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Why is payroll automation critical to 2022 business growth?

Payroll automation takes everyday payroll processes and makes them faster, more accurate, and predictable.

For years, payroll has been seen as a cost center, not a vital internal support process, which is critical for keeping employees loyal and engaged. As a result, investment in digital payroll processes has tended to fall behind customer-facing functions.

This lack of investment was highlighted during the first lockdown when there was a need for remote access to payroll processes. In some organisations, the legal, moral, and employee obligations were challenging to maintain. Immediate, interim solutions had to be implemented to keep essential workers working.

Many of these fixes have since been converted into payroll modernisation projects. As it stands, 61% of respondents to the 2021 Global Payroll Complexity Index, published in October 2021, have outsourced some or all their payroll operations. Key drivers for this were:

42%

regulatory complexity

30%

corporate strategy for outsourcing

27%

cost reduction

15%

support M&A activities

Technology investment and adoption have risen in the past two years, recognised as essential by many to meet the demands put upon all business functions to increase efficiencies, lower risks, and create an employee user experience that enables optimum productivity. For the first time, the use of agile Cloud payroll technologies exceeds that of on-premises (62%), a rise from 34.8% in 2019. 

“The business intelligence that can be reported from standardised payroll data, factored with that from other departments, is potential strategic planning gold.”

Employees are driving the need for payroll process agility.

While business strategies and headlines remain focused on attracting, training, and retaining employees. If you do pay them on time, accurately, and in line with local, regional, and national regulations and taxes, this doesn’t matter. People will leave.

Further complexities are on the horizon for payroll. New working models potentially change how, what, and when employees are compensated. The increase in gig workers, and the rise in elastic hiring continues, so do those advocating on-demand pay. Traditional payroll systems are not set up to manage instances such as these.

“The payroll function is becoming increasingly complex as companies struggle to keep pace with shifting workforce demographics brought on by the pandemic. It was a major achievement for companies to keep payroll running when business continuity was challenged, but it was far from ideal. HR and payroll leaders are eager to realize the benefits of digital payroll.”

Luca Saracino, Senior Vice President, International Sales and Strategy
Alight

There is a definite trend as more businesses invest in HR transformation initiatives, so payroll modernisation is starting to be pulled along.

The thinking behind this is the need to streamline and simplify manual processes across all of workforce management, by using technology to reduce costs, increase efficiencies, and improve the user experience. To this end, 40% of companies say they will modernise payroll systems by 2023.

Payroll transformation for business sakes

As is usually the case with any business transformation project, there is no one-size-fits-all when it comes to digitising payroll. Before all else, it’s essential to understand the stakeholder needs for payroll investment. This will enable you to:

  • Formulise the global payroll strategy

  • Update payroll operating models

  • Make payroll intrinsic to strategic business planning

  • address the lack of investment in digital payroll processes and additional integration

It’s not a straightforward re-evaluation. There are multiple stakeholders invested in payroll processes. These range from those being paid to people who manage the operations and require it to be an efficient, low-risk, low-cost invisible process. In addition, authorities expect it to be fully compliant and reported. All must be equally satisfied.

The big question to ask here is: can you manage or have the skills in-house to do this without specialist support?

Investment protection

Payroll modernisation projects need to flex to the needs of the business. Therefore, the technology chosen must be agile. The two obvious options here are outsourcing or investing in a scalable cloud HCM and payroll system that can be added to and integrated with other process systems. This approach is also future-proofed due to the nature of the purchasing model.

For the fledgling project to stand a chance of success, all stakeholders' needs and expectations must be established, discussed, and agreed upon. A value management project is essential as part of the planning stage and should include at least the following.

  1. Projected costs must be based on actual supplier provided estimate, whether internal or external service providers

  2. Potential increases must be calculated and presented as ‘worst case’ project costs

  3. Continuity plans must be built-in to protect against the unknown, including global crises, vendor collapse, and potential business growth or retention

  4. Potential increases based on several agreed variables. These must be calculated during the planning phase of the project and must be approved before work begins

For the fledgling project to stand a chance of success, all stakeholders' needs and expectations must be established, discussed, and agreed upon. A value management project is essential as part of the planning stage and should include at least the following.

  1. Projected costs must be based on actual supplier provided estimate, whether internal or external service providers

  2. Potential increases must be calculated and presented as ‘worst case’ project costs

  3. Continuity plans must be built-in to protect against the unknown, including global crises, vendor collapse, and potential business growth or retention

  4. Potential increases based on several agreed variables. These must be calculated during the planning phase of the project and must be approved before work begins

  1. Inability to present the business case for payroll modernization, demonstrating return on investment, and KPIs for success, especially as payroll has been a cost center.
  2. Fear of failure - “what if the project goes wrong?”
  3. Lack of in-house skills to scope, build, manage, and track payroll transformation projects, and system integration
  4. Lack of literacy to capture, process, query, analyze, and report data-driven insights to the business.
  5. Need to ensure data management's privacy, security, and resilience in the automated and self-service process.

Boost the effectiveness of your payroll operations

Payroll automation technologies will transform your payroll function and eliminate many of the risks and challenges associated with manual processes. The right technology choices and integration partners can integrate your payroll with HR and workforce management software.

Other functions, including finance and procurement, can also be integrated to provide a powerful platform for managing your total workforce's careers, development, cost, and efficiency. This standardised data source can then offer business intelligence based on strategic business intelligence.

Related Insights

2023 Global Payroll Complexity Index Report

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Present-day Challenges of Global Payroll Management

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Global Payroll Complexity Index 2021

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