The Future of Payroll – A roundtable discussion with Reward Strategy and SD Worx
Payroll is different from most business functions. Compared to the likes of finance or marketing, payroll often goes completely unnoticed – that is until something goes wrong. Where other departments tend not to be measured by accuracy payroll has to strive for perfection or risk serious consequences from the wider organisation and that doesn’t come without its challenges.
Leading provider of Payroll and HR services, SD Worx, recently held a round table in partnership with Reward Strategy to explore these challenges. Attended by payroll professionals from some of the biggest employers in the world, the roundtable brought the issues facing payroll to the forefront. These included, dealing with legacy systems, international payroll barriers as well as the age old debate – what is payroll’s role within the wider organisation?
Creating truly global payroll
One of the biggest challenges for those operating payroll internationally, was the ability to create a unified global payroll system that works at scale. According to the 2019 Global Payroll Complexity Index, Europe leads the way when it comes to complex payroll systems, with France, Italy, Belgium and Germany taking the top spots. These complexities are down to various factors, including the review of national and local data legislation off the back of GDPR, as well as one-third of governments having no schedule for tax legislation changes.
These create unique challenges for the payroll department because there are so many moving parts. People are often experts in their own country, but with each and every market having different rules and regulations, it’s near impossible to manage the payroll process centrally. Yet, the feedback was that other countries often rely on UK experts as they tend to understand the payroll system better, meaning that there is very little ownership over who is ultimately responsible for global payroll.
Another issue raised was the fact that it’s not unfamiliar for companies to have staff that have moved country without the companies knowledge. In fact, 28% of payroll professionals in Europe don’t know how many employees they have working in the EU (SD Worx Brexit research 2019). This calls for the need for payroll experts at a local level in all operating countries, or a global payroll provider that has the expertise to run payroll successfully in every market.
It’s time to leave the legacy behind
Payroll is difficult to manage, especially across borders, but during the roundtable it was also very clear that existing processes can make a difficult job even more complex. Payroll is often forced to retrofit against existing legacy structures, which mean that organisations are left with bespoke and difficult to manage systems. This is why there were many calls from attendees to strip payroll back and focus on getting the basics rights, only then can other add-ons like talent management and time and attendance registration be properly implemented. It was also clear that while technology is a key element in improving payroll, professionals still don’t have the right tools to be able to effectively digitise. Mainly because payroll struggles to get buy-in from the whole organisation when it comes to introducing new technology.
One national retailer for example, mentioned that implementing new technology goes beyond just getting board level buy-in. All stakeholders, whether that be the shop floor staff or area managers, have to be fully on board into to implement new payroll technology. They often find that some stores are more than willing to get on board, whereas others find it difficult moving on from legacy systems. This then creates more chance for inaccuracies and adds further complexity to the payroll process as they attempt to manage these differences.
Robots vs humans
As expected, automation was a heavily debated solution and one that many believe can help overcome legacy systems. Some companies have even built their own automation in-house, allowing them to streamline the transfer and processing of necessary payroll information such as student loans and pensions online – this helped considerably for companies employing people at scale. Yet, according to a recent report from Deloitte, only 32 percent of companies are prepared for Robotic Process Automation (RPA) technology. Given that payroll lags behind other departments in embracing digital transformation, payroll is likely to not reach the full potential of automation for many years to come.
While conversations around automation are important, the whole room agreed that the single point of failure when it comes to technology is the human element. Payroll is tasked to deal with many compliance issues but too often organisations worry about whether the new technology is compliant, as opposed to whether the people and policies are meeting regulation. The problem with getting the balance right between technology and the human touch is that payroll suffers from a lack of resources and time to be able to effectively test/trial what works best.
Payroll is becoming a strategic business function
The requirements to work in payroll are increasing because of added red tape and so is the level of expertise needed, yet payroll staff still feel undervalued and believe they aren’t getting the recognition they deserve. This is partly due to the fact that it sits in a grey area – it’s not HR, but it’s also not finance. We’ve already established that payroll finds it difficult to get buy-in from the wider organisation and this is made worse by the fact that payroll isn’t always valued in the way it should be.
By 2025, however, businesses will be investing more in their payroll technology, according to 88% of Chief HR Officers and Chief Financial Officers (World’s Economic Forum, 2018), which shows that attitudes are likely to shift and payroll will be seen as a more strategic business function.
The future of payroll
Payroll is a complex but essential business function that rarely gets the credit it deserves. As with many sectors, professionals are hedging their bets on technology to simplify and improve processes. This gives payroll a real opportunity to prove it’s worth and show just how valuable it is to the wider organisation. But, it was clear from the roundtable that payroll shouldn’t rely on technology alone. Both organisations and payroll providers often make the mistake of forgetting the human element in technology and that is where the mistakes happen.
Ultimately, payroll needs to stop waiting for a seat at the table and use the data and potential is has to prove it’s worth as a strategic business function.
Interested in reading more from our roundtable? Take a look at our guide ‘Learn from the Leaders’.