Recent disruptive changes have exposed the vulnerability of legacy payroll processes. This can impact organisations that are not using agile models and brings a risk of potential financial losses. This can be in the form of reduced productivity or compliance failures leading to fines.
The increasing trend of remote work and distributed teams adds complexity, affecting tax and legal obligations through employee location changes. However, organisations can effectively manage controllable changes by using the right technology.
The 2021 Alight Global Payroll Complexity Index (GPCI) Top 40 highlighted the vulnerability of outdated payroll processes. This was particularly clear during the COVID-19 pandemic lockdowns.
The 2023 GPCI Top 40 report highlights the challenges and potential risks faced by multinational businesses lacking efficient and adaptable payroll operating models. With increased mobility, flexibility and the prevalence of digital workplaces, organisations must adapt to these changes.
Payroll processing in countries with high complexity rankings, is usually due to intricate calculations and reporting requirements. Continuous innovation in payroll technology is helping to gradually reduce these risks.
The underlying message is that businesses must embrace payroll transformation and ongoing process optimisation to thrive in this evolving landscape.
There is more to payroll
Beyond paying employees on time, payroll operations can also provide key business intelligence. In times of change, having real-time payroll data can be extremely useful for making business and workforce decisions.
However, this is only possible for organisations with standardised and streamlined payroll processes.
After the COVID-19 pandemic, the wellbeing and experiences of employees significantly influenced job transitions. This underscored the importance of a satisfied and content workforce. As a result, Human Resources (HR) needs to use additional analytics to gauge employee sentiment.
Benchmarking change in global payroll management
The Alight Global Payroll Compliance Index (GPCI) serves as a benchmark for monitoring changes in the payroll industry. The 2021 GPCI played a crucial role in evaluating the impact of the pandemic on payroll management.
Published shortly after the pandemic began, the report revealed that 26% of organisations expedited their payroll transformation projects in response to the crisis.
For the first time in the 10-year history of the GPCI, cloud-based payroll processes surpassed on-premises systems, with adoption increasing from 34.8% in 2019 to 61.5% in 2021.
Investment in HR analytics also saw growth, with adoption rising from 20.8% in 2019 to 35.2% in 2021, underscoring the increasing importance of data-driven insights in decision-making.
The 2021 GPCI also uncovered ongoing investment plans in payroll transformation. Among firms with outsourced payroll, 62.5% had digital transformation projects scheduled by 2023 and 16.7% of firms managing payroll in-house had similar plans. Furthermore, 19.6% of organizations planned to outsource specific aspects of their payroll operations.
However, the research also highlighted that a significant percentage of international businesses continued to rely on high-risk and inefficient payroll processes. More than a third of organisations used spreadsheets, while 17.7% relied on non-compliant manual and paper-based systems.
It will be intriguing to see the progression of these investment plans and the prevalence of high-risk payroll processes in the upcoming 2023 Alight Company Payroll Complexity Index.
“The post-pandemic era calls for an agile, responsive and compliance-driven approach to multi-country payroll. Organisations are encouraged to strategically adapt their global payroll operating models to ensure accuracy and compliance.”
Building resilient payroll operating models for an evolving future
Many have underestimated the permanence of remote work, digital workplaces and adaptable operating models. However, by 2023, these shifts seem to have become the new norm.
The workplace has undergone significant changes, presenting opportunities and challenges. A seismic shift has propelled us toward an employee-driven culture where digital workplaces and remote work are now expected.
However, with uncertainty surrounding the global economy it will be interesting to see how long employees are able to drive change.
To keep pace with this transformation, organisations have adapted payroll practices, emphasising flexibility, transparency and diverse employee benefits.
Although, digital transformation has often encountered hurdles, challenges have emerged in data security, system integration and compliance with privacy regulations.
Furthermore, the increasing demand for remote work has added complexity. Organisations face diverse tax laws, employment regulations and cross-jurisdictional reporting requirements, requiring a deeper understanding and careful execution.
Yet, compliance remains non-negotiable. It is essential to adhere to labour laws, classify remote workers accurately and show an unwavering commitment to tax and privacy regulations.
2023 Alight Company Payroll Complexity Index
The 2023 Alight Company Payroll Complexity Index aims to dig deeper into the effects of the digital workplace, the shift towards an employee-driven culture and increased employee mobility on payroll management.
After completing the survey, you’ll see your personalised payroll complexity and risk score. Plus, by participating you will be shaping the future of payroll.