As an HR, finance or business leader, you are responsible for making sure that everyone is paid correctly and on time. Even one error can shake employees’ trust in your organization and put your reputation at risk.
And yet, 29% of businesses are still using a payroll system that is 10 years old or older, according to the “Evolution of Payroll Technology Trendline Survey'' study by Kronos and the American Payroll Association. To put that in context, they’re using tech that was around before Apple’s iPhone came into the world!
Clearly, there are many organizations that need a payroll overhaul. If yours is one of them, read on. Here are 5 trends that are shaping payroll – and they may just influence your next purchasing decision.
We’ve all experienced a significant change in work norms over the past year and the Coronavirus pandemic has raised the strategic value of HR technology, according to the 2020 HR Technology Pulse Survey from Gallagher, an Illinois-based consulting services firm. The survey found that companies are increasing investment in HR technologies such as payroll, time-keeping, and performance evaluation systems. The goal is to future-proof their HR operations and ensure they’re prepared for anything – including unpredictable events like a pandemic.
As the future workplace looks increasingly distributed, with entire teams working from anywhere, organizations are turning to payroll tech capabilities to support the vastly expanded remote workforce. Payroll tech with built-in compliance tools can help to standardize processes, improve efficiency, and alleviate pressure on small and thinly stretched payroll teams.
While some organizations are choosing to invest in on-premise payroll systems, a significant number are taking the opposite approach. We’re seeing significant interest in fully outsourced or hybrid payroll models where companies hand over this essential function to an external partner, saving time and money. Payroll outsourcing can reduce your total cost of ownership by at least 20%, since credible suppliers can take advantage of economies of scale to offer highly competitive pricing.
However, outsourcing is not just about the money. Organizations are choosing this model to avail of the expertise offered by specialist, full-service payroll teams. Tax rules, employment regulations, and data protection requirements are complex, change quickly, and vary from country to country. A good outsourced team will take care of these compliance headaches, reducing the chances of a mistake being made that could leave you wide open to penalties.
For business leaders, leaving payroll to the experts delivers peace of mind. It also means winning back the time you would have spent on payroll and diverting it to value-added activities like building sales.
In fast-moving environments where change is the only constant, there’s a real impetus for faster close times and more up-to-date data for analysis. Payroll has had to adapt to many changes over the past year with the rise of remote work, contract work, temporary labor, furloughs and more. If decision makers are getting April’s payroll data in August, it won’t be easy to make the right workforce-planning decisions.
The latest cloud payroll software aims to provide faster payroll closing combined with the best data for analytics and reporting. Besides reducing ownership costs, these systems are easy to scale (or contract) as your workforce changes. If you are managing a growing, fluctuating or seasonal workforce, this is a huge plus.
Security is another area where cloud solutions shine. With a cloud payroll system, the vendor takes care of security by fortifying their data security and releasing frequent, automatic updates that keep up with the latest potential attacks. There’s much less chance of you suffering a breach and suffering financial penalties if data compliance regulations are violated.
Standalone payroll systems are like a black box of mysterious secrets – you know there’s some interesting data in there but you have no idea how to unlock the box and access them. All-in-one solutions, on the other hand, weave HR’s employee data with finance’s time and pay data to give you one version of the truth—from hire to retire—for an overall snapshot of performance, productivity and reward.
All-in-one solutions have a number of important use cases. For example, you can correlate pay and performance, which makes it easy to justify decisions relating to salary increases and promotion. You can drill down into the cost and impact of overtime, absences, bonuses or expenses, giving a much clearer idea of the effectiveness of your benefits and engagement programs. Some solutions will even let you model an employee’s flight risk, so you can assess how likely it is that an employee will leave your company and make early interventions if you wish them to stay.
The emergence of gig work, short-term service provision and ‘renting’ talent has many flexibility benefits for employers but it throws up all sorts of difficult questions:
These are questions that a modern payroll solution should and can answer, and new solutions are cropping up all the time. Leveraging this technology will be critical for gig-based businesses, both to streamline operations and to deliver the prompt payment and compliance expected by this different breed of workers.
As 2022 marches on it undoubtedly will be another challenging year ahead for HR and payroll teams as organizations seek to navigate through the disruption. But the technology is adapting fast.
Companies that make strategic investments will put themselves ahead of their peers and reap the benefits of a well-run business.