” he says.
Real-time payroll presents more value for businesses and their employees, particularly in the context of the cost-of-living crisis. “For finance teams, this improves visibility of ongoing costs, allowing them to make informed budgeting decisions quickly and effectively,” he says. “Meanwhile, employees can see how much they are earning, as they are earning it, helping them manage their personal finances and contributing to improved financial well-being.”
Trueman also says that payroll teams are leveraging cloud technology in order to run payroll across global locations to deliver wherever the hybrid workforce may be. “Where this capability is coupled with a collaborative employee experience focussed HRM platform, it empowers organisations to work in the way they want, from where they want without the downsides of on-premise software,” he says.
Despite the plethora of technological advancements, it is worth noting that some organisations are only at the start of their journey to benefit from payroll technology. MHR’s research also revealed that 72% of organisations are still operating manual, legacy payroll methods.
For Tom Price-Daniel, vice president of strategy at global payroll and compliance provider Teamed, the past few years have seen payroll move from being more of a “backwater” consideration to a dynamic and commercially important one. He agrees that payroll services have grown to match the needs of the dispersed workforce and says it enables organisations to secure the skills they need. “We work with a number of companies who will hire people wherever the skills are,” he says, “and there will be a continual trend there.”
The result is that payroll has become an attractive area for investment in new businesses and innovative solutions. This rapid development may be welcome, but PriceDaniel notes that the need for accuracy in payroll is still over-arching, and something which cannot be excused or compromised as a payroll provider grows. Get one paycheck wrong, and there can be serious complications. “Pay is the glue, the blood that keeps everything together,” he says. “Without it, you can’t pay the mortgage or buy bread in the supermarket. Payroll is everything.”
So, whilst Price-Daniel has seen some features and approaches in payroll trickle down from solutions and services provided by the retail banks, the main priority for employers selecting a payroll provider remains the delivery of an accurate and compliant service.
Tammy Hibbert, business process outsourcing manager at Symatrix, describes payroll as a source of intelligence for the business which can be used to help drive overall strategy. “With integrated HR and payroll systems, the data generated is increasingly used by finance to optimise staffing numbers in each department, as well as inform decisions on reducing operational costs and increasing return on investment,” Hibbert says.
“Payroll data can be key in supporting financial forecasting, as well as determining the impact of proposed changes in business approach,” she continues. “By integrating payroll data into business forecasting, finance directors can get visibility over their costs, in turn helping them to evaluate how to control and reduce them.” This kind of insight can support strategic decision-making, including how to shape new recruitment drives, or even to scale up operations to move into new geographies.
Trueman agrees on utilising payroll to influence strategy. “Moving forward, companies are going to increasingly think about how they can use technology to leverage payroll data as an organisational asset, in particular when combined with other data such as HRM and learning,” he says. “Using AI and other analytical technology, companies will be able to capitalise on the payroll data they generate, to help scenario plan, forecast, and enhance their decision-making processes.”
At LACE Partners, Kirby believes the industry has so far been driven by the need to deliver a great user experience, that it’s sometimes given more importance and attention than the technical side of delivering the payroll service.
“The modernisation of payroll technology has been fantastic, and has played its role in payroll itself modernising,” he says. “But I do think there needs to be a rebalance when it comes to UX versus complexity. We’ve rightly stretched away from having UX dictated by technology; now I think it’s time to pull back slightly and address the complexity point again.
“In the same way a phone that can control a SpaceX rocket but can’t make calls is useless to you, a payroll system that can offer you 200 dashboards but only handle five overtime rules may also be useless,” he adds.
As positioned as payroll is—perhaps the most important link between the employer and employee—it’s understandable why payroll should need to be at once complex (reflecting the need of the employer) and simple for the employee who just wants to be paid. But as the next iteration of payroll technology takes place, bringing in further AI, machine learning and robotic process automation, there will be a more personalised approach delivered for employees who are now part of a dispersed, hybrid workforce.