A strategic payroll system plays a key role in maintaining the morale of employees and the financial stability of companies.

The way companies are operating has changed drastically of late, for example, employers now have official flexible working policies in place and employees have the freedom to choose how and when they want to work. In this flexible working environment, payroll continuity is of utmost importance.

The entire payroll system can be enhanced and made more efficient if processes are standardised, optimised and digitised. As companies have adapted to this new normal and made shifts to their working policies, it is essential for their payroll processes to adapt to a new flexible world.

The current payroll mindset

When payroll is viewed in isolation from a business’ broader HR and financial objectives, the ‘human’ aspects of the process can go missing, such as user experience or transparency.

The ADP Research Institute found almost one third of employees in the Asia Pacific region would not realise if they were paid incorrectly, and for 11 per cent of these employees, it was because their pay or payslip confuses them.

Globally, one in three employees say they are always, often or sometimes paid late.

Processes that are heavily reliant on manual input can be fraught with error and inefficiency. This risk has been put in the spotlight during the coronavirus pandemic, as almost every country has seen rapid legislative changes around working arrangements, wages, entitlements and subsidies.

At the beginning of the pandemic, the number of new regulations that impact payroll increased by 400 per cent in a single month. Organisations without a standard process for receiving and implementing regulatory changes were at greater risk of violations.

A lack of digitisation not only makes compliance difficult in the midst of regulatory shifts, it also leads to poor visibility and quality of data. This can hinder the capability of reporting and decision-making.

Without automation and integration across the business, the hidden costs of payroll mount up. Common inefficiencies include time spent collecting and interpreting data, validating results and answering employee enquiries.

Current challenges with payroll

Payroll staff have had to pull together to keep legacy payroll systems operational. During the peak of the pandemic, payroll teams were the only ones left onsite, forced to step in where remote management tools failed. Some businesses had to entirely circumvent their on-premise systems and panic-run payroll directly through their banks, reconciling discrepancies at a later date.

Several challenges faced by many organisations whilst running payroll are:

· Many companies who manage their payroll in-house, particularly small and mid-sized companies, find it is a labour-intensive, manual process prone to error.

· Payroll is often seen as tactical and not a core part of the employer-employee relationship, leading to poor user experience.

· There are many hidden costs associated with payroll processes that are not automated or integrated into the broader HR or finance systems, including time spent collecting and interpreting data, validating results and answering employee enquiries.

· Low visibility and quality of data also hinder reporting capability and impact decision-making.

Mitigating risk

A payroll process that is optimised, visible and agile enables greater accuracy by reducing the possibility of human error and allowing easier access to important information. When information is digitised, payroll professionals can receive relevant details such as timesheets and tax codes directly from the source.

Moving information to a cloud-based platform supports business continuity, which proved to be critical during the unprecedented move to remote working over the past year.

When employees are located across the globe, the importance of a modern and integrated payroll solution becomes amplified. Almost half of payroll professionals said they had very low or limited levels of standardisation globally. This made communication between payroll teams difficult in a time of crisis.

Setting up the structures to enable an efficient and compliant payroll globally is one of the key benefits that can be realised when leaders set a deliberate payroll strategy for the business.

What is the need for a rethink around payroll management?

Payroll transformation can bring deep and strategic advantages when organisations take a step forward and not keep the payroll function in tactical silos. Businesses today need a sturdy and resilient processes to manage the uncertain and fast-evolving environment. COVID-19 drove a 4X increase in new regulations that impacted payroll in just 30 days, making payroll more susceptible to error and risk. By transforming pay, organisations can remain ahead of the curve and prepare for ever-increasing complexity in regulations, audit and compliance.

In the emerging low-touch economy, organisations will be left vulnerable and at a risk if their complex payroll processes, financial administration burdens, spreadsheet chaos, compliance and Human Capital Management visibility gaps remain unchallenged.

COVID-19 has created challenges which can only be resolved by reimagining and rethinking the approach towards payroll management. Organisations in this brave new world are laser sharp, focussed on reducing inefficiencies and minimising redundant and overlapping organisational processes. And these can be found in unexpected places like payroll.

Creating value

Some of the first areas where a business will see value in payroll are increasing productivity and reducing costs associated with an outdated, error-prone system. As the payroll process becomes increasingly optimised, visible and agile, the benefits will start to flow on across the entire business.

Payroll data can be messy when it is sitting in numerous spreadsheets or across programs. Digitising and integrating data allows for leaders in all departments to spot trends and gather insight that can inform business decisions in real-time.

Having the ability to be more innovative in remuneration models means pay can better align with employee needs, whether that means having tailored payroll schedules for some individuals, or managing flexible benefits such as paid overtime or the option to buy annual leave. This ability is also advantageous in recruitment and talent attraction.

Payroll can be a means to empower employees and strengthen their relationship with the company. Being paid on-time, correctly and transparently is intrinsic to the way employees perceive their employers. When payroll information is accessible on demand, there will likely be fewer queries and any errors can be identified sooner by employees.

Adaptability of payroll in the near future

The rapid move to remote working, combined with a global economic slowdown has been a catalyst for payroll to adapt and continue to adapt in the near future. Employees are seeking greater choice of payment methods, as a single method may not suit all employees. Organisations also need to address remote working and prepare for issues surrounding remote workers from different tax jurisdictions and across borders, as well as questions around time tracking post-COVID-19, especially for company audits. Organisations also need to support flexible working and ensure employee data is secure remotely.

Many organisations are fast realising that big strategic advantages can come from prioritising some simple changes that will have a big positive impact.

A strategic payroll system plays a key role in maintaining the morale of employees and the financial stability of companies.

Transforming payroll requires endorsement from senior leaders and collaboration between HR and finance departments. It is by no means a straightforward feat, but the potential advantages can be felt far beyond these two departments and in the bottom line.

If your payroll solution does not increase efficiencies, enhance visibility and empower agility company-wide, it is time to take a look at your processes through a strategic lens.

(The given article is authored by Rahul Goyal, MD – India & South East Asia, AD)