December 2023

Payroll’s Untapped Potential

By Frank Smits

UntappedPayrollInsideIn 2020, businesses went through significant changes resulting from shifts in world health, geopolitics, and consequently, the economy. Practices and working methods have changed, sometimes substantially. As always, these changes come with advantages and disadvantages, and risks and opportunities.


The HR Function Is Strategic

The human resources (HR) function was on the frontline managing these changes, but some of its sectors were cast into the spotlight to ensure both continued, reliable service, compliance with data protection requirements, and changing legislation in different countries.

Numerous companies are now pursuing international development and expansion, and the emerging practical problems deserve our full attention. One area that stands out from the others is payroll management and as a market leader in global payroll, we can share valuable insights on this topic.

The three years ending with 2023 have brought payroll management out of the shadows, pulling it out of its position as a mere “accessory” back-office function and enabling it to take on a more important strategic value for businesses. And with new ambitions come new demands and expectations for payroll teams to manage, as business leaders increasingly turn their focus towards transforming their approach and management in the different countries where their companies operate.


The Potential of Payroll

We performed a global survey on the subject, “The Potential of Payroll,” to have a fact-based description of the phenomena we've just mentioned. We interviewed 1,486 senior leaders from multinational organizations of more than 1,000 employees headquartered in 16 countries, who work to one degree or another in their company's payroll management, or who, due to their functions, possess in-depth knowledge of the subject.

The survey shows that the historically overlooked payroll departments possess the potential, when integrated with the increasingly vital decision-making tool of responsive HR analysis, to be the next big flag bearer in their company's strategic innovation.


Accurate Payroll for Exact Data

The results of the polling data revealed that only 33% believe their company’s payroll is sufficiently accurate, while 56% said they don’t have full visibility over payroll performance, accuracy, and other data across all their international locations. The polling data also revealed that 40% believe that each country has different methods of tracking compliance, and 45% say their senior managers send them increasingly recurring payroll requests, which proves that payroll data influences strategy at the highest levels.

Most of the payroll professionals we interviewed said that they don’t have full visibility of payroll performance, accuracy, and data across all their international locations. This can be rectified by adopting a more joined-up approach that can help businesses with global efficiencies, benchmarking, and central leadership that is needed when expanding into new markets. It is becoming more important to maintain control over operations, keep an eye on global payroll operations, and utilize performance reporting tools so that HR teams have a clear view of the situation of employees. This is important in terms of compensation and aligning their talent management, recruitment, or training policies, while guaranteeing the protection of employees' personal data and the data of the organization itself.


New Employee Expectations About Payroll

The COVID-19 pandemic may have made the concept of remote work more acceptable, but in some cases, it also created challenges for payroll professionals. According to our survey, 31% of respondents say that many of their employees have relocated to other jurisdictions or countries since the pandemic, while 56% said that ensuring these workers are taxed correctly has caused them some, or many, challenges. Meanwhile, 45% of the respondents stated that since the pandemic, employees have had an increasing number of questions about their pay.

What a departure! Efficient and accurate payroll enables businesses to hit the ground running in new markets, ensuring that local employees are engaged, productive, and motivated from the outset. A lack of payroll accuracy is hampered further by a shortage of payroll talent. As a result, more staff are questioning their pay more frequently, further increasing the pressure on already over-stretched payroll teams.


The (New) Pressure From Cybersecurity Risks

Technology has enabled businesses—particularly the payroll industry—to make great strides with the implementation of processes that make payroll more compliant, timely, and accurate. However, cybersecurity measures are often not robust enough to protect the company’s employee data. Respondents to our survey shared their views on the importance of cybersecurity, which include the following:

  • 61% of respondents revealed their payroll operation had been impacted by a cybersecurity breach at least once in the last 24 months
  • 98% of respondents think that data security has become more important in the last 12 months

This threat of a cyberattack is causing some businesses to postpone standardizing or integrating their payroll operations at a global level. However, doing nothing leaves organizations vulnerable to further attacks which can cause massive (and costly) reputational, regulatory, and staff engagement challenges. The threat of cyberattacks is always evolving, so it should be a high priority at the top of any payroll and business agenda. Pre-emptive action is needed, and payroll must take the lead to safeguard employee and pay data.


A Decisive Issue for Global Companies of All Sizes

It's clear that the solutions to address these issues are becoming more strategic and that payroll must be at the core of strategic decisions and transformations.

With clients of every size in practically every country, we know that a multi-country payroll system with unified information must be the foundation of all human resources information systems (HRIS). At ADP, we understand that this approach is critical for large groups, but it is becoming just as important for small businesses. These are often small to medium enterprises (SMEs) and even start ups that cannot afford HR professionals in every country in which they operate. Businesses often choose to rely on the expertise of an HR specialist with multi-country payroll experience. They can also decide to contract payroll talent where it exists with the certainty that their employees will be paid promptly in local currency and that a specialist can guarantee them total compliance with social and tax legislation even on the other side of the world. This also ensures that any subsequent business growth will not call into question the model, which can be adapted to the development of the organization, both in terms of the number of employees and geographic expansion.

Let's hope that businesses will look at this opportunity with much greater interest!

As ADP is continuing to run this survey year over year, it could be interesting to compare the evolution with 2024 trends. To discover those, you can download and review the report.

Frank Smits is President for Celergo Streamline at ADP. As an executive leader for this fast growing, large division of ADP delivering multi-country payroll across 140 countries globally, he is responsible for leading the overall strategy and performance of the business, balancing the needs of clients, associates, and shareholders. Smits has been with ADP since 2009.
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