The future of payroll

01 April 2020

This is the year for payroll transformation, says Helen Armstrong, chief executive officer of Silver Cloud HR, who explains why this is great news both for payroll professionals and for employees too.

We’ve seen so many changes in human resources (HR) over the last couple of years, with digital transformation now dominating agenda. Yet from a payroll point of view it’s pretty much stayed the same. For many, payroll is still seen as a back-office process, whether managed in-house or outsourced to a bureau. It’s very manual and has low visibility within the business – preventing it from being recognised as the value-add it could be.

Payroll simply hasn’t kept up with the rate of technological change and, whilst some notion of ‘there must be a better way to do this’ has always been there, people have very much been of the mindset  that ‘if it works, don’t change it’.

We’ve let businesses down somewhat, in terms of what we are able to offer in payroll and no-one has been brave enough to really change anything. The focus has generally always been on how we can make current systems more compliant, so the technology has certainly held everybody back.

Thankfully, things are now evolving, and payroll is waking up to the digital revolution.

New technology, new opportunities
Payroll is an ideal candidate for robotic process automation (RPA), which can automate manual entry and payroll runs. RPA technology that can sit on top of existing systems in order to do this already exists and we are now seeing newer systems that have this technology built in.
Alongside benefits such as reducing manual entry, increasing accuracy rates and minimising errors, RPA allows payroll managers to introduce cost savings that will ultimately make the business more competitive.

RPA will also have a big impact on attracting new talent to the sector, something that is a real challenge. You don’t often find new people coming into payroll – it’s usually people who have ‘fallen into it’. Yet the introduction of automation and other new technology will make the sector more attractive and more exciting, bringing an entirely different type of person into the industry.

Those currently working in payroll may have concerns that the introduction of automation will mean an end to their role, but while of course their roles will change, any fears of being ‘replaced by robots’ are unfounded. There will always be aspects of payroll that we need people for. Look at HR where we now have whole teams of HR systems specialists. If you’re implementing a new payroll system, particularly one that is powered by RPA, who’s going to manage it?

The knowledge and experience that payroll professionals offer is never going to be redundant. What’s more, the additional time and space gained thanks to automation technology will provide them with the opportunity to play a more strategic role and make a real difference to the business they are working for.

What’s next for payroll?
Automation in payroll is still very much in its infancy, but the next real advancement will be real-time pay. It’s something that is on all payroll vendor roadmaps and is set to be a game changer.

Real-time pay is where a payroll manager or employee can log into the system and see the payroll output in real time – no more lengthy payroll processes or waiting until a set day of the month. With real-time pay, you no longer have to press a button to run payroll, it’s already running in the background.

The core benefit of this lies in the visibility provided to payroll managers – enabling them to identify if they’ve got a problem before they start paying people. For finance directors and business owners too, this visibility gives them the power to proactively adjust their financials up or down if they don’t see the figures they are expecting.

But it’s not just the commercial benefits that should interest businesses. The impact of real-time pay and its ability to open up the doors for offering ‘pay-on-demand’ to employees will undoubtedly have an impact on the financial wellbeing of the workforce.

According to the Chartered Accountants Benevolent Association, ‘financial wellbeing’ is about a sense of security and feeling as though you have enough money to meet your needs. It’s about being in control of your day-to-day finances and having the financial freedom to make informed choices that allow you to enjoy life.

Allowing employees to have more visibility over what they have earned as well as control when they are paid goes hand in hand with this. Giving them access to the wages that they have already earned, will play a huge part in reducing finance-related stress and absenteeism, something that is currently costing UK businesses around £15bn per year.

A recent study by financial wellbeing provider Neyber, which explored the spending habits and attitudes of more than 11,000 employees and 720 employers, found that three in five (62%) employees were affected by money worries – a figure that translates into more than 20,000,000 British workers across all income groups.

Introducing pay-on-demand will also help to reduce the need for pay advances and salary loans, which are coming under increasing scrutiny from the Financial Conduct Authority. These are now classified as consumer credit and can often serve to increase the amount of financial stress and anxiety suffered by workers.

While pay-on-demand is still perhaps an alien concept to many companies, it isn’t as scary as you might think. Businesses can set a number of parameters, such as withdrawing a percentage of pay per month or year or limiting the number of withdrawals per month. Rules can even be set to charge the employee for each transaction to cover admin costs should the business wish to do so.

As more and more organisations become aware of the possibilities that new technology can bring to payroll, we are seeing a shift in the way in which payroll software is selected. One of Silver Cloud’s core services is helping businesses choose the right payroll software for their business, and while we are used to questions regarding headcount suitability, compliance and reporting functionality, forward-thinking companies are now asking “how does this software help us meet our employees’ needs?”

This is clear indication of the changing mindsets of payroll professionals and there is a lot of new tech coming onto the market that can service this paradigm shift. The challenge will be for older systems to innovate and adapt their software to fit with these new demands.

We’re looking forward to seeing how they respond and are keeping a close eye on developments.

This article was featured in the April issue of Professional in Payroll, Pensions and Reward magazine and was correct at the time of publication.