Payroll software trends

Employers are grappling to attract, recruit and retain top talent as evidenced by the ‘Great Resignation’ and employers are having to re-think their employee value proposition and employee experience is a key focus. Payroll arguably shouldn’t be a ‘moment that matters’ as it should be a seamless customer experience, both for employees and the payroll teams, but how it feels to be paid, receive the correct amount of overtime or resolve an underpayment is emotive and increasingly employers are looking to technology to make this experience positive.

Additionally, there is an increased trend in the use of employee self-service to update personal data, view online payslips or request holiday and how payroll technology can integrate with or streamline solutions to meet this demand is becoming more important.

The use of cloud technology in the payroll and HR function is nothing new, however it is expected that this trend will grow in 2022 and beyond and Covid-19 has been a catalyst for digital transformation. Employees are now demanding flexibility in a hybrid working world and by utilising technology, this can be an enabler for employers to empower and engage their workforce.

The trend for organisations to expand their use of artificial intelligence (‘AI’) and Robotic Process Automation (‘RPA’) and automation continues and in 2022, it is expected that AI and RPA make the jump into the mainstream as businesses look to compete in a post-pandemic, disrupted remote world.

The 2021 Gartner Market Guide for Multicountry Payroll Solutions recognises that this has already begun in payroll, with early signs of a mainstream adoption of hyper-automation and machine learning, including continuous payroll processing and payroll fraud detection. This provides opportunities to standardise and integrate payroll processing, reduce the risk of human errors and freeing up valuable time for payroll teams to focus on the value-add strategic insights.

Digital transformation is increasingly about data and insights and through this lens, the payroll function can demonstrate how it can move from being purely transactional to adding strategic value to an organisation by leveraging the valuable data that it processes to support the business with making more evidence-based, strategic decisions.

Organisations have been increasingly focusing on how to standardise and streamline their global payroll operations to drive efficiencies, manage business continuity and gain control of costs by utilising payroll technology.

Where organisations have grown organically or there is a decentralised management and ownership of payroll, this can lead to a lack of payroll oversight as well as reputational and compliance risks. Left unchecked, this can lead to costly compliance failures, increased risk and ultimately impact the employee experience and relationships with local tax authorities.

To address this, we are seeing more organisations invest in designing and implementing a robust global payroll operating model, complemented by utilising payroll technology. This  ‘cost avoidance’ approach to managing payroll operations through effective governance structures and adopting leading practice processes and controls is a trend we expect to continue in 2022 and beyond.

We have seen an unprecedented amount of domestic regulatory and compliance change, both in the UK and globally in recent years. This includes UK legislation such as with Off Payroll Workers, Coronavirus Job Retention Scheme, Health and Social Care Levy and changes to the National Minimum Wage and Holiday Pay regulation plus the much anticipated UK Corporate Governance SOx framework, which is all contributing to fundamentally transforming how businesses need to capture, analyse and report payroll data.

Employers are continuing to grapple with this and will need to ensure that that their processes and controls support workforce compliance and with greater regulatory scrutiny, combined with higher employment costs this has brought payroll strategy and delivery sharply into focus. This is not expected to let up and we anticipate a continued trend in the complexity of workforce compliance and an increased focus on getting it right by global tax authorities in 2022 and beyond, with organisations looking to technology and software to help them.

The pandemic accelerated the pace of workforce change in many aspects and this also included the changing demand from workers to be paid faster and more conveniently. This was partly driven by the disruption and uncertainty but also the increased financial pressure from the rising cost of living, meaning workers need and expect to be paid, in some countries and industries, on-demand or in a particular currency i.e dollars or even cryptocurrency.

As a consumer, we are getting used to making payments through technology on our phones or online and the trend for 2022 and beyond is for this to extend to receiving payments this way as well. Platforms such as Earned Wage Access, where employee accrue pay in a self service application and then download pay when convenient or Digital Wallets are set to increase in popularity. This will mean that payroll functions are going to have to increase their flexibility and focus on employee experience and really challenge themselves to operate leading practice process and controls if they want to recruit and retain the best workforce.

In conclusion, the only constant is change and disruption is likely to remain a trend and how employers adapt to this will be key.

As a business critical function, payroll is exposed to this disruption and to stay ahead, employers will need to review their payroll strategies and leverage the changes in payroll software and technology. In order to do this, organisations should ask themselves the following questions:

• What is my payroll strategy, is this future-fit and does this align to the broader organisation strategy and technology roadmap?
• Is the ownership of payroll centrally led or decentralised, and do I have full oversight of the payroll operations, costs and risks? Is this fit for purpose?
• Are my payroll processes and controls leading practice and do they support compliance?
• What is the payroll employee experience, pain and gain points and how can this be improved?
• Are we leveraging technology and data and are we capturing the right performance insights?

If you would like to talk through how we can help you with your payroll strategy, please get in touch with Emily Salathiel or your normal KPMG contact.