01 November 2021
The CIPP policy and research team hosted a roundtable at National Payroll Week (NPW), led by Samantha Johnson LLB(Hons) ChMCIPPdip, CIPP policy lead, to discuss how payroll might look in the future
Candy Jackson – Microfinch
Eira Hammond ChFCIPPdip – Hi Group
Gemma Creamer – Portfolio Payroll
Jade Burke – Reward Strategy
Karen Beckett BA (Hons) ChFCIPP – Dorset Healthcare University NHS Foundation Trust
Leslie Symonds – Ceridian
Melanie Pizzey – GPA
Michelle Sutton MCIPPdip – Suez
Richard George MCIPPdip – The Payroll Centre
Rob Gimes – Access People
Samantha Johnson LLB (Hons) ChMCIPPdip – The CIPP
Spencer McDonald – ADP
Steve Watmore – Sage
Vickie Graham DipM ACIPP ACIM – The CIPP
Will Jackson – Zalaris
NPW provided the first opportunity in 2021 for the CIPP to meet face to face with its members. Kicking off the week in style, the Future of Payroll roundtable explored technology, data security, flexible working, succession planning and much more. The discussion was based on the results of the 2020 Future of Payroll survey, which provided interesting findings for the discussion.
Artificial intelligence (AI)
86% of survey respondents said that AI will continue to replace more transactional payroll tasks, and 68% considered that this will allow payroll to add more strategic value. What is the future for AI and payroll?
Will Jackson: Let’s demystify AI. Using a macro to automate a spreadsheet function is technically AI, it is using automation. However, there is a second aspect of it – that is machine learning, where the machine gets smarter the more you use it. Chatbots are a notable example, as they use history to start to anticipate what the next question might be.
Vickie Graham: The CIPP uses security software where machine learning identifies what normal behaviour is, giving it the ability to flag when something out of the ordinary happens.
Samantha Johnson: AI is one of those terms that has a different definition for everyone. It can be anything from a system calculating sick pay all the way through to machine learning. Software providers are giving payroll growing opportunities to shape what payroll could look like.
Michelle Sutton: Customer service is still an important aspect of payroll. You cannot have a conversation with a machine.
Rob Gimes: I agree, people will still need to speak to people and there still needs to be skilled individuals who understand how things are calculated to then relay that information to others. That will be the future of payroll.
MS: Every year we send an email to all employees on a month 1 tax code. Employees love that service because they get their rebate sooner. The task can be automated, but a machine would not have thought to deliver that level of service.
Eira Hammond: To me, that is the true value of payroll – understanding how it is done to then automate and give space to deliver an exceptional service. Before I joined Hi Group, I never believed that technology could run payroll. However, I have seen with my own eyes that it is possible. Payroll teams often think, ‘what are we going to do if technology takes our role?’ but using the technology to do the simpler stuff allows payroll to use their skills and experience in more complex areas.
Security
Only 38% of respondents hosted software in the cloud. How do you see this figure changing in the future as people continue to work remotely? And what impact could remote working have on data security in payroll?
Spencer McDonald: The traditional ways of working have been highlighted during the pandemic. Companies had to find a way to run payroll offsite, and it is amazing how many people still have paper payslips. For businesses, security is paramount, and they are asking how secure data is more so than ever.
MS: Good security is about education. Your payroll team needs to understand what acceptable use is. For example, they could download a bank automated clearing service (BACS) file onto a desktop, but they wouldn’t because they know it is not acceptable.
VG: It is important that teams understand the reason why too. What is the risk of breaching acceptable use? Data is so valuable and cyber security is becoming more popular as a topic because scammers are using more intelligent and complex methods to extract data from individuals.
WJ: What coronavirus has done for a lot of payroll departments is make them analyse the risks in payroll and their disaster recovery processes. We mobilised easily, but we had to step in for customers who didn’t have a plan B.
Richard George: The other challenge is the change in environment from office to home. There is such a huge educational change around the parameters of how people work when working from home (WFH), and security needs to form part of that.
Gemma Creamer: Recruitment is so much easier for hybrid working and it is seen as more of a benefit than a pay rise for many people. Money is not the main motivator anymore. Recruiters are having to manage recruitment processes differently because it is all about flexibility, well-being and employer empathy. Employers have also found they have been able to identify training concerns highlighted due to WFH.
SJ: Do you think if there are security breaches when WFH, we will start to see the industry go back to the office or will we see security technology adapt to manage the risk?
Leslie Symonds: We will see security addressing the gaps to manage the data risk. Companies also need to think through and adapt their policies so that they make sense and hold true in the new working environment. Do you have a password on home Wi-Fi settings, for example?
Karen Beckett: It goes back to the basics of payroll, treat everyone’s pay as if it is your own. That is the education from day one. Treat all data in that way.
EH: Many small and medium-sized enterprises (SMEs) use payroll products and manage their processes through Excel, using emails to share information. It is a huge risk.
RGi: That is how many businesses operate – that is why education is so important to encourage them to choose to work in a different way. There are file-sharing tools that are widely available to keep data safe – nobody should be sending email attachments. I have worked hard to keep all exception reporting inside the product, but users still ask if they can export the data.
Pay on demand (POD)
97% of respondents did not offer a POD solution, but 35% said they would possibly, or will, introduce a solution in the future. Will this payment facility be a part of the future of payroll?
RG: The nature of the world is changing. In the gig economy it’s already POD. It is a very morally difficult position for employers. Are you doing the right thing for your employees, or are you just increasing the problem?
MS: We implemented drawdown to support employees and help them avoid going to pay day loans. We see regular users of the scheme and you could argue it is encouraging the cycle of debt, but it is likely they would have gone elsewhere, and this is a better alternative.
EH: When companies moved payrolls from weekly to monthly, it was to support employer cashflow – nobody asked if it was right for employee well-being. When we give employees money at the end of the month, do we know what people are going to spend it on? It is their money, what right do we have to prevent people from having access to their own money?
RGi: I agree, for me the moral dilemma is the cost – asking employees to pay a fee to access their earnings.
Melanie Pizzey: It is also a concern that there is no body regulating these companies, and there are some dubious companies coming into the space at the moment.
Steve Watmore: The people most impacted by this are those that are more vulnerable. It is important to also educate. Employers should be facilitating POD for the right reasons.
WJ: The gig economy will create an environment in which people have more than one job. Technology will ultimately support flexibility and the ability to drawdown. POD is not just about financial challenges, but perhaps because that is the way it should be.
Pressures of technology
In her foreword, Daniela Porr describes technology as “bringing new solutions and pressures” into payroll teams, what pressure does technology place on payroll?
WJ: Technology will not solve all your problems. Testing is crucial, but not as crucial as looking at what you are trying to do differently. Do not reconfigure and implement the same thing. Look at what you are doing now, and work with your provider to shape what you want.
MP: Sometimes people sell the dream, and it does not come true. People lose jobs because they implemented software that did not deliver. There should be a responsibility on providers to be honest and transparent. This often happens because payroll teams are not involved right at the beginning.
SM: Companies should not just look at technology – they should look at their own process. Trying to sell to users is difficult because you are often working at stakeholder level when the users who implement the software have not been the decision makers.
SW: We also need to be careful of buzz words throughout, such as integration and automation. You need to have auditability of what these words do.
SJ: Throughout implementation projects, assumptions happen by the provider and the teams, creating results that neither party wanted. If payroll get involved earlier, they can ask the detailed questions sooner rather than later.
KB: The challenge for payroll is that we only trust technology when we test it.
SW: You must trust technology otherwise you will never step forward. The technology should be telling you it thinks something is wrong and flagging for you to check it.
KB: Payroll teams also need to have fundamentals and not just rely on the system. We are the ones that need to give answers to employees.
Flexible Working
67% of respondents saw an increase in flexible working requests and 82% allowed teams to work from home. How will flexible working impact the future of payroll?
WJ: Crucially, you must have the option. For example, removing start and end times or allowing heads of departments to decide where their teams work. If someone does their job in twenty hours rather than forty, that is them being efficient. Employ with trust and all employees must do is keep it.
RG: It is a double-edged sword. In the pandemic, we saw two different things. Certain people stepped up their outlook, productivity, and their attitude to work. Others did not. WFH enhanced that vision of what happens in an office.
SW: It’s not a will, it’s a skill. Without that communication and collaboration work in the office some people really struggle. Companies need to teach employees how to work from home, educating about how not to burn out, how not to always be online.
MP: Equipment and environment is also important. People had to set up desks and chairs. Some were working on their dining room table, others in studio flats with partners. There have been some really challenging working conditions.
SM: It has been really difficult over the last eighteen months, and we should avoid talking about who has done nothing. We have all faced personal challenges with home schooling, mental health and the logistics of WFH. Employers should be careful about saying who has been a superstar and who has not.
SJ: The pandemic has given us an opportunity to experience WFH. Each business now needs to decide, based on its own culture, what is right for them. Employers must be aware they could create a flight risk if employees want to continue to work remotely or in a hybrid fashion and it is not offered.
KB: Some people cannot work from home, for various reasons. It could be anything from their home set-up to their mental health. As a manager, you have got to try and identify if people cannot cope at home.
SM: The other side to consider is remote workers. It is difficult not to let the office-based workers dominate the airways and ensure remote workers get to contribute. Often, people will return to work if they want their voices heard.
LS: Firms need to have policies in place to adapt for those issues. For example, if any of the team are not present in the office, the whole meeting should happen online. We are going to have to see more of a conscious effort of how WFH works.
GC: The good thing about the pandemic is that it has accelerated attitudes to WFH – but you would still be surprised how many companies are insisting on five days a week in the office. That is a tough sell to candidates on the market right now.
Key Skills
The top five skills respondents were looking to develop in the future were leadership, technology automation, remote working, communications and data analytics. Do you agree with this list as the priorities for payroll professionals?
SW: I do not think the individual needs a skill of technology automation. You need to understand it to a point, but if you understand it too much, you become a developer. Payroll is more about the people-focused elements of the role.
SJ: If you constantly rely on a provider, it is going to come at a cost. Understanding the system and being able to adapt it to change is how you get value out of both the system and the team.
MP: Fifteen years ago, payroll was all about customer service. It has been forgotten for a few years but is coming round again.
MS: It does depend on the team. I cannot imagine my team not delivering great customer service because that is the standard we set. But I recognise there is really bad service out there too, where errors aren’t corrected, and employees have no contact with the payroll team.
RGi: Is it because the resource in payroll has been squeezed that we have moved away from customer service? Return on investment cases are often based on the reduction of the size of teams.
SW: Or is it because payroll teams are better than they used to be? They are not getting it wrong because technology is helping them?
MP: Customer skills have decreased slightly. People can sometimes avoid using the phone and communicate via emails instead. Customer service is an important skill for payroll professionals to hold.
Communication
With 93% of respondents using email, phone or face-to-face methods to answer queries, and only 2% using chatbots, will this technology play a part in the long-term future of payroll?
LS: Financial institutions are using chatbots and many people are happy to engage in this way. It is strange that people do not want to engage with this in payroll.
VG: Payroll is a complex and emotive subject. Using chatbots for basic tasks is fine but pay is emotive with lots of elements impacting it and people want reassurance that it is correct.
SW: A chatbot should not replace a person who is adding value. Chatbots should signpost to the relevant person. They should be designed to absorb the basic questions, such as ‘what day is my pay day?’, and then the experienced and knowledgeable people deal with complex queries that come through.
RG: Pushing people to chatbots first, only to find out they cannot help you will frustrate people when it takes fifteen minutes just to speak to someone.
MP: We use chatbots because they are quicker than email, more responsive and more visible. Automation can work, you just have to invest in it. It is only as good as what you put into it.
RGi: Perhaps the reason it’s not prevalent in some payroll departments is because they do not have the time to build up a bank of questions.
Payroll Policy
64% of respondents agreed that a single enforcement body would be a positive step forward. How will this policy decision shape the payroll role in the future?
MS: I would like to understand if they will be specialists in their areas? Will they be looking for fault and interrogating the data for any technicality or will they be more pragmatic? Holiday pay is an area of real complexity.
SW: What is the aim of doing this? Employees should be protected but employers should not feel attacked by this — employers get things wrong because legislation is unclear. The bodies should be clearly accountable for what they want to achieve.
MP: Will they use this body to recoup money from the coronavirus schemes? In Australia, there is a lot of naming and shaming for holiday pay and minimum wage.
KB: Her Majesty’s Revenue and Customs (HMRC) will audit on current rules and some small companies will not have the knowledge and insight to prepare for an audit like this.
SW: We have too many items of complex legislation, so it is not transparent for employees. This change needs to come from policy makers, not just the businesses with employees in them.
Maintaining compliance
82% of respondents look to webinars to help understand how to implement changes in legislation, how will technology play a part in developing the skills and understanding of payroll professionals?
KB: A lot comes to payroll because people don’t trust HMRC. People are not getting a great service from HMRC.
RGi: They see payroll as being on their side, not HMRC. We need to be thought leaders in the profession and start to roll out education to our employees and provide financial support. This feeds into the well-being piece.
SJ: The success of pay as you earn (PAYE) is also its downfall. People forget the relationship is between them and HMRC, not their employer and HMRC. Payroll can help people understand that they own their own tax affairs, the employer simply works as an intermediary.
RGi: I think we can share messages better as companies and software providers, for example using payslip messages to give people clarity.
Payroll Strategy
59% of respondents consider that pay strategies should remain confidential. Gender pay gap reporting is in place and ethnicity pay gap reporting is a potential future development. What part can payroll play in future pay strategies?
LS: Employees see it as a plus where employers are transparent about their pay strategy. Employees feel they can rely on it, and that action is being taken to close the gaps. These ethics and values are positively received in the market, so more employees will seek that transparency.
EH: Often pay is kept confidential because for many employers, pay is unfair.
WJ: For employers, there can be a challenge in releasing salaries because competitors can headhunt key talent and draw them in with higher salaries. It pushes the cost of employment up and ultimately increases customer costs.
EH: Is payroll strategy then about analysing the payroll and benchmarking internally and externally? This often already exists in reward, but not all companies have reward teams.
VG: Often this is done within departments, but it is not joined up with the rest of the business. Payroll teams are in a good place to join up with the rest of the business and make sure reward is fair across the company.
RGi: This is often reliant on role structure being in place across the organisation, and many SMEs use spot salaries because it is not in place. Arguably though, it is the only way we reduce the pay gaps.
Succession
Only 41% of respondents had a succession plan in place. Is the payroll industry investing enough in future talent?
MP: People outside of payroll do not really understand what we do. We need to change this perception. No one should ever ask, ‘what is payroll?’ We need to promote the industry to the younger generation.
SW: Payroll needs to rebrand. We need to talk about how many millions flow through payroll and draw people in. It is all about marketing. We need to make it sexy.
SJ: Branding is important, but we also need to be proud to work in payroll. We need to tell people why we love what we do and be role models for the industry. Shout about payroll to promote and support the future of our industry.
Featured in the November 2021 issue of Professional in Payroll, Pensions and Reward. Correct at time of publication.