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Payroll process transformation – what do HR directors need to know?

By Chloe Lewis - Client Director - Alight Solutions

There is no one better to tell us about what HR directors need to know about payroll process transformation than an HR director herself. Chloe Lewis, HR Director for many years across three FTSE 100 sectors and now Client Director at Alight Solutions. She most recently was part of the HR team at UK retailer, Sainsburys.

Q1. Alight’s 2021 Global Payroll Complexity Index report says 40% of companies are looking to upgrade their payroll systems. What does this mean for HR leaders? 
Cost controls, workforce data insights, process assurance, visibility, efficiency, and governance together will serve to ensure a high performing payroll function driving getting the basics right and driving trust and engagement.

The pandemic reminded us that employees are vital to business success. All organizations need to ensure people processes are fit for the digital world of work. Lockdowns around the world highlighted the pertinence or remote access to vital applications and services. Payroll is one such.

Employee and wider stakeholder wellbeing, motivation and loyalty is closely linked to being paid accurately and on time every time, Governments also mandate this. The payroll process is strictly regulated and as is revealed in the Global Payroll Complexity Index (GPCI) report, fines for non-compliance are significant.

To have payroll in the cloud removes much of the stress of overseeing this highly challenging and essential process. Done manually or using a disparate mix of processes leaves it open to human error. Digital payroll automates much of the routine and error prone admin.

Further to this, with the parity companywide standardized brings to the payroll process, so HR leaders have the assurance payroll will operate smoothly, is secure and is low risk come what may. Artificial intelligence will highlight to any anomalies before they become an issue.

Q2. Why are HR leaders looking to upgrade their payroll systems?
Again, controls, visibility, policies and governance, integration with data from other functions or parts of any business, process assurance and efficiency, and the visibility standardized, and centralized data provides to ensure efficiencies and process improvement and ultimately colleague experience.

HR directors are also keen to bring payroll in line with the transformation of other HR functions. In many larger firms, overall HR platforms, learning and development, recruitment, reward, and recognition, for example, are now largely self-service. Accessible via a mobile device these are great for anyone not in a desk-based role. For HR, this increases the likelihood of people engaging and taking advantage of L&D resources and career advancement opportunities.

The competitive advantage for both business and talent acquisition that come from the clarity, insights, and governance process standardization brings are manifold.

The operational benefits of single source, real-time, and highly accurate HR insights and data exciting the wider boardroom too. Nearly all decisions, current and future, loop back to people, may this be talent availability, costs planning, supply capabilities or performance, for example.

For those able HRDs able to provide these though the pandemic has raised the profile and status of all HR departments. There is a clear link to the performance of firms with digitized business processes and those without through the pandemic. This loops back to why there is such a leap in proposed spending for modernization of HR and payroll the world over,

Pre-pandemic, with payroll the thinking tended to, “it’s on premise and it works, let’s leave it.” Lockdowns proved that “it works” is not enough. The past few years proved too many legacy and on-premise payroll systems don’t have the dexterity needed for the modern world.

While some are fast reaching end of life for support, the major issue with older payroll set-ups is they’re near impossible to access remotely without significant IT support investment, which took time. This raised the risk of missed payroll, leading to potential loss of staff loyalty, and compliance failure. Both costs too great to carry off in an already crisis situation.

The GPCI also reveals some more hidden challenges including the very real possibility of unidentified payroll leakage. Year on year this can cost US businesses tens of millions of dollars until identified. For some this might never be.

For HR, this adds to the total cost of payroll and so reduces funds available for not just talent acquisition, but the training and development of much needed people. The business case for payroll modernization has never been stronger.

Q3. What benefits can they achieve by upgrading their payroll systems? Does it help with security and ID theft of employees?
With the correct access policies in place, there can be no more secure and efficient way to process payroll than in a well-managed or outsourced digitised payroll process. Platinum level security and personal identifiable information (PII) is by default. Where processes are automated the risk of human error is eliminated.

Artificial intelligence also serves to alert administrator to any anomalies ahead of issue and robotic process automation and the rise of one-touch payroll will drive mean time to payroll process completion without effort to the maximum. The GPCI report looks further at the rise in these innovations, and the benefits thereof.

Q4. What features should HR leaders look for when upgrading systems? 
2022 is about driving efficiency. Not just in HR, but across the business. We need better colleague experience through better controls, leaner processes, greater efficiency, and optimal functionality.

Digital transformation is the only way to achieve this. The payroll system chosen, whether managed in-house, by a specialist service provider or fully outsourced, must support continuous modernization. It also needs to flex in the case we have another unprecedented event.

Payroll innovation is rapid, and your competitors are investing. For the first time the installed base of Cloud payroll exceeds all other processes. 63% of firms invested in the past two years, a rise from 34.8% as reported in the 2019 Global Payroll Complexity Index report.

HRDs have the opportunity to drive. To make payroll data the heart of the business. People matter more than ever. You can automate many aspects of a business, but without people, you can’t, at least for now, fully function.

Across the board we’re facing talent shortages, but especially so in payroll. The failure of firms to forward plan to ensure the supply their products and services can’t be repeated if they want to survive. It is vital that the digital transformation you lead is focused on efficiencies, better operating models, and controls.

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