The impact of COVID-19 on payroll: five key findings

During the COVID-19 (coronavirus) crisis, many trends that were already growing steadily may suddenly be accelerated. The huge amount of pressure it has placed on internal functions could force business leaders to act quickly to transform their operations, reduce costs, and create efficiencies by using technology.

So, how have businesses responded to the increased strain placed on one of their (if not the most) important functions – payroll?

We surveyed nearly 160 industry leaders during the early stages of the outbreak to find out.

1) Organisations will focus on stronger business continuity planning

Our research revealed that around four in ten organisations (39%) will place a stronger emphasis on payroll in their business continuity planning as a result of COVID-19.

This is likely because a significant proportion of organisations have struggled to deal with the unforeseen pressure placed on their payroll teams. We found that nearly a third (30%) had already lost payroll capacity to some degree, while 5% stated that they had lost even more. On top of this, 44% said they’re not confident about their ability to maintain payroll continuity throughout the duration of the crisis.

There are, of course, a huge number of functions to consider as part of a business continuity plan – but chief amongst them should be payroll. After all, an organisation can’t run at all without the ability to pay its people.

2) Adoption of payroll automation will be accelerated

So, how can organisations develop stronger payroll continuity processes?

One of the first things to think about – especially during a pandemic – is how to reduce the organisation’s dependency on human work. Prior to the outbreak, many organisations had already started to use automation to meet increasingly complex and demanding payroll requirements, but these new challenges may further accelerate the rate of adoption. In fact, more than a quarter (27%) told us they would prioritise automation initiatives as a result of COVID-19.

Perhaps the biggest payroll continuity challenge is working with limited payroll team sizes. We found that 85% of organisations have fewer than ten payroll staff, with a small number even stating that they employ just one person to administer the entire function. And, although our survey was taken before the peak of the crisis, one in twenty (5%) reported that, due to absence and illness, they already lacked sufficient human resources to carry out payroll duties.

Far from replacing staff, automation could not only support continuity during similar crises, but also enable organisations to work more efficiently on the whole.

Vickie Graham, Business Development Director at the Chartered Institute of Payroll Professionals, commented (CIPP): “Payroll is traditionally a department with very little incentive or investment to change technology due to the risks of things going wrong and not being able to pay employees. So it is encouraging to see that many organisations will focus on accelerating the adoption of automation in the future.”

3) Outsourcing could represent a short- and long-term solution

While just 1% of organisations told us they have outsourced their payroll requirements as a direct result of the COVID-19 crisis, it could represent a solution for both the short- and long-term problems many are likely to face.

In the short-term, organisations that have reported a loss of payroll capacity could benefit from the additional support and expertise offered by a third-party provider. These providers are often better placed to take on large and complex payroll requirements at short notice.

In the long-term, we could also see a stronger trend towards part or full outsourcing due to the cost savings and peace of mind it can provide for organisations that will likely be hit hard by economic downturn.

4) Remote working will become the new norm

Although lockdown restrictions will be gradually eased over the next few months, it may be a while yet before the world of work goes back to ‘normal’. Many business commentators have already suggested that remote working could be the new normal post-COVID 19.

As a result, organisations will need to take steps to enable full remote working if they have not done so already. Remote working for payroll teams must be looked at especially carefully, as many rely on an exclusively on-premise IT setup to administer the function. This has already caused issues for a number of organisations, with almost one in five (18%) telling us that their payroll team members don’t have access to the appropriate resources they need to be productive when working from home.

As a by-product of the shift towards remote working, we could see the increased adoption of cloud-based payroll software, since it can offer a flexible, secure, and highly scalable alternative to on-premise solutions.

Vickie Graham commented: “It is likely that the long-term impact of the coronavirus outbreak on payroll will include more flexible working arrangements, moving operations to the cloud, and enabling a greater work/life balance.”

5) Payroll teams must be prepared for short-notice legislation changes

The COVID-19 crisis has underscored the importance of reacting swiftly to sudden changes to legislation. As is the case with many changes to legislation, compliance isn’t just about avoiding penalties, but also supporting employee wellbeing. In other words, it’s about ensuring your people are paid the right amount under the right circumstances.

The crisis has brought about several important emergency measures, including changes to sick pay and the introduction of employee furlough schemes. However, according to our survey, 41% of payroll teams have struggled with the complexity of the new measures, while 33% are concerned about the manual work involved in adopting them.

Vickie Graham commented: “The changes that have been introduced by the government have been fast moving and complex, making it difficult for those working within payroll to keep up with the changes.”

With further measures indoubtedly yet to come, organisations must act in good time to ensure they can adopt them with minimal disruption to their usual operations. Organisations should consider seeking payroll advice to fully understand the detail of the measure, as well as remain in close contact with their software providers in order to quickly implement any software patches required to support them in achieving compliance.

Learn more

To learn more, download our free research report: COVID-19: Measuring the impact on the present and future of payroll operations.

Or to find out about how Zellis can support your organisation with its payroll and HR requirements during the crisis, please visit our dedicated coronavirus page.