Business owners around the world are struggling to make sense of what these unprecedented times will mean for them and their businesses. With new considerations nearly every day, business has never been more challenging and, as a result, global payroll teams will play a more important role than ever before.
Despite uncertainty, many are using this as a time to take stock and plan for when trading conditions do eventually begin to resemble normality once more.
That’s why it’s also a good time to think about where global payroll sits within your organization. Whether it falls under finance, the remits of HR, or in some form of grey void in between the two, one thing is for certain: the day-to-day working of your payroll team now stretches way beyond a set of simple administration tasks.
Ongoing compliance, complex reporting, forecasting, and increasing security challenges have all become the new norm for those working in payroll globally. In recent years, we’ve seen the introduction of major data protection laws and contracting regulations. Payroll is treading more complex ground than ever before, and it is a serious responsibility, particularly when it falls to an already busy accountant or stretched HR manager.
Because it plays such a pivotal role in any company, you would think that payroll would be an important presence around all boardroom tables. But predominantly it is not, and its voice remains woefully unheard.
A survey by our own company, Access, recently carried out in the U.K. showed that payroll is not represented at board level in almost two-thirds of firms, and that is a picture likely to be replicated worldwide.
Payroll Is Not a One-Trick Pony
The problem is that payroll is often siloed to the “transactional processes” and, while this element cannot be denied, payroll does so much more.
Furthering that argument is the Alight/NGA HR 2019 Global Payroll Complexity Index, which compiled feedback from nearly 2,500 payroll professionals from around the world and ranks the top 40 countries in terms of payroll complexity.
One of the key findings from the 2019 index was the growing levels of anxiety around data ownership. Respondents from every country pointed to “the protection of personal identifiable data in the payroll process” as a significant challenge. The research went on to show that such complexity can be managed by creating a balance between standardizing processes, attracting and retaining the best talent, selecting the right service delivery model, and using technology efficiently, including the use of artificial intelligence (AI).
Given the increasing complexity around data ownership, the General Data Protection Regulation (GDPR) is prompting reviews of data protection legislation far beyond the EU. It is business critical that this is handled in the right way, yet those dealing with this daily are still being denied a presence in the room where the biggest decisions of all are made.
Developing Trends Require Action, Investment
It is not just external pressures faced by payroll, with employees themselves becoming more demanding. As global consumers, we have all become used to having the trappings of technology at our fingertips, and this is now bleeding into the workplace. We know that employees are asking for more intuitive platforms and personalization to allow greater interaction and self-service options.
It therefore should come as little surprise that Access identified on-demand pay as one of the top payroll trends of 2020. With an ever-growing number of employees wanting to decide how and when they receive their salaries, it is a trend that we anticipate will spread rapidly through mid-market companies. While it gives people much more control to manage their personal finances in a way that suits them, it will, of course, mean dramatically different ways of working for payroll teams.
Seventy-seven percent of payroll managers told us that they viewed on-demand pay as a key software innovation and it is something that global payroll teams should be aware of and prepared for. Until recently, on-demand pay had limited localized traction worldwide and was instead, relatively limited to the global gig worker economy, where the expectation of immediate, or near-immediate pay is commonplace. However, in many countries, more traditional firms are now competing with those hiring gig workers and so more employees are looking for on-demand pay as standard, particularly those living paycheck to paycheck.
Of course, it is not just for the benefit of the employee, with employers themselves potentially gaining from more flexible payroll options, including higher productivity, improved engagement and retention, and better employee relations.
With the inevitable global economic fallout from the COVID-19 crisis, it could be argued that payroll teams around the world should be speaking to the board now to explore on-demand payment options to better support their staff.
On-demand pay is just one example of the continued consumerization of global payroll. Increasingly, employees, just like everyone else, are growing ever used to user experience being at the heart of all aspects of their lives. The same applies for payroll, with increasing requests for pay slips, financial records, and tax returns within just a few clicks.
In many ways, payroll is becoming more consumer (employee) facing than ever before. Eighty-nine percent of payroll managers admitted consumerization will have a huge impact in the next two years, increasing the argument that it should be elevated to board level. At almost every board table you will find a customer sales representative talking about financial performance, so why should there not be someone to represent the financial requirements of your brand’s biggest daily consumers—your employees?
Further highlighted payroll trends from Access include automation and cloud capability. Both are designed to offer greater degrees of flexibility, accessibility, and productivity, but inevitably, the introduction and scale-up of new technology and systems takes set-up and training time, as well as investment from the wider business. All of this once again brings us back to our initial question: why is such a pivotal function of many businesses not represented at the boardroom table of 64% of companies?
Lacking a Sense of Belonging
Looking back to one of the initial points, one of the major issues around representation seems to be a lack of understanding around where payroll belongs within an organization and who should have responsibility for it.
From speaking to businesses, we found that payroll is a standalone function in just 22% of firms. More commonly, payroll is treated as a bolt-on to another division, with 45% of companies grouping it under the finance department and 33% placing it as part of the HR team.
There is no right or wrong answer here, and pros and cons can be argued for both finance and HR.
It is easy to see why most global businesses believe payroll should be handled by finance. We have already established that it is often the largest expense for most companies. Add to this the fact that integrating data between these two functions can strengthen financial reporting and tax compliance, and there is certainly an evident logic.
On the other hand, most payroll challenges and changes tend to occur in connection with HR-related matters like promotions, hiring, employee benefits, and bonus payments. You should equally consider the issue of confidentiality, which is usually controlled by HR. We have also already seen that the top payroll trends are increasingly people focused.
Of course, given the evident increasing complexity of payroll operations, now could well be the time for more businesses to start viewing it as a standalone function. With rising demand to keep up with employee expectations, technological trends, and external regulations, not to mention the incredibly fast moving COVID-19 crisis, payroll managers worldwide need to be able to gain board approval quickly to optimize systems and to solve any potential problems swiftly.
The Right Time for Change?
We must be realistic and recognize that changes to board structure can take time. Given the current global economic situation and the uncertainties surrounding the current COVID-19 pandemic, now may not be the time for widespread change. However, even if 2020 is not the year for payroll to have a seat at the table, it is certainly the time for it to have a stronger voice and for businesses to explore ways to give payroll managers a platform to talk about concerns and proactively improve their systems and ways of working.
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Emma Saxton is Payroll Services Operations Manager at the Access Group and has more than 15 years of experience in the payroll sector. Graduating from the University of Derby with a MSc in Payroll and Business, Saxton is also a member of the Chartered Institute of Payroll Professionals (CIPP). Well regarded as an initiator of change, she is recognized for implementing complex payroll improvement strategies that expand operational efficiencies and enhance business performance.