July 2022

How to Apply Technology, Technique to Global Payroll Operations

By Michael Baer, CPP, MA

TechInnovations_InsideOf the few things that are certain in modern life, the continued advancement of technology and technique are two. The development of new systems, devices, and tools, coupled with more resourceful and efficient ways to manage them, keeps happening, no matter who is in power or how bad the economy because of wars, pandemics, and other disasters. This progress is now baked into the human condition. Across the globe, we have reached the stage where the constant effort for improvement creates meaningful change.


Data—Get Processed

For global payroll systems, we know technology means there is the hardware and code for the software to help with processes. But what gets processed? Data.

It is important to interpret this data, determine how it can be used, and then effectively communicate its use. Once the technique, or how-to, is determined, the technology can start to be applied effectively, and often, a variety of uses can spring from a single innovation.

This is especially true with technology and technique applied to global payroll operations. When time collection first became automated, we discovered the data that’s primarily used for payroll purposes could also predict and show a level of employee behavior and engagement.

This helped employers learn more about their employees. It wasn’t just time collection anymore for the single purpose of calculating hours worked. It also involved scheduling information and time off. It became a time management system that propelled the rise of human capital management (HCM). 

When it comes to payroll data, time-worked information, which comes at the beginning of the pay cycle, is just the tip of the iceberg. For global operations, especially recently, there is a desire to leverage other payroll data for a myriad of uses in an employer’s organization. 

We often hear how payroll is sitting on a gold mine of meaningful information that an organization can use to improve management of the workforce. I envision those who are focused on HCM as being excited about applying more analysis to the data to see trends and predict outcomes.   


Global Payroll’s Enhanced Role

Payroll has always been critical to the success of operations, simply because so much money is involved. It’s one of the largest outlays for any employer. But payroll moves into the realm of having strategic value once business leaders recognize the value of data and the accurate analysis of that data needed to assist employers in the management and costs associated with that management.

There is the idea that somehow correctly harnessing this data is meaningful and valuable. But data can also be collected and used the wrong way. It takes several factors for data to become useful.

Analysis needs to be advanced to the point where data can be effectively identified for a secondary use or multiple uses. This ability has become a core competency for global payroll professionals. It is necessary now to not simply process the data for the payday but to work with it further in ways that can add value to payroll operations worldwide.

Technological innovations can lead to either data collected the wrong way or data collected for good intentions but used in ways that could negatively impact employee privacy or employer operations. It’s important to understand the role governments have in limiting both the kind of data collected through payroll operations and its extendable uses to better the employer operations. Using demographic and seemingly business-relevant personal data collected by payroll is much more difficult outside the United States.

Europe’s General Data Protection Regulation (GDPR) is a prime example of restricting the use of personal information that employers had commonly collected and used for various purposes without considering the consequences. Now the consequences can be in the millions of euros. This limits the scope and value of the data collected.


Governing Technology

While technology and technique help employers manage employee data and streamline processes and payments, it also gives governments modern tools to monitor and audit foreign and domestic firms and employees coming in and out of the country. 

A certain set of contradictory motives are in play when reviewing how governments address technological developments and attract commerce. On one hand, there is a desire for governments to increase business and attract foreign investment through a myriad of financial incentives. At the same time, they want tax revenue and they want to treat foreign and domestic businesses equally. For foreign and domestic workers, some countries will use an employer’s payroll data to track, tax, and restrict the collection and use of data. If this data collection cannot be justified for use by the employer, the data cannot be analyzed.


The Next Phase—What Is Timely Pay?

For employees worldwide, the payroll process starts the moment work starts with the collection of time worked and ends when the employee is paid.

We discussed how transformative automated timekeeping was to collect valuable data for employers. The last piece of the payroll process for employees—being paid—is similarly undergoing a fundamental change in line with what happened when automated timekeeping systems were introduced. Recent technology and techniques streamline the transaction process, reduce costs, and make money more available to employees when they need it, wherever they are.

The application of the technology to provide earned amounts not just more efficiently to workers, but on-demand, is changing the definition of timely pay. Conventional mechanisms, known for years as solid and best practices are being pushed aside, not because they are no longer best practices, but because there are now new practices and separate avenues built by innovative organizations that asked the question: What is timely pay?

After years of using a specific technology for the purpose of providing on-demand pay, other payroll-related tools have sprung from the same root. These tools aid payroll operations in their ability to push payments out quickly and at less cost. The technology and technique have evolved into a collection of newer and better electronic mechanisms as new technology should. 

However, the payment evolution doesn’t just include when a transaction with an employee is completed, but the flexibility of how it’s completed. New payment applications outside of traditional bank accounts are becoming more popular, and payroll needs new applications to make these happen.

Further, the manner of the payment—the currency—is also undergoing changes, with some insisting they be paid some of their wages in cryptocurrencies.

Some countries—El Salvador for instance—are allowing cryptocurrencies, while others like China, are cracking down on using this currency type.

The instability of the cryptocurrency market and the resource-hungry manner such currencies are developed is currently hindering widespread use. But the attraction to alternative payments remains. The notion that cryptocurrencies could be legitimized as legal tender like a nation’s currency is starting to gain some traction.

What the cryptocurrency push speaks to, however, is the process, and blockchain technology is behind it. When it’s developed properly, there are opportunities with this technology in the payments arena and in other transactional applications, too.

Stay tuned on new developments on all fronts related to payments. Progress will continue. Unless we enter a new version of the Dark Ages, know that developing technologies and techniques keep changing the status quo to improve processes across the global payroll function.

Michael Baer, CPP, MA, is a special advisor with DailyPay. Before joining DailyPay, Baer was the managing editor overseeing domestic and international payroll news and analysis with Bloomberg Tax, previously BNA. The American Payroll Association (APA) presented him with a Special Friend of the Board of Directors Award in 1998. He earned a Master of Arts in International Affairs with The American University’s School of International Service, and a Bachelor of Arts in Government and Politics with the University of Maryland. Baer first gained experience in payroll and human resources with Marriott and later was the personnel manager for the Shanghai Hilton. He lives with his wife and children in Alexandria, Virginia.
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