It goes without saying that 2020 has been a particularly challenging year for payroll professionals, with the COVID-19 pandemic causing workforce disruption unlike anything we’ve experienced before.
However, as we have discussed previously, it’s important to identify opportunities for digital transformation within payroll, to help organisations tackle the challenges created (or in some cases, further exacerbated) by the pandemic.
So, what are the key elements of this digital transformation? This year’s Future of Payroll report from the Chartered Institute of Payroll Professionals (CIPP) provides us with a strong indication of the trends. Here are our key takeaways.
1. Heading for the cloud
The adoption of cloud software has increased significantly amongst payroll teams, from 25% last year to 37% this year. On-premise deployments are still just as common (37%) as cloud, while hosting software on a client server is the least popular option (25%).
There is a strong indication that the pandemic will escalate the adoption of cloud in the coming months and years. The core benefits that cloud systems offer, including better flexibility, scalability, agility, and cost control, have all proven crucial for organisations that have mobilised rapidly for the ‘new normal’ of homeworking.
Our view: it’s important not to see increasing cloud adoption as just a reaction to the pandemic, but rather an acceleration of an already growing trend. Cloud software is helping to simplify payroll for growing organisations and, as a result, 68% of respondents believe it will help the payroll profession to showcase its true strategic value.
2. The essential role of automation
There is a growing expectation amongst payroll teams to use automation for the more ‘transactional’ elements of their work. Nearly all (92%) say they still complete time-consuming tasks such as handling payroll queries manually, but a similar number (86%) feel automation and AI should play a bigger role in streamlining them.
For example, 77% of respondents believe advances in technology will help improve efficiency and accuracy in the payroll department which, from a CHRO or HR Director’s perspective, can support stronger employee experiences and employee-employer relationships. Similarly, the potential to use automation to reduce payroll processing costs (cited by 62%) is an exciting prospect for CFOs and Finance Directors, especially in the current climate of economic uncertainty.
Over half (59%) agree that stronger payroll technology will lead to quicker problem solving (and fewer problems to begin with), which for CIOs and IT Directors means more focus can be placed on strategically valuable activities, such as surfacing business intelligence from the payroll and HR functions.
Our view: Far from seeing it as just a ‘nice to have’, decision makers in HR, Finance, and IT Operations – who often share responsibility for payroll – must recognise the huge role automation can play in driving additional value in their respective areas.
3. Getting the best of both worlds
The traditional approach to buying payroll and HR software is now being challenged. In recent years, the predominant perception has been that organisations have to make a major compromise when selecting their technology: they either opt for specialist (or ‘best-of-breed’) payroll software that doesn’t integrate well with other reward and HR tools, or they buy an ‘all-in-one’ suite that gives them payroll, HR, and reward tools in one place, but doesn’t deliver the required level of sophisticated functionality.
Now, thanks to advancements in technology (particularly in the area of systems integration) it’s possible to get the best of both worlds. In fact, nearly two-thirds (63%) of payroll professionals now say that they’re looking for specialist payroll software which integrates well with other specialist software, rather than a more generic suite of software.
Our view: This is great news for businesses – it means payroll teams can use best-of-breed functionality to better handle increasing legislative and workforce complexity, while tighter integration promotes organisational efficiency and ensures employees can enjoy more convenient pay, HR, and reward experiences.
4. Low demand for ‘pay on demand’
‘Pay on demand’ (the ability for employee to access their salary on more flexible terms) has been widely touted as a future trend in the world of payroll and HR. But for now at least, mass adoption seems unlikely, with 97% of respondents saying that their organisation doesn’t offer a flexible pay option, and 66% also saying that there are no plans currently to implement it.
There are a few possible reasons for this. Perhaps the main reason not to adopt flexible pay is that it would require an organisation to rethink its finance and its payroll operations. In industries where most organisations still mostly work to the traditional 9-5 model, and where monthly salary payments are the status quo, adopting flexible pay can seem like an unnecessary, complex disruption. Not to mention that it could actually contribute to employees’ financial worries in the long-term by encouraging a perpetual cycle of debt.
In contrast, it’s likely to be a more attractive option for industries like retail or hospitality, where jobs are typically lower pay, working schedules can be irregular, and employees could improve their financial wellbeing with more flexible access to their salary.
Our view: It seems that the jury is still out on ‘pay on demand’ – and where we do see an increase in adoption over the coming years, it’s likely to be restricted to the handful of key sectors where its benefits will be felt most strongly.
Find out more
What other trends, challenges, and opportunities lie ahead for the payroll profession over the coming months and years? Make sure to read the full Future of Payroll 2020 report (sponsored by Zellis) to find out.
And, to learn how Zellis can help solve these challenges and transform your payroll operations, check out our exciting new cloud-based human capital management solution, Zellis HCM Cloud.